costs and benefits; secondly, adjustments may be needed in the market prices of inputs and outputs
to account for price distortions; and thirdly, con- sideration and estimation of any forward and
backward links to the primary charcoal produc- tion industry Abaza, 1993; Dosman and Luckert,
1998.
Specifically, this study focuses on answering two major questions in public miombo woodlands sur-
rounding the Kitulanghalo Forest Reserve: 1 What is the value of charcoal production the main
commercial activity in the area from the produc- ers’ point of view? And 2 is the full cost of
charcoal production being acknowledged?
2. Study area
The study site is about 50 km east of Morogoro and 150 km west of Dar-es-Salaam and comprises
public communal lands surrounding the Kitu- langhalo Forest Reserve. The public lands com-
prise settlements, open woodlands and cultivated land. The area is bisected by the Dar-es-Salaam –
Morogoro highway which marks most of the southern boundary of the reserve and is the main
transportation route for forest products to urban and commercial centres such as Dar-es-Salaam and
Morogoro Fig. 1.
One thousand and twelve households with a total population of 4640 people live in three vil-
lages: Lubungo, Maseyu and Gwata, of which the surrounding woodlands are important for subsis-
tence purposes and as a source of income, as the majority of the local people obtain construction
materials, fuel wood and medicines from them Luoga et al., 2000b. The public lands, which are
easily accessible to the people B 5 km from settlements, and B 10 km from the Dar-es-
Salaam – Morogoro highway, are estimated to cover about 16 500 ha, out of which 3150 ha
comprise permanent cultivation and settlements and 13 350 ha open woodlands.
The climate of the area is tropical and subhumid Kielland-Lund, 1990. Mean annual rainfall is
about 900 mm which is seasonally distributed providing a wet season from November to May
and a dry season from June to October. The annual mean temperature is 24.3°C while the annual min-
imum and maximum temperatures are 18.6 and 28.8°C, respectively. This climate, together with the
generally nutrient-poor, well-drained soils, sup- ports miombo woodlands and some patches of
semi-evergreen forests Kielland-Lund, 1990.
There are no longer large wild mammalian herbivores in the area, nor are there cattle due to
the presence of tsetse flies Glossina spp., which transmit sleeping sickness nagana to domestic
animals. Annual fires are common in the area, although there are no specific data for fire fre-
quency and intensity. The local farming system is characterized by shifting cultivation of food for
subsistence consumption and the market. Farm production, which is generally poor, relies on
family labour with simple tools and no or very little capital input.
3. Methods
Unstructured and group interviews were used to obtain information on costs and revenues associ-
ated with charcoal production from key informants who were charcoal producers n = 8, all male resi-
dents who were born in the village, charcoal wholesalers n = 3, village headmen n = 3, forest
guards n = 3 and the regional forestry officer. Ten unburnt charcoal kilns were randomly selected in
communal lands and measured to obtain the stacked volume of wood. The solid round wood
volume was calculated as 60 of the stacked volume O’Kting’ati, 1984 and was converted into
charcoal weight equivalents, with 8 m
3
of round wood required per tonne of charcoal Ishengoma,
1982. CBA was undertaken by calculating the net
present value NPV of future cash flow from charcoal production on both a per capita NPV
c
and a per hectare NPV
h
basis, using costs and revenues that were based on data from the kiln site.
The rationale behind using CBA was that the analysis
employed economic
scarcity values
shadow prices in estimating costs or benefits as opposed to the use of market prices in a financial
analysis Dixon and Sherman, 1991. Direct costs included raw materials, labour and equipment.
The value of round wood as a raw material was obtained through derived demand from tax roy-
alty paid by wholesalers for each bag of charcoal bought from a producer.
Labour was assumed to have a shadow price of zero because of persistent unemployment in the
area, and the opportunity cost of labour was also very close to zero because there was no commer-
Fig. 1. The location of Kitulanghalo Forest Reserve and surrounding public lands, Morogoro, Tanzania.
cial farming. However, during cropping seasons charcoal production competes with subsistence
farming for family labour. In this case, during sensitivity analysis the shadow wage was set at
100 US 1.67 personday
− 1
and at 50 of the government minimum wage Peters et al., 1989.
Indirect costs were calculated as the opportunity costs of products foregone through charcoal pro-
duction. Direct benefits consisted of revenues re- ceived from charcoal sales, while net revenue was
calculated as the difference between annual rev- enue and cost, i.e. net revenue = revenue − direct
costs + opportunity costs which was then dis- counted to calculate the NPV Little and Mirrlees,
1974; Turner et al., 1994. Through discounting, the assessment of total monetary value not only
takes into account the current market value of 1 year’s harvest, but also the present discounted
value of future production. The analysis period was 15 years, equivalent to the life span of an axe,
which is the key tool in indigenous charcoal production.
NPV =
15 n = 1
R
t
− C
t
1 + i
t
where NPV is the net present value, R
t
is the revenue accrued at time t t = 1, 2, 3,…15 years,
C
t
is the cost incurred at time t, and i is the discount rate.
The choice of a discount rate is not necessarily a straightforward decision Krutilla and Fisher,
1975; Norgaard and Howarth, 1991, but some guiding principles are available Dixon et al.,
1989; Norgaard and Howarth, 1991. In this par- ticular study, a real effective discount rate was
used Fredriksson and Persson, 1989 which was derived from commercial bank lending rate and
inflation:
RDR = NDR − IRNDR + 1 where RDR is the real discount rate; NDR is the
nominal discount rate 22, i.e. the current 1997 Tanzanian central bank interest rate for
short and long term loans; and IR is the inflation rate 17.
Due to the absence of national price indices for wood products, current 1997 prices in Tanza-
nian shillings TAS were converted into low infla- tion US US 1 = TAS 600, where inflation was
assumed to have the same effects on revenue and cost over the analysis period. Sensitivity analyses
were carried out to determine how the NPV
h
model responded with varying discount rates, costs and revenues.
4. Results
