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Alternative Investments | Pine Tree Growing In Uganda

11
Posted April 7, 2013 by Ugandan Diaspora News Team in Business ~ 7,698 views

     

Pine  Growing — Yosamu Semugoma has been growing Pine in Uganda over the last 7 years. For many Ugandans, tree growing has become the long term investment. Annual returns average 10-25% depending on tree specie grown, and for how long. We talked to Yosamu to dig up some data. (yosamusemugoma@gmail.com, +256-772-422958)

Recommended Trees

Pine and Eucalyptus are the most feasible trees to grow in Uganda. They are relatively high value given the time they take to mature. Pine takes 15-18 years to mature, Eucalyptus 10 years. Other tree species include Mahogany (40 years), Muvule (40 years), Musizi (15 years). Although Musizi takes a relatively short time to grow and is a low maintenance tree, it’s not high value and takes too much space to grow. We’ll focus mainly on Pine growing.

Inputs

One needs land, seedlings, labor, capital. Initial costs include cost of clearing land, buying seedlings, planting seedlings, transportation costs, seedling handling costs. Main monthly running costs include transportation costs to visit farm, security costs to safeguard against tree theft and/or fire. After year 3, maintenance costs for Pine drop significantly. Unlike Eucalyptus that’s susceptible to termites and needs a regular dose of pesticides, Pine can grow without issue in termite infested land. However each tree requires some level of care against pests and disease.

Data

440 seedlings of Pine are recommended on every acre of land.
Each seedling costs about 400/= ($0.15).
Cost of clearing an acre of land is about 150,000/= ($58)
Cost of planting seedlings on an acre is about 50,000/= ($19)

The first 3 years are the most hectic in terms of maintenance costs, making sure the trees get off to a good start. A worker can look after up to 20 acres of land. So to benefit from scale, given that the running costs for 20 acres is about the same as the running costs for a farm less than 20 acres, if you have the land and initial capital to cover planting costs, you may as well do 20 acres.

See Figure 1 for a breakdown of costs and returns assuming a 20 acre tree farm 40km outside of Kampala.

Figure 1: Cost and Return breakdown for Pine Tree Growing in Uganda

Twelve years looks like the meaty part of the curve in terms of annualized returns and time requirement. If you’re a patient investor you could go out to 40 years. There’s not much value add to the price of Pine after 40years.
Given the long time frames required for Pine investments, to help generate some interim cash flows some folks plant both Pine and Eucalyptus. A 7-year Eucalyptus log is worth 40,000/= ($15) while a Pine log is 10,000/- ($4).
The returns from Pine growing look healthy, assuming today’s prices reflect at a minimum the price of pine 10 or so years from now.

Challenges

Long Time Horizon
Hefty Capital Requirement
Easy loss due to fire and theft
Price risk at maturity although this can be hedged away by securing a price contract

Most investments have challenges, the question is, can you handle the pain?
Reach out to Yosamu if interested in growing your own trees. The man loves trees.

We leave you with legendary investor Warren Buffet, “Someone’s sitting in the shade today because someone planted a tree a long time ago.”

Compiled by Emmanuel Sabiiti Team: Zach Aprea, Jay Dhamsania. Email: info@emmaresearch.com


About the Author

Ugandan Diaspora News Team

Ugandan Diaspora News Online is an independent, non political news portal primarily aimed at serving Ugandans who work and reside outside Uganda. Our aim is to be a one stop shop for everything Ugandan and the celebration of our Ugandan heritage.

11 Comments


  1.  

    What a very interesting investment opportunity.

    I’d probably rather invest in something like that with $100k than putting $100k into a pension fund.




  2.  
    Hussein B

    Can any one recomend a potential buyer of pine about 30acres @9years of age,thank you




  3.  
    nikos

    This is very insightful, please keep us in the loop for more investment opportunities.
    Cheers




  4.  
    Didas

    Just to share my passion with tree growing i planted 5 acres of Eucalyptus and after 3 years i got unsolicited offer of 120 million.




    •  
      Peter

      Hello Didas,

      I have more than 50,000 trees at 4 to 5 years. Where can i get a buyer. They are located 200 kms south of Kampala capital. Approximately 30,000 Eucalyptus, 20,000 Graveillea and 10,000 pine.

      Was your offer selling off with the land or without the land?.

      Thanks
      Peter.
      SoddoPeter@hotmail.com




  5.  
    Frank kasonga

    with the introduction of insurance to cover this sector ,one can now invest without much worry.




  6.  
    Peter

    Hello Didas,

    I have more than 50,000 trees at 4 to 5 years. Where can i get a buyer. They are located 200 kms south of Kampala capital. Approximately 30,000 Eucalyptus, 20,000 Graveillea and 10,000 pine.

    Was your offer selling off with the land or without the land?.

    Thanks
    Peter.
    SoddoPeter@hotmail.com




  7.  
    Dora M.N. Kampala

    Thanx for the insight but we also need the market connection. I have 460 acres of pine in Mubende, some is 8years and some is 10 years old. I want to sell off all the trees but also the land will be sold. if you want to buy trees only, wait for the land to be sold first but if you want the land we can negotiate for both as a deal. I really want to know that it is not a waste of time because I have been trying to sell for two years now.
    thanks.
    Dora
    doramngabo@gmail.com




  8.  
    Dora M.N. Kampala

    Thanx for the insight but we also need the market connection. I have 460 acres of pine in Mubende, some is 8years and some is 10 years old. I want to sell off all the trees but also the land will be sold. if you want to buy trees only, wait for the land to be sold first but if you want the land we can negotiate for both as a deal. I really want to know that it is not a waste of time because I have been trying to sell for two years now.
    thanks.
    Dora
    doramngabo@gmail.com, 0754 950455





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