Alternative pricing mechanism of teak forest plantation saw-logs in Tanzania

Abstract

The main objective of the study was to analyze the various pricing mechanisms that can be used in setting prices for teak saw-logs and the prevailing market characteristics influencing prices in Tanzania. Primary data on the factors influencing auctioning and stumpage appraisal and, teak saw-logs production and trading costs were collected through questionnaires and field observations from Mtibwa and Longuza teak forest plantations, FBD head offices and inners of the various auctions conducted between 1998/1999 and 2005/2006 in the country. The visited stakeholders also provided data on the royalty fee and ublic auctioning stumpage values of the teak saw-logs. Secondary data were obtained from various reports and documents. From the data collected, the appraisal stumpage values of the teak saw-logs were calculated and, ompassions were made between royalty fee, public auctioning and appraisal stumpage value pricing mechanisms to know which one among the three generates more revenues to the teak saw-logs producers and, what market structure favours each pricing mechanism. The results of the study indicate that the Tanzania government’s effort to generate more revenues through selling her teak saw-logs by public auctioning instead of royalty fee has significantly increased revenues. However, conditions that favour pure competitive market structure, in which public auctioning operates effectively are lacking. The study further found out that there is a significant difference among the stumpage values of the logs obtained through royalty fee, public auctioning and appraisal stumpage value pricing mechanisms. For example, in the last auctioning (2005/2006) conducted at Mtibwa plantation forest the royalty fee and public auction stumpage values of the teak saw-logs were TAS 55 759/m3 and TAS 108 000/m3 respectively; while, the appraisal stumpage value of the same logs was TAS 219,000/m3. This shows that the royalty fee stumpage value was 51% of the public auctioning stumpage value and only 25% of the appraisal stumpage value. The auctioning stumpage value was only 41% of the appraisal stumpage value. However, the appraisal stumpage value was 73% of the FOB price (TAS 300 000/m3) of the 2005/2006 auctioned teak saw-logs. This information shows that the appraisal stumpage value of the teak saw-logs has the highest value compared to royalty fee and public auctioning pricing mechanisms and, it estimates the timber value at production site closer to its market value. Therefore, in order to generate more income through timber selling the government of Tanzania could consider charging her timber by applying the appraisal stumpage value pricing mechanism. It is ommended to use the appraisal stumpage values as a floor price when auctioning publicly timber and, a review of the training syllabus for certificate and diploma courses to incorporate the application of stumpage appraisal timber pricing echanism, which many foresters are not conversant with.