Exploring the Creation of Efficient Forest Industry Cluster in Huambo, Angola

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Title: Exploring the Creation of Efficient Forest Industry Cluster in Huambo, Angola
Author: Anttila, Teemu T. T.
Contributor: University of Helsinki, Faculty of Agriculture and Forestry, Department of Forest Sciences
Publisher: Helsingin yliopisto
Date: 2017
Language: eng
URI: http://urn.fi/URN:NBN:fi:hulib-201708225255
Thesis level: master's thesis
Discipline: Metsäekonomia ja markkinointi
Forest Economics and Marketing
Skogsekonomi och marknadsföring
Abstract: Industrial clusters are a worldwide phenomenon and a vital economic development strategy. The approach is defined to be an interrelationship between its participants, suppliers and related industries that produce synergy in a particular location. Clustering has become to be a crucial feature in nation’s economic development. However, the approach has not yet been studied widely in Sub-Saharan African countries and the existing number of empirical studies are limited. Therefore, this leaves a gap for an up-to-date study to investigate the possibilities of developing an efficient forest industry cluster in Angola. The purpose of the study was to critically assess and to define the potential of different wood processing industries in connection to develop an efficient forest industry cluster in the Province of Huambo. The objective was to create a comprehensive picture of the existing market situation through a field study and to develop the future concept of wood processing industries. Research methods were qualitative in the empirical part of the study and quantitative in the investment calculations. The primary data were collected through a semi-structured field interviews and observations of existing operators. Interviews were conducted in January and February 2017 to obtain knowledge about the prevailing market situation and about the existing wood product manufacturers. The data were collected with nine interviews, which were transcribed. Pictures and video clips were recorded to support the observations from the factories in the data collection. Based on the field study and observations, investment alternatives were decided and calculated to different wood processing industries. Profitability of the investments were calculated with the Net Present Value (NPV), Internal Rate of Return (IRR), Multiple of Invested Capital (MOIC) and Wood Paying Capability (WPC) at stumpage. Attention was paid to the uncertainty in the calculations with the help of sensitivity analysis. The literature review was based on the cluster theory, collective efficiency and the capital expenditure projects. As a result of this study, an investment model was developed in a shape of a cluster. The cluster model contains five different dimensions: sustainable plantation forestry, production of primary wood products, production of secondary wood products, wood residues sufficient utilization and production of sustainable energy. This study suggests that veneer peeling and sawn timber production could be selected for the primary wood production, carpentry and furniture for the secondary processing and wood residues to produce sustainable energy. The corresponded 10-year investments NPVs varied from USD 606 000 to USD 974 000 at an interest rate of 15%. The maximum IRR achieved was 31.6% and the minimum was 16.8%. The highest WPC at stumpage achieved was USD 69.8 and the lowest was USD 44.1. The MOIC ranged between 2.4 and 4.0 times the invested capital. This study suggests that the Company could develop an efficient forest industry cluster around veneer peeling with the support from other wood processing industries to the region.

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