Equitable Forest Revenue Management

Forest Revenue to Improve Livelihoods

Benefit sharing leading to poverty alleviation and improved livelihoods is a key component of this project and a primary co-benefit. The communities where we are working are some of the poorest communities in the country, with median household income below $1 per day and the majority of the population living below the internationally accepted line of absolute poverty ($1 per day). Sales from carbon credits and subsequent income from timber will make significant contributions to improving community livelihoods and alleviating poverty, and we estimate that revenue from the forests could eventually add 50% to the total village income in villages with substantial areas of healthy forest.

Our Approach

MCDI is committed to supporting lasting sustainable forestry and rural development in the areas where we work, and we believe that thorough and ongoing engagement with local stakeholders is critical to the success of this long-term approach. Our experience with PFM has shown that it is most effective when the communities themselves are fully involved in every aspect of forest management, including monitoring activities and making key decisions about revenue distribution and management.

We will establish agreements – which will eventually become official contracts – with each REDD village outlining the different roles and obligations of each party (MCDI and the community) and the revenue sharing arrangements. Each village government will have access to legal services in forming such agreements and can dissolve the agreement with 90 days notice without financial risk. Carbon revenues will be split by the beneficiary community and MCDI (as the service provider) to meet transaction costs of expanding PFM facilitation and FSC to the village.

MCDI will assist the communities to establish systems to build village governance and meet the standards necessary for effective, democratic control and decision making over proceeds from PFM. Under previously established PFM/FSC projects facilitated by MCDI, timber revenues have been placed in a Village Natural Resource Committee bank account for use and distribution at the village level with direction given by the Village Assembly.  MCDI project staff initially supports the management of this account, but gradually the committee will gain full control over it. In addition, MCDI provides support and capacity building to the community as a whole, which includes, sensitizing village governments about issues of gender, youth and other disadvantaged groups and ensuring they are well represented in decision-making processes; training village leaders on simple financial management skills so that they can explain to their constituents how funds have been spent; and promoting accountability and transparency with the Village Assemblies so that they are aware of the full range of options available to them and so that they can help determine how funds get spent on community development projects.

Lessons Learned So Far

In June 2012, we teamed up with our partner, University of East Anglia, to carry out an audit of PFM revenue expenditures in the four villages supported by MCDI that has sold timber to date (only one, Kikole, is also a REDD pilot village). As well as tracing records of expenditure, the views of the wider community were canvassed through focus group discussions that specifically excluded village leaders. Each use of PFM profits was explicitly discussed with two focus groups, disaggregated by gender.

In the 3 years between July 2009 and June 2012 the four villages earned just over TZS 35m/- or roughly USD $22,500. Of this, we were able to locate records of expenditure of 23m/- with 1.75m/- remitted to Kilwa District Council as their share of revenue, and around 10m/- in declared balances (although in practice these were hard to verify). Of the 23m/- spent, between 39% and 65% went on ‘process’ expenses (e.g. forest management, committee running costs, transport costs going to the bank, etc.) in each village, and therefore between 35% and 61% were realised as profits. The average profit margin (profits divided by management costs) was 102% across all villages. Results show on average that 86% of profits were spent on outcomes considered widely beneficial, with both men and women approving of the vast majority of expenditure. The one exception was Kikole village where one focal group (men) was highly critical of how the Village Council had managed some of these profits, especially of projects initiated but then not finished, in this case, a new house for the village midwife.

Monitoring

In 2011, data was collected to produce an initial baseline of the socio-economic and governance status for the project. The household socio-economic survey and analysis was structured to measure net social impacts on local people.  The survey considers a number of different dimensions of wellbeing and household wealth, from farm size and crop production to housing quality and source of lighting, as well as borrowing and lending. It compares villages already inside MCDI’s FSC group certificate (and earning PFM revenue) with villages participating in the REDD project and control villages.  The baseline survey also measured the equality of distribution of income among households in each village.

A baseline analysis report was produced, and MCDI intends to continue monitoring these communities using a similar approach so results can be compared over time. We are optimistic that the basic action of monitoring the communities will, to a degree, incentivise improvements as village leaders will seek to increase their scores. At the end of each monitoring visit the team concludes with a discussion as to what could be done to improve performance, with action points to be revisited in later monitoring.