Economic feasibility of a second pulpmill in Kenya

Abstract

Kenya's forestry has passed through a long exploitation phase which involved the removal of most of the usable timber species followed with the introduction of fast growing exotic species. These offer an assured industrial base because of fast growth rates and are now supporting 1 pulp and paper mill, 4 plywood mills, 3 match factories, 1 particle board mill, 300 sawmills and 1 fibreboard mill. Current production of softwoods exceeds the industrial requirements of the country and a proposal to establish a second pulpmill to utilise excess softwoods was presented to the government a few years ago. This proposal was rejected on the understanding that there are no wood supplies. At the same time the Development Plan [1983-88] has proposed a paper and pulpmill under the Lake Basin Development Authority to utilise bamboo. In addition there are plans for expanding the existing pulpmill from the present production of 49,000 tonnes of pulp to 60,000 tonnes per year. Webuye pulp and paper mill was set up with hopes for enormous benefits for the country in the form of foreign exchange savings and export earnings. It appears to be failing in this because of its heavy foreign debts, capital intensity and the efforts of trying to meet all the paper needs of the country, resulting in inefficient operations. The demand unsatisfied by Webuye cannot justify a second pulp mill which could only depend on a regional rather than a Kenyan market to realise enough economies of scale. Tanzania has established a large Kraft mill which is already in trouble over lack of markets, Malawi is planning a large mill to utilise its large supplies of pines and the region generally does not have as healthy a market for paper products as envisaged years ago. Pursuit of industries for their own sake has influenced many industries in Kenya in the past and a second pulpmill is seen as part of an international concert in industrial financing in some low income countries. Some of these industries have had little regard for the socio-economic conditions existing in the countries and have resulted in economic harm rather than the cure expected. The Kenyan economy is quite promising currently but most rural and urban poor continue to be marginalised by industries that do not take their lot into consideration. A second pulp mill for Kenya fails in improving the foreign exchange position, balance of payments, terms of trade, employment opportunities, contribution to equality and income distribution and most socio-economic "attributes" of industrialisation.