Zimbabwe’s Allied Timber has abandoned contract milling and is now in the process of acquiring own equipment in a move to ensure resource sustainability.
The state-owned firm was contracted to 50 saw mill operators in an agreement where the harvested timber was equally shared between the company and the contractor. The agreement was to cover the company’s production shortfalls since it did not have adequate capacity and was also used as black empowerment tool.
According to last year’s budget, contractors were supposed to contribute 32 percent of Allied’s annual production.
The contracts expired in December and the company had invited bids for 2016. Allied has however issued a statement that the process has been cancelled.
Allied Timbers’ main business comprises timber harvesting, reforestation forest management, saw milling logs, value addition of timber and distribution of various timber products.
The company has allegedly decided to put an end to the agreement the after establishing that the rate at which the forests were being extracted was unsustainable. The arrangement also created competition for Allied as prices for its products were much higher than those charged by contractors for similar products.
Allied Timber secured a loan from a local financial institution to buy new equipment and production will be significantly curtailed to allow deployment of the new equipment.
Reports reveal that Allied products are in the market but the company has nothing to show for it. The arrangement has further led to competition from rival companies who allegedly get their products from Allied Timber.
The company’s management feels it is not a sustainable way of doing business and no official comment could be obtained from Allied. An internal audit reveals various irregularities in the tendering process. The audit further revealed lack of transparency, citing massive corruption in the awarding of tenders.
The analysis also revealed that contract milling was supposed to contribute 32 percent to Allied’s annual production budget but as of September 2015 the contribution was 41 percent. The special audit report on contractors questioned why a budget limit put in place cannot be observed.
The report shows that by September 30 last year, the budgeted volumes had almost met. However, it also highlighted some financial savings under the contract milling agreement.
Excess budgetary allocation is a plus for contractors who easily get access to timber products above the contracted volume without considering the Allied Timber forestry. This, according to the company, leads to negative impacts on future forestry sustenance.
