Ministry of Environment, Water and Natural Resources

ANALYSIS OF THE CHARCOAL VALUE CHAIN IN KENYA

FINAL REPORT | AUGUST2013

Copyright © 2013 This report was commissioned by the Kenya Forest Service (KFS), Coordinated by the National REDD+ Coordinating Office (NRCO) and carried out by Camco Advisory Services (Kenya) Limited. Appreciation goes to all the respondents interviewed in Nairobi, Kwale/Lunga Lunga, Kitui/Mutomo, Baringo and Kajiado as well as the KFS team at Karura and Ecosystem Managers in the 24 counties where charcoal data was available for providing useful charcoal and forestry data. The charcoal producers, transporters and dealers were especially useful in understanding the charcoal value chain including the challenges faced by various actors along the chain.

ii Analysis of the Charcoal Value Chain in Kenya

iii Analysis of the Charcoal Value Chain in Kenya

Document type: Final Consultancy Report Client: Kenya Forest Service Client contact: Alfred Gichu Other details: National REDD+ Coordinator Date:

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Table of Contents

Table of Contents ...... v List of Acronyms ...... viii List of Tables and Figures ...... ix Executive Summary ...... xi 1 Introduction ...... 1 1.1 Objectives of the Study ...... 1 1.2 Summary of the Approach and Methods ...... 1 1.3 Background ...... 2 1.3.1 Charcoal in the Kenyan Economy ...... 3 1.3.2 Charcoal Consumption...... 3 1.3.3 Charcoal Supply ...... 4 1.3.4 Raw Materials for Charcoal Production ...... 5 1.3.5 Charcoal and Deforestation/Forest Degradation ...... 5 1.4 The Charcoal Value Chain ...... 6 1.4.1 Stakeholders along the Charcoal Value Chain...... 6 1.4.2 Charcoal Production technologies ...... 7 1.4.3 Charcoal Marketing ...... 12 1.4.4 Taxation and Other Fiscal Measures Relevant to Charcoal ...... 12 1.5 Comparative Analysis of Regional Charcoal Production Systems and Value Chains ...... 13 2 Policies and Legislative Frameworks ...... 15 2.1 Energy Act and Policy ...... 15 2.1.1 Revisions to the Energy Policy (2012) ...... 15 2.2 The Forests Act (2005) and Draft Forest Policy (2007) ...... 16 2.2.1 A Policy Response to the “Charcoal Problem”...... 16 2.3 The Constitution of Kenya (2010) ...... 17 2.4 Other Policies and legislative Frameworks Relevant to the Charcoal Industry ...... 17 2.5 National Development Plans ...... 18 2.5.1 Vision 2030 – Long-term and Medium Term Plan ...... 18 2.6 Overview of specific projects, plans and programmes relevant to charcoal ...... 19 2.6.1 The Kenya Charcoal Policy Handbook...... 19 2.7 Synergies and conflicts between existing plans, development policies and legislation and charcoal production ...... 19 3 The Charcoal Value Chain ...... 21

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3.1 Overview ...... 21 3.1.1 Charcoal production ...... 21 3.1.2 Transportation and Marketing...... 27 3.1.3 Charcoal consumption ...... 30 3.1.4 Briquette production from charcoal dust ...... 32 3.2 Key Actors and practices along the charcoal value chain ...... 33 3.2.1 Wood Production ...... 34 3.2.2 Charcoal producers ...... 35 3.2.3 Charcoal Transporters ...... 38 3.2.4 Charcoal Vendors: Wholesalers and Retailers ...... 40 3.2.5 Charcoal consumers ...... 40 4 Economic Analysis of the Charcoal Value Chain ...... 42 4.1 Charcoal production Channels ...... 42 4.2 Analysis of Selected Value Chains ...... 48 4.2.1 Kajiado Value Chain ...... 48 4.2.2 Baringo Value Chain...... 49 4.3 Economic Analysis of the Charcoal Value Chains ...... 49 4.3.1 Distribution of income along the value chain ...... 51 4.3.1 Market Response to Charcoal Pricing ...... 52 The conclusion is that there is very limited market response to charcoal prices as it is entirely in under the control of the cartels...... 53 Main Challenges along the value chains ...... 53 5 Mapping Charcoal Hotspots ...... 56 5.1 Identification and Analysis of Hotspots ...... 56 6 Selected Case Studies ...... 60 6.1 Charcoal Production by CPAs in Kwale County ...... 60 6.2 Charcoal production by CPAs in Kitui Zone within Kitui County ...... 61 6.3 Documentation of illegal payments during charcoal transportation from Namanga to Nairobi .62 6.4 Charcoal import and export ...... 65 7 Conclusions and Recommendations ...... 66 7.1 Conclusions ...... 66 7.2 Recommendations ...... 68 7.2.1 General Recommendations ...... 68 7.2.1 Specific Recommendations to Strengthen the Value Chain ...... 69

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8 References ...... 70 9 Annexes ...... 73 Annex 1: Summary of charcoal key statistics in counties where data was provided for the study ...... 73 Annex 2: Questionnaires used collect data from Charcoal producers, transporters and wholesalers ....76

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List of Acronyms

BTG Biomass Technology Group CVC Charcoal Value Chain CHAPOSA Charcoal Potential in Southern Africa CPA Charcoal Producer Association CPG Charcoal Procured Group ESDA Energy for Sustainable Development Africa DEC District Environmental Committee FAO Food and Agriculture Organization (of the United Nations) FCPF (World Bank’s) Forest Carbon Partnership Facility FINNIDA Finnish International Development Agency GEF Global Environment Facility KEFRI Kenya Forestry Research Institute KES Kenya Shilling KFS Kenya Forest Service KIPPRA Kenya Institute of Public Policy Research and Analysis MoE Ministry of Energy NFA National Forest Authority (Uganda) NCCRS National Climate Change Response Strategy NRCO National REDD+ Coordination Office PSDA Promotion of Private Sector Development in Agriculture REDD Reducing Emissions from Deforestation and (Forest) Degradation REDD+ “REDD+” goes beyond deforestation and forest degradation, and includes the role of conservation, sustainable management of forests and enhancement of forest carbon stocks R-PIN REDD+ Project Idea Note R-PP REDD+-Readiness Preparation Proposal SACCO Savings and Credit Cooperative Society UNDP United Nations Development Programme USAID United States (of America) Agency for International Development Ushs Uganda Shillings

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List of Tables and Figures Table 1: Key charcoal stakeholders along the value chain ...... 7 Table 2: Charcoal production technologies ...... 11 Table 3: Other policies and Legislation relevant to charcoal ...... 17 Table 4: Summary of the actors within the wood production chain link ...... 34 Table 5: Summary of key actors within the charcoal production chain link ...... 36 Table 6: Summary of the actors within charcoal transportation ...... 38 Table 7: Summary of the actors within Charcoal marketing ...... 40 Table 8: Summary of actors within charcoal consumption ...... 40 Table 9: Main charcoal producing areas destined for major cities and towns ...... 57 Table 10: Documentation of illegal payments during charcoal transportation (Namanga-Nairobi route) . 63 Table 11: Specific recommendations to strengthen the value chain ...... 69

Figure 1: The Casamance Kiln as an Improvement to the traditional Earth Kiln resulting in efficiencies of up to 30% ...... 8 Figure 2: The Brazilian Half Orange Kiln that produces cleaner, better quality charcoal, with very high efficiencies if well built and operated ...... 9 Figure 3: Main sources of wood for charcoal produced within the KFS movement permit system ……..23 Figure 4: Percentage of tree species utilised for charcoal prodution for charcoal passing through the KFS permitsystem………………………………………………………………………………………...……24 Figure 5: Prosopis Juliflora stacked and left to dry in readiness for carbonization in Baringo ...... 25 Figure 6: A KFS supported brick kiln in Mutomo, Kitui ...... 26 Figure 7: Charcoal production using a traditional kiln in Kajiado………..………………………………26 Figure 8: Charcoal production using an improved kiln in Baringo…………………...……………...... 26 Figure 9: Taru charcoal collection point for Samburu CPA in Kwale County ...... 28 Figure 10: Charcoal being transported on a motorcycle from farmlands to the market in Kajiado ...... 29 Figure 11: Percentage of different modes of transport within Nairobi ...... 29 Figure 12: The main urban markets for charcoal passing through the KFS permit system...... 30 Figure 13: Percentage of retailers’ main market in Nairobi ...... 31 Figure 14: Percentage of retailers’ sources of charcoal in Nairobi ...... 31 Figure 15: Charcoal being sold along the roadside in Baringo County ...... 32 Figure 16: Accumulation of charcoal dust within a collection centre in Kwale ...... 43 Figure 17: Marketing channels for charcoal in Kenya...... 44 Figure 18a: Wood producer to charcoal producer to transporters to vendors charcoal production chain……………………………………………………………………………………………………….45 Figure 18b: Charcoal producer to retailer to consumer charcoal production chain………………………46 Figure 18c and d: Producer to consumer/retailer charcoal production chain (for roadside sellers)……....46 Figure 18e: Wood producer to charcoal producer to retailer to consumer charcoal production chain……47 ix Analysis of the Charcoal Value Chain in Kenya

Figure18f: Wood Producer to charcoal producer to broker to transporter to broker to wholesaler to retailer to consumer charcoal production chain……………………………………………………………….…..47 Figure 19: Determinants of producer and transporter prices…………………………………………...…51 Figure 20 Distribution of income along the value chain…………………………………………………..52 Figure 21: County map showing the charcoal hotspots ...... …..58 Figure 22: Value chain for Msambweni CPA in Kwale County...... 60 Figure 23: Charcoal value chain for Mutomo CPA in Kitui County ...... 61

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Executive Summary

Charcoal is a key bio-energy resource in Kenya, providing domestic energy for 82% of urban and 34% of rural households. The charcoal industry also creates jobs for wood producers, charcoal producers, transporters and vendors. The industry reportedly employs almost 1 million people on a part and full-time basis across the value chain. In spite of its significance, the charcoal sub-sector continues to bear a negative image and remains largely informal thus limiting its potential to attract meaningful investment. The Energy and Forestry Policies and Acts have recently legalized sustainable charcoal production, and efforts are underway by government agencies, including the Kenya Forest Service (KFS), and the Ministry of Energy (MoE), to take forward the implementation of this legislation.

If charcoal production and its use are to contribute to sustainable development and poverty alleviation, the entire charcoal value chain needs to be understood and addressed in a holistic manner. Based on this understanding of the value chain, strategic interventions can then be developed geared towards promoting enabling framework conditions that create business opportunities for a wide range of value chain actors while fostering rural and urban employment and incomes. The value-chain approach thus brings out the charcoal business from the difficult- to-regulate informal sector and enables policymakers to harness its potential for sustainable development. This necessitates a comprehensive analysis of existing constraints and the streamlining of response strategies, combining approaches such as sustainable natural forest and land management, policy & legal-regulatory reform, and investment promotion.

This study was commissioned to provide information on the scale and economic value of the charcoal industry in Kenya, identify the driving forces behind charcoal production, understand the key players and the value chain, and provide a sound basis for policy development that reduces the negative impacts of the industry on the forest sector.

Findings from the study revealed that most trees used for charcoal production are sourced from rangelands under various forms of ownership including freehold, group ownership and trust lands. The production is mostly done using tradition inefficient technologies, while resource exploitation is unsustainable.

Charcoal production, transportation and marketing is mostly organised in an informal system. However, formalisation has begun to take shape, albeit slowly, through implementation of the charcoal rules established in 2009.

There are different and sometimes complex channels through which charcoal moves from producers to consumers. Six different channels are summarised here:

1. Chain 1: Wood producer to charcoal producer to transporter to retailer to consumer. 2. Chain 2: Wood Producer to charcoal producer to transporter to wholesaler to retailer to consumer:

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3. Chain 43: Wood Producer to charcoal producer to broker to transporter to broker to wholesaler to retailer to consumer: 4. Chain 4: Producer to consumer: Usually a small-scale producer takes the charcoal directly to the consumer. 5. Chain5: Wood producer to charcoal producer to retailer to consumer: Wood producer sells trees to charcoal producer.

While the first four channels are common in places where strong charcoal producer associations exist, the last two options are mostly practiced along the roadside with the people involved not having the requisite permits and documentation to trade in charcoal.

Considered holistically the annual contribution of charcoal to the economy is estimated at about KES 135 billion. The costs and complexity increase with the length of the chain. The charcoal prices also vary depending on the season with lower prices registered during the dry season and higher prices in the rainy season owing to low supplies and high cost of transport. Charcoal pricing increases from a low of KES 250/bag at the producer level to a high of KES 2800/bag at the consumer level, with the latter being realized where charcoal is sold to households in small 2kg-tins.

Profits are disproportionately skewed in favour of the vendors and transporters, with the producers and the consumers getting the least margins. Revenue accruals and distribution varied significantly along the value chain with the vendor (wholesalers and retailers) controlling 41% of the market share, transporters 37% and producers (wood and charcoal) only 22% (Figure 17). A greater portion of the profits (63%) in the charcoal value chain goes to the vendors with the wood and charcoal producers enjoying only 24% of the total profit.

An economic analysis of the value chain concluded that producer and consumers are the least beneficiaries in the chain due to lack of structures and ineffective implementation of the laws and policies, high levels of corruption, bribery.

Nairobi is a major market for charcoal in Kenya; a greater proportion of this charcoal is produced from as far as Lamu and Kwale counties. Other counties where charcoal is produced for the Nairobi market were Kitui, Kajiado, Narok and Baringo. The table below summarizes the key charcoal hotspots identified during the study.

City/Town Major sources Nairobi Kitui, Makueni, Tana River, Kwale, Narok, Baringo, Kajiado, Garissa Mombasa Kwale, Tana River, Kilifi Kisumu Elgeyo Marakwet, Turkana, Narok Nakuru Narok, Baringo Eldoret Elgeyo Marakwet, Turkana

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Kakamega Kakamega, Turkana Bungoma Mt. Elgon, Turkana Nyeri Laikipia, Nyandarua Garissa Garissa environs Embu Tharaka, Kitui Meru Tharaka

The charcoal value chain is bedevilled by many challenges including:

 Unregulated/illegal charcoal trade: Wood harvesting, charcoal burning, transport and trade are still unregulated despite the enactment of the charcoal policy in 2009. Sixty (60) percent of charcoal is produced by groups outside the CPAs. This makes the regulation of the charcoal business more difficult.

 Rampant and Systemic Corruption in the Charcoal trade. The situation worsens during the periodic bans on production and trade where producers have to part with huge amounts as bribe to the police and county council security to deliver charcoal to the market. This diminishes the legitimacy of the charcoal business, and leaves many producers and transporters vulnerable to economic exploitation.

 Inefficient conversion technologies are the logical consequence of the unregulated & insecure setting, clandestine operation and overall capacity deficits. There is need to link the producers to other sources of finance to invest in more efficient technologies

The report concludes that the economic significance of the charcoal sector could be higher than is reported, with potential to contribute significantly to the country’s revenue base while improving livelihoods. The lack of up-to-date date that is readily accessible has however greatly obscured this potential and helped perpetuate unsustainable practices.

It is recommended that a number short, medium and long term interventions be implemented to assure the end users access to an affordable and quality energy source. The recommended interventions touch on ensuring sustainable feedstock supply, better carbonization technologies and full implementation of the Charcoal Rules. There is also need to address governance issues to stem rampant corruption associated with the sector. On the other hand, the actors on the supply side especially the producers need training on business skills while consumers should be encouraged to adopt energy efficiency technologies and other energy alternatives.

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1 Introduction

1.1 Objectives of the Study Deforestation is an important factor in global climate change. It is estimated that more than 1.5 billion tonnes of carbon dioxide are released into the atmosphere due to deforestation every year. Charcoal production comes up for mention as one of the leading causes of deforestation and forest degradation. It is also considered one of the few income generating opportunities available to resource poor rural people. Likewise, majority of charcoal consumers cannot afford alternatives such as LPG or electricity for cooking and heating; thus making it the main source of energy for millions of people within sub-Saharan Africa (Mugo et al., 2007).

REDD+ is a mechanism agreed to by parties to the UNFCCC to support voluntary efforts of developing-country parties to mitigate climate change by reducing emissions from deforestation and forest degradation, promoting conservation and sustainable management of forests as well as enhancing forest carbon stocks. The Forest Carbon Partnership Facility (FCPF), an innovative partnership of developed and developed countries, with the World Bank as the Trustee, and the United Nations Forum on REDD+ (UN-REDD) are the two major international initiatives supporting developing countries efforts to formulate and implement policies and strategies to support REDD+ implementation. Kenya is a member of the Forest Carbon Partnership Facility and is receiving financial and technical support towards developing its Readiness activities. Kenya is also an observer member of the UN-REDD+. Any country wishing and eligible to participate in the REDD+ mechanism under the FCPF must first produce a REDD+-Readiness Preparation Proposal (R-PP). Kenya’s RPP identifies unsustainable utilization of forest products, especially charcoal production, as a major driver of deforestation and forest degradation in the country. A REDD+ strategy therefore needs to address the charcoal industry with a view to identifying and promoting options that support sustainable production and consumption of charcoal.

In Kenya, the charcoal industry provides employment to a significant proportion of the population; a 2005 study estimated that over 700,000 people are employed in the industry and that it generated over US$427 million that directly benefited grassroots communities. However, charcoal has been kept out of the formal economies of this country, partly due to lack of supportive data and information (Mary Njenga et al., 2013). The purpose of this study is to provide information on the scale and economic value of the charcoal industry in Kenya, identify the driving forces behind charcoal production, understand the key players and the value chain, and provide a sound basis for policy development that reduces the negative impacts of the industry on the forest sector.

1.2 Summary of the Approach and Methods Literature review of past charcoal studies including; status reports from relevant ministries and government agencies notably the forestry and energy ministries, academic literature, project reports, business reports and available statistics (Kenya Bureau of Statistics) on the charcoal

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industry was done. Other sources of literature were workshop proceedings, media clippings, and web posted documents. Literature relating to value chain and best practices in the region including Uganda, Malawi, Rwanda and Tanzania was also analyzed.

Primary data was collected to verify and confirm what was uncovered from secondary data as well as generate new information. The phase involved on-the ground assessment in selected parts of Kenya through purposeful sampling on the basis of KFS conservancy areas where charcoal production was known to be a major economic activity. These were; Eastern, Coast, South Rift and North Rift. Data for the remaining five others; Western, Nyanza, North Eastern, Mau and Central was collected through telephone/email interviews with conservancy heads and ecosystem managers. Tools utilized in the field study were: Questionnaire survey for transporters, wholesalers and retailers, Focus Group discussions, personal interviews with key informants, charcoal producers, transporters, entrepreneurs, intermediaries, service providers, government officials, and non-governmental organizations. Others tools used were Local Case Studies.

Hotspots were identified and mapped out on a county map for Kenya. Data was analysed using MS Excel and Statistical Package for Social Sciences (SPSS) and the results summarized into means and other statistical measures as necessary and presented in the form of tables, charts and graphs. These were complemented by field photographs.

1.3 Background The total forest resources in Kenya comprise about 3 million ha of land equivalent to 6% of the total land area (FAO, 2010). According to World Bank (2007) this includes about 1.64 million hectares of closed canopy forest, 610 000 ha of plantation forest, 851 000 ha of rain forest and 211 000 ha of dry zone forests.

These forests play a key role in communities’ livelihoods by providing forest related goods and services including energy, food, housing materials, medicinal herbs, are home to most of the country’s indigenous flora and fauna and provide a range of other ecological benefits including the regulation of water flow. The largest closed canopy forest blocks in Kenya-Mt. Kenya, the Aberdare Range, the Mau Complex, Mt. Elgon and the Cherangani Hills-constitute the main “water towers” of Kenya and form the upper catchment of all main rivers in the country namely; the Tana, Chania, Thika, Ewaso Nyiro, Athi, Malewa, Nzoia, Yala, Nyando, Sondu, Mara, Turkwel and Malakisi rivers. (Akotsi and Gachanja, 2004).

Kenya has previously witnessed a high rate of forest cover loss. For example, satellite image analysis of forest cover changes for 2000 to 2003 revealed a forest loss of more than 7000 ha of indigenous cover within the Mau complex (Akotsi and Gachanja, 2004). An analysis carried for development of Kenya’s RPP identified both direct and indirect drivers of deforestation and degradation. According to the RPP one of the most important drivers is increased population leading to conversion of forests into agricultural land. The problem is further compounded by high poverty levels (RPP, 2010). The document attributes degradation to unsustainable practices such as charcoal production, over-grazing, illegal logging, poor governance and inappropriate

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silvicultural practises. Similar drivers were also reported by KFS (2010) as illegal logging, charcoal production, poverty and population pressure.

1.3.1 Charcoal in the Kenyan Economy The charcoal sector has acquired considerable economic importance because of increasing urbanization. According to the comprehensive national charcoal survey of Kenya study undertaken in 2004 by ESDA, now CAMCO, the total annual charcoal consumption is estimated at 1.6 million tonnes, generating an estimated annual market value of over KES32 billion (US$427m), almost equal to the KES35 billion (US$467m) from the tea industry (Mutimba and Barasa 2005). About a quarter of household income in Kenya is spent on wood fuel, usually regarded as the poor person’s energy source, since the alternative energy sources are beyond the means of most Kenyans (Kituyi, 2002).

The number of people engaged in the charcoal business is remarkable. A figure of 200,000 people were directly employed in production and an estimated 500,000 others involved in transportation and vending of charcoal, who were in turn believed to be supporting 2.5 million dependants (Mutimba and Barasa, 2005). The survey data from the national study further breaks down the average incomes generated from charcoal as KES 4,496 for producers, KES 11,298 for transporters and KES 7,503 for vendors. Studies by GTZ (2009) reveal that producing cook stoves provides good business opportunities for producers, suggesting that an average of 337 improved cook stoves per month are produced per producer, earning them an average monthly income of US$120-US$240.

The industry also contributes to government revenues through licences and business permits. For instance, PISCES (2010) reported a fee of 20 shillings and 1800 per bag and per lorry load of charcoal respectively being charged by the Kitui county council. The study by ESDA (2005) reported a fee of between 30 to 50 shillings per bag of charcoal collected by county councils. The survey data by ESDA (Mutimba and Barasa, 2005) also showed that the potential government revenue stood at over KES 5.1 billion if sufficient efforts were invested in effective collection. The study indicates that if cess were charged on all the estimated 60 million bags of charcoal traded within the country, this would generate an additional KES. 1.8 billion to KES. 3.0 billion Annually.

1.3.2 Charcoal Consumption Biomass has been reported to be the most widely used energy source in Kenya; at about 68%, followed by petroleum products at 22%, electricity 9% and other forms of energy at 1% (Kituyi, 2002, MoE 2002). These studies are supported by recent findings by KIPPRA (2010) which showed that about 70% of the consumers use biomass while 30% use other fuels. As in other parts of the region, charcoal demand in Kenya is high among urban households. For example, in 2000, a study by the Ministry of Energy (MoE, 2002) reported 82% charcoal consumption in urban areas compared to 34% of rural households in Kenya. The study reveals startling and seemingly contradictory statistics concerning charcoal: although more urban dwellers use it, the 3 Analysis of the Charcoal Value Chain in Kenya

per capita consumption is actually higher in the rural areas than in urban areas i.e., 156kg compared to 152kg in urban areas. Charcoal also occupies a unique position in the national energy mix because unlike firewood, its use among the high-income groups is also quite high, standing at 83% (MoE, 2002).

The annual consumption was estimated at between 1.6 -2.4 million tonnes (Mutimba and Baraza, 2005), with 10 % of the charcoal heading to the capital city, Nairobi (Mary Njenga et al. 2013). The results compare well with those from Tanzania where Dar es Salaam, the largest city, accounts for more than 50% of all charcoal consumed in the country (Van Beukering, et al.2007). The situation is similar for Uganda; for example in Kyegegwa District about 70% of timber and charcoal products are taken to Kampala city (Kakuri, W. 2012). In Malawi, the four largest urban centres account for roughly 90% of the charcoal used in the country (Kambewa, et al. 2007). In Kenya, it is estimated that about 135,000ha of fast-maturing tree species (with the ability to produce about 18 tonnes of charcoal from one hectare) will be required every year to meet the current demand of 2.4 million tonnes (Mugo et al. 2007).

1.3.3 Charcoal Supply In Kenya wood for charcoal production is sourced through both legal and illegal means. The national charcoal survey found that majority of the trees used for charcoal production came from the producer’s own farm and from private land including ranches that were being converted to agriculture or being cleared to pave way for grazing. Fewer numbers of trees were obtained from Government, County Council and communal lands (Mutimba and Barasa 2005). According to the study illegal charcoal production from protected government forests contributed about 13 per cent of total charcoal production.

Charcoal production from people’s own farms was found to be common in areas of Nyeri, Lugari, Meru North, Kilifi, Bungoma, Maragua districts. In these areas, landowners grow trees for fruit production, firewood, building, construction and produce charcoal as a by-product. Moreover, charcoal production is small scale and entails utilising mostly off-cuts, remnants and sometimes branches of these trees (Mutimba and Barasa 2005).

Charcoal is also produced when new land is opened up to give way to crop production. Trees cleared from such land are used to produce charcoal. In Narok District, wheat and maize production is quickly replacing pasture land. In the past the locals used to set able their land in an effort to get rid of all vegetation including trees. Due to the negative effects of this practise on the fertility of land, outsiders were invited to clear the land with leeway of using the trees available. These shrub-like trees are then converted to charcoal as they cannot be used for construction (Mutimba and Barasa 2005). The study further reveals that communities in Garissa County clear and produce charcoal from an invasive tree species popularly known as Mathenge (Prosopis juliflora) in an effort to save pastures for their livestock. In areas such as Taita Taveta and Kitui Districts where land is managed for livestock production in ranches, squatters clear trees, shrubs and bushes to free up the land for pasture production; charcoal is then produced from the cleared wood (Mugo and Ong, 2006). Just like the above cases, charcoal is produced as

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a by-product in Kakuzi Ltd. It is produced from stumps of Eucalyptus spp. after the tree is cut for production of posts (Mary Njenga et al. 2013).

1.3.4 Raw Materials for Charcoal Production Even though all species of wood can be carbonised to charcoal, the quality of charcoal varies from species to species and is dependent on the method of carbonization. Casuarina equisetifolia, Acacia mearnsii, Acacia polyacantha,and Acacia xanthophloea, and other acacia and combretum species are some of the species that have been reported to produce high quality charcoal (Mugo and Ong 2006).

Acacia species is the most widely used tree for charcoal production in Kenya, according to Mutimba and Baraza (2005). This was attributed to its availability, especially in rangelands, and the production of high quality charcoal. Acacia tortilis, A. nilotica, A senegal, A. mellifera, A. polyacantha, and A. Xanthophloea are the most widely used (38 per cent) and preferred (45 per cent). Other popular species include Croton, Olea, Manilkara, Mangifera, Eucalyptus, and Euclea (Mutimba and Barasa 2005).

In Garissa, an invasive tree species Prosopis Juliflora popularly known as Mathenge is the main source of raw material for charcoal. The Lelechwa shrub (Tarchonathus camphoratus) is most commonly used in Narok. At the coast, producers mostly use branches of the mango tree (Mangifera indica) for charcoal production (Mutimba and Barasa 2005). .

1.3.5 Charcoal and Deforestation/Forest Degradation Several studies in charcoal producing countries have attempted to capture the impacts of charcoal on deforestation and forest degradation. In Malawi, Kambewa, et al., (2007) analysis of the impact of the charcoal industry on forests revealed a volume equivalent to about 15,000 hectares of forestland being cut per year, with close to 60% of the charcoal being produced in Forest Reserves and National Parks. The study also reveals the negative impacts of charcoal making on species composition of forests. In this situation preferred species for charcoal making are removed leaving woodlands of lower quality. In Tanzania, a survey of 244 households in six cities was used to determine whether current consumption levels, charcoal production techniques and forest management practices are sufficient to meet present and future charcoal demand (Mwampamba, 2007). The survey attempts to make projections to year 2100 to determine whether forests can continue to meet future demand under different scenarios. The survey’s projections of future consumption predict an increase in overall consumption and subsequent forest loss over time.

In Kenya, close to 22 million cubic metres of wood is carbonised to meet Kenya’s annual charcoal demand. About 40% of the charcoal comes from rangelands, 40% from farmlands and 20% from government forests (Republic of Kenya, 2002). Even though Kenya’s arid and semi arid lands are the major sources of charcoal, cattle production remains an important economic activity in these areas. According to Mugo and Ong (2007) in most areas such as Taita Taveta

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and Kitui districts where land is managed for livestock production in ranches, squatters clear trees, shrubs and bushes to free up the land for pasture production. Charcoal is then produced from the cleared wood. On the other hand, land cleared for agriculture produces wood for charcoal in Narok District (Mutimba and Barasa 2005). Communities in Garissa district clear and produce charcoal from an invasive tree species popularly known as Mathenge (Prosopis juliflora) in an effort to save pastures for their livestock (Mutimba and Barasa 2005). Unfortunately, charcoal production remains quite traditional, with inefficient wood to charcoal conversion from less than 10% to about 15%, thereby exacerbating the problem. Furthermore, regeneration of the feedstock in not considered part of the charcoal production business (Bailis, 2009).

1.4 The Charcoal Value Chain

1.4.1 Stakeholders along the Charcoal Value Chain The charcoal value chain starts where the tree grows and the wood is cut and ends with its consumption and includes all the economic activities undertaken between these stages. Many different stakeholders participate in the value chain; right from wood production, carbonization of the wood, packaging and transportation of the charcoal, retailing and distribution, and consumption. A brief review of literature of charcoal value chain analysis within the region helps identify the main actors and understand their roles and main activities.

In a study aimed at generating data on the profits and margins along Uganda’s charcoal value chain Shively et al. (2010) identified five major roles for value chain participants: producer, agent, transporter, trader, and retailer. This was confirmed by another study aimed at understanding key players along the timber and charcoal value chain in selected districts in Uganda (Kakuru, 2012). This study identified tree farmer/land owner and forest authorities at the local level in the wood production section, charcoal producers in harvesting and charcoal production, transporters and Traders (retail and wholesale) in the transport, distribution, retail and wholesale trade section and households and institutions in the consumption section.

A study of charcoal consumption, trade and production in Malawi (Kambewa, et al., 2007) revealed several scenarios dependant on the route followed by charcoal from the producer to consumer. The first scenario was from producer to consumer, whereby a small-scale producer takes the charcoal directly to the consumer. The second scenario was from producer to buyer to consumer, where a buyer purchases the charcoal from the producer and takes it directly to consumers’ homes. The third scenario was from producer to primary buyer to secondary buyer to consumer which was a more complex option in which there is both wholesale and retail markets. According to the authors, the last scenario was most common in Blantyre and Lilongwe where there were well-established wholesale markets, especially in high-density, shanty and unplanned areas.

The charcoal value Chain and improved cook stove sector analyses commissioned by SNV in December 2010 for Rwanda identified five key actors in the wood production component of the charcoal value chain (CVC): wood producers, local authorities, National Forest Authority (NAFA) District Officer, financial services providers and research institutions. Within the 6 Analysis of the Charcoal Value Chain in Kenya

carbonisation section of the CVC, the analysis found main stakeholders are charcoal producers, local authorities, middle men, financial services providers, communication enterprises and research institutions. A further analysis of the CVC identified transporters, community police and middlemen as the key stakeholders in the transportation section. The analysis also identified charcoal retailers, local authorities and landlords as main stakeholders in the retail and distribution section. A clear definition of the roles and activities of each stakeholder based on the above and other reviews is presented in the table below.

Table 1: Key charcoal stakeholders along the value chain Section Stakeholder Roles Wood production Tree owners May manage his or her own trees Sources for wood either legally or illegally Producers Government institutions e.g. Policy formulation Forest and local authorities Provision of technical support Licensing (tree cutting permit) Carbonization Charcoal owners Provides the capital for the process Provides labour for charcoal preparation at Employees site Transportation Transporters Transports charcoal from production site to urban area Middlemen/Wholesalers Buys charcoal from transporter to sell to retailers Government institutions e.g. Policy formulation police, forest and local Provision of technical support authorities Licensing (movement permit, illegal taxes) Vending Retailers Purchases and sells charcoal at market or (Wholesaling and small shops Retailing) Policy formulation Government institutions e.g. Provision of technical support local authorities Licensing (Premise permit, illegal taxes) Consumption Households and institutions Purchases and uses the charcoal for cooking, heating, water boiling etc.

1.4.2 Charcoal Production technologies Biomass carbonization results in a more refined, energy-intense fuel than raw biomass, which is usually referred to as charcoal. Charcoal can therefore be defined as the solid residue derived from carbonization distillation, pyrolysis and torrefaction of fuelwood (FAO, 2004). Like direct combustion, some basic carbonization technologies (“First Generation”) have been around for a long time. Improvements of these technologies (“Second Generation”) have also been around for a long time and are fairly well-known. More advanced technologies are still under development. The so-called “Third Generation” technologies target the recovery of harmful gases and other useful by products. Although they have been shown to be technically feasible, they are for a 7 Analysis of the Charcoal Value Chain in Kenya

large part still undergoing development before they can undergo full commercialization. Apart from capturing the by-products of the carbonization process, these technologies also aim to integrate charcoal production and other processes such as power generation and perhaps chemical manufacture.

Figure 1: The Casamance Kiln as an Improvement to the traditional Earth Kiln resulting in efficiencies of up to 30%

8 Analysis of the Charcoal Value Chain in Kenya

Figure 2: The Brazilian Half Orange Kiln that produces cleaner, better quality charcoal, with very high efficiencies if well built and operated

Technology is a major barrier to realizing sustainable charcoal. Over 90% of charcoal in Sub- Saharan Africa including Kenya is produced using traditional earth-mound kilns with very low wood to charcoal conversion efficiencies ranging between 10% and 15%. Sustainable production systems and appropriate modern technologies are lacking. Production is commonly carried out by small, economically weak and unorganized individuals or groups using wood from unsustainable sources. Traditional kilns dominate the production of charcoal in Africa. In Kenya, wood-to-charcoal conversion efficiency rates range between 10-15 % with only a few cases achieving rates above 20% (Bailis, 2009). Table 3 gives the typical carbonization efficiencies of some of the available charcoal kilns. As can be seen, the range is quite broad, suggesting that a lot of gains can be made through adoption of improved technologies. Expert opinion is that significant gains can be made by replacing the first generation methods that are typical of the current charcoal production systems with the improved second generation technolgoies in the short to medium term. A gradual shift can then be made to the third and fourth generation technologies in the long term. Second generation kilns include the modified earth mound, Brazilian bee-hive, half-orange brick, drum and the casamance kilns with higher efficiency rates of up to 30% (Bailis, 2009). Over 99% of kilns used in Sub Saharan Africa fall under these two categories. If the intention is to replace tradition technologies used by rural, small scale producers, a number of factors need to be given careful consideration. Gomaa et al. (2011) gives a number of such factors for improving charcoal production technologies, with the most important being: 1) increasing production per unit of feedstock, 2) reducing negative environmental impacts. Therefore, they 9 Analysis of the Charcoal Value Chain in Kenya

recommend that any improved design kilns should comply with five key requirements: Simple in design, Small scale and fast cycle, efficient in use, economical to use and finally, environmentally benign. The Kenya Forest Service in collaboration with UNDP undertook a study to determine available charcoal production technologies in Kenya. Table 3 below has been modified from the survey report and summarises the different production technologies.

10 Analysis of the Charcoal Value Chain in Kenya

Table 2: Charcoal production technologies

Applicability Disadvantages Type of technology Advantages Efficiency (Large or small scale) / Challenges Not easy to control Used for mall scale Known and easily Traditional Earth Kiln Charcoal easily contaminated, 15-20 % production mounted pollution control Controlled air flow and Improved / Casamance Small scale production Stack arrangement need precision 26 – 30 % process Drum kilns A) KEFRI design For domestic use Easy to construct Charcoal easily contaminated 20-30 %

B) Maxwel design Makes use of the little Small scale Clean charcoal produced. 20 - 30 % twigs Mobile/high Mekko kiln ( Biochar) Both small/large Still prototype/ costly 50 – 75 % recovery/recycled gases Portability/good Portable metal kiln Both small/large costly 26 – 30 % recovery/ Ring Kilns Small/Industrial High recovery Costly 30 - 50 % Brick kilns a. Half orange kilns Small scale Uses small materials Costly 50 - 60 % b. Dome shaped Can be for large scale Large scale Costly transportation of materials 28 – 30 % production c. Rectangular shaped Good recovery, and for Small scale Transportation of materials 28 – 30 % enterprise development Mobile, other by Retort Large scale use Costly and need large materials 70 – 80 % products Source: Kenya Forestry Service, USAID, UNDP, GEF Umbrella Cost Sharing Agreement. Report (2008).

1.4.3 Charcoal Marketing Charcoal is a highly commercialized commodity which can be transported economically over long distances. Studies indicate that only a small proportion of households produce charcoal for own use (7%), while the majority of households (93%) buy it mainly for cooking (Republic of Kenya, 2002). This is collaborated by finding from the national charcoal survey which revealed that it is an established part of mainstream Kenyan life with customers ranging from households to food businesses (Mutimba and Baraza, 2005). The most common charcoal supply chain consists of three levels. First the transporters visit the production site or a designated collection point with a motorised or non-motorised means of transportation and buy the charcoal in bulk. They then transport the charcoal to vendors (wholesale or retail) mostly in urban areas. In the national survey study findings (Mutimba and Baraza, 2005), 56% of producers sold their charcoal to vendors via transporters as well as directly to households, food businesses and other customers including social institutions. Charcoal is packaged using second-hand maize or sugar sacks and twine ropes. A standard bag contains about 35kg of charcoal with twine ropes woven on top of the sack to secure the charcoal. At the retail level it is sold in different quantities. On one end there are outlets for bulk purchases using bags, while at the other end are small scale retailers, found within very close proximity to households (CHAPOSA, 2002). This small scale retailers mostly sell charcoal in small units, the most common being the 2 kg tin.

1.4.4 Taxation and Other Fiscal Measures Relevant to Charcoal

Within the charcoal sector, the current licensing systems are not related to sustainable harvests. These systems operate merely for revenue collection and do not give any regard to the quantities of wood harvested vis-à-vis sustainable yields (World Bank, 2011). The Forest Act and Charcoal Rules 2009, require wood producers to get licences from the Kenya Forest Service in order to harvest trees for commercial charcoal production. Charcoal transporters are also issued with a movement permit by KFS for transporting the charcoal to urban areas. At the same time, the director of KFS is required to issue export and import permits for charcoal. The law empowers forest officials to levy fines and penalties for transporting and trading charcoal without the required licenses. Business owners operating within municipalities and county councils, where the charcoal is sold, are required to have business permits (trade licences) irrespective of what they sell. Despite it being a KES 32 billion industry, no formal taxes are levied on charcoal. It is estimated that the Kenyan economy loses about KES5.1 billion annually, based on the 16 per cent value added tax due to lack of an appropriate taxation system for charcoal (Mutimba and Barasa 2005).

1.5 Comparative Analysis of Regional Charcoal Production Systems and Value Chains A literature review was conducted so as to make a comparison of charcoal production systems and charcoal value chains for Rwanda, Malawi and Uganda. Rwanda is reported to be one of the few countries with increasing forest cover, growing about 7% from 2000 to 2005 primarily due to large numbers of forest plantations. The country’s charcoal production system is characterised by high timber and woodfuel prices due to massive prior deforestation. Most of the charcoal is derived from trees planted on government, private or community land. Charcoal is no longer being produced from natural forests and the remaining rainforests are well conserved. There exists secure land tenure and improved market control and negotiation power of farmers/ charcoal producers. Due to the rising income, there is improved social standing of farmers in rural society (NL Agency, 2011).

In Uganda, charcoal is produced mainly from woodlands which constitute roughly 3,975,000 hectares or 81 percent of Uganda’s total forested area. Charcoal production is concentrated in central Uganda and parts of western and northern Uganda, with the main species utilized for production being; Combretum; Terminalia; Albizia; Acacia; Allophylus and Grewia spp. These woodlands are characterised by low rainfall and charcoal production is undertaken as a main activity by the locals or at times as a complement to land clearing which produces large volumes of raw material suitable for conversion to charcoal (Shively, et al., 2010). Most of the charcoal produced in these areas is transported to Kampala city. There is lack of control at all levels in the value chain due to the weak capacities of the forest authorities (Kakuru, 2012).

In Malawi, 60% of the charcoal consumed in the major urban areas including Blantyre City, Lilongwe City, Mzuzu City and the Municipality of Zomba is mainly produced from Forest Reserves and National Parks. 40% comes from customary land and 2% of charcoal comes in from Mozambique. Also, charcoal making is altering the species composition of forests and production is done using traditional earth kilns which is wasteful and inefficient (Kambewa, et al 2007).

In all the three countries, the industry provides substantial employment for those involved in charcoal production, transportation and trade. In Rwanda, surveys in 2010 indicate the sector employs more than 300, 000 people in wood production, and 8,000 people in charcoal production, with a further 200-300 people involved in its transportation (Blodgett, 2011). In Uganda, around 200,000 permanently earn money from charcoal ESD (2007). In Malawi, a study by Kambewa, et al (2007) estimated that 92,800 people owed their livelihoods to charcoal. This included 46,500 producers, 12,500 bicycle transporters, 300 other transporters and 33,500 traders.

In terms of revenue generated, there are significant variations in the three countries. The charcoal industry revenue accounts for about 0.5% of Malawi’s GDP. The approximate value of the industry in the four largest urban areas of Malawi is roughly US $41.3 million, a figure that is slightly less than the value of Malawi’s tea industry (Kambewa, et al 2007). In Rwanda, the industry contributes to between 1.1% and 5% of its GDP (Blodgett, 2011). Closer to Kenya, the

13 Analysis of the Charcoal Value Chain in Kenya

industry’s contribution to Uganda’s GDP stood at Ushs 70 billion (Approximately USD 36,175,711-1 USD=1935) (Knöpfle, 2004).

Benefits are almost evenly distributed among stakeholders in the charcoal value chain in Malawi, with values accruing to producers ranging from 20% to 33% of retail price, transporters earning 20% to 25% of final value and retailers making the greatest profits of 25% to 33% of final selling price (Kambewa, et al 2007). A study analysing the Profits and margins along Uganda’s charcoal value chain (Shively et al 2010), reveals the greatest overall returns to participation in the charcoal value chain is among traders. Within the Rwandese value chain, wood production sector was valued at US$ 8.7 million, carbonization at US$ 17.5 million, transport sector at US$ 19.7 million and the retail and distribution at US$ 6.5 million (Blodgett, 2011).

14 Analysis of the Charcoal Value Chain in Kenya

2 Policies and Legislative Frameworks

2.1 Energy Act and Policy The enactment of the Energy Act (2006) and shortly after the passing of the Energy Policy 2007 heralded a new era in energy planning in Kenya that was dynamic enough to enable responsiveness to prevailing energy issues within a short time. The Energy Act of 2006 consolidated the Electricity Act and the Petroleum Act into one new statute and established the Energy Regulatory Commission (ERC) and other statutory bodies to manage specific aspects of energy in Kenya. Although pundits pointed out several deficiencies – for example that it still focused too much on electricity and petroleum, had no strategies for renewable energy development, and a flawed appointment procedure to the ERC – it still was a big departure from traditional energy planning in Kenya. The energy policy of 2007 on its part emphasized the need for the availability of energy, accessibility at cost effective prices and the supply to support sustainable socioeconomic development while protecting and conserving the environment. For the first time, there were specific provisions for the promotion of renewable energy including biomass. The Energy Act (2006) provides:“The Minister shall promote the development and use of renewable energy technologies, including but not limited to biomass, biodiesel, bioethanol, charcoal, fuelwood, solar, wind, tidal waves, hydropower, biogas and municipal waste.” Regarding institutional and regulatory arrangements, the policy pledges to ensure the integration and harmonization of policies, plans, strategies and operations of the energy sector and sub- sectors, and with policies of other sectors of the economy through a strategy of:  Streamlining areas of responsibility in the provision of energy services to rural areas;  Establishing an autonomous body, responsible for rural energy, including electrification. This is no doubt to address the long term skewedness in rural versus urban energy supply in favour of the urban areas.

The policy promotes efficient production and use of energy (e.g. firewood and charcoal), and encourages cogeneration as an efficiency measure. It calls for power sector reform, to improve supply and pricing strategies (tariffs). Research and Development also features in the policy as one way of improving both energy supply and efficient utilization. It proposes improved data collection and database management for improved planning.

2.1.1 Revisions to the Energy Policy (2012) Although the Energy Policy (2007) was a major improvement, no sooner was it passed than it became apparent that there was need to align energy policy with overall development goals. A point to note is that this situation is not unique to the Energy Policy alone. In order to achieve integrated and harmonized national development, it has become necessary to align all development programmes with Kenya’s long term development blueprint popularly known as Vision 2030 (Government of Kenya, 2007). This necessitated the revision of the Energy Policy

15 Analysis of the Charcoal Value Chain in Kenya

(2007) to ensure it is in line with Vision 2030, The National Climate Change Response Strategy (NCCRS) as well as the Constitution. The Constitution has provisions that Kenyans have a right to quality and adequate services which can be interpreted to include energy supply services. The revised policy also takes into account the fact that Kenya now has proven deposits of oil.

2.2 The Forests Act (2005) and Draft Forest Policy (2007) Although the policies relevant to biomass energy for a long time existed in a disjointed manner scattered in various departments or ministries with glaring lack of coherence, recent events have shown significant changes. Previously, it was common to find diffuse energy policy issues within different development plans and policy documents. Most encouragingly, changes dating from mid-2000 have shown progress towards harmonization of the policy and institutional framework. Kenya’s Forests Act 2005 became operational in February 2007. Its operations are informed by other policies/legislation including, the Forest policy, the Kenya Forestry Master Plan and the Environmental Management and Co-ordination Act of 1999. The new Forests act places emphasis on sustainable forest management, and recognizes opportunities in well managed biomass energy and charcoal production systems. For example, Sessional Paper No. 9 on Forest Policy (2005) provided for: i. Promotion of sustainable and efficient utilization of woodfuel; ii. The promotion of efficient wood energy technologies; iii. The regulation and production and marketing of charcoal.

This policy document has since been revised into Sessional Paper No. 1 of 2007 on Forest Policy which reiterates these provisions. The revised document also takes cognizance of other opportunities such as carbon sequestration and carbon markets (including REDD+) which can be exploited to provide incentives for participating in sustainable charcoal.

2.2.1 A Policy Response to the “Charcoal Problem” Charcoal was for a long time decried as the leading cause of deforestation and numerous but unsuccessful attempts were made to ban its production. For a long time, charcoal production was widely criminalized yet it remained the most ubiquitously traded energy commodity on the streets of many towns and cities. The reality that charcoal is an integral part of Kenya’s energy mix which needs regulation rather than stop-gap reactive responses however eventually prevailed and consequently the charcoal rules were formulated and anchored under the Forest Act of 2005. This gave rise to The Forests (Charcoal) Regulations 2009, popularly known as the “Charcoal Rules” which relate to forestry and sustainable charcoal production, transportation and marketing. For the first time, the Charcoal Rules provide for an institution to coordinate sustainable charcoal production, the licensing of charcoal production and marketing, in addition to prescribing sanctions for contravening the provisions therein. Although critics have pointed out some inconsistencies in the regulations, for example in the matter relating to charcoal associations (does the use of commercial charcoal imply that one could still produce “non- commercial” charcoal without belonging to an association?), it is still considered a significant step towards regulating the industry.

16 Analysis of the Charcoal Value Chain in Kenya

The passage of the so-called “Charcoal Rules” to date however has yet to see any tangible benefits. Mugo and Ong (2006) observe that banning the making and transportation of charcoal in African countries including Kenya prior to the enactment of the Charcoal regulations has largely been unsuccessful in regulating its production and trade. They argue that matters are made worse because there are no incentives for investment in planned charcoal production and consequently, the current charcoal business is unsustainable and has a negative image. They conclude that despite the gains made by enactment of the Forest Act in Kenya, implementation of the law tends to depend largely on the political goodwill of the officials in office.

2.3 The Constitution of Kenya (2010) The constitution provides for a two-tier structure of government, i.e. the National and the County Governments. It distributes the functions and powers between the two levels as detailed in Chapter Eleven and the Fourth Schedule. Specifically in relation to the energy sector, Part 1 of the Fourth Schedule provides that the National Government shall be responsible for:- (a) Protection of the environment and natural resources with a view to establishing a durable and sustainable system of development including water protection, securing sufficient residual water, hydraulic engineering and the safety of dams (b) Energy policy including electricity and gas reticulation and energy regulation (c) Public investment.

In relation to the County Governments, Part 2 of the Fourth Schedule provides that they shall be responsible for county planning and development including electricity and gas reticulation and energy regulation. The constitution also has provisions on maintaining a minimum forest cover of 10%. This would form a good entry point for sustainable forest management and conservation and by extension sustainable charcoal production.

2.4 Other Policies and legislative Frameworks Relevant to the Charcoal Industry Kenya has other policies addressing different sectoral issues but with provisions therein that are directly or indirectly relevant to charcoal. These are summarized in Table 2 below:

Table 3: Other policies and Legislation relevant to charcoal

Policy/Legislation Policy Goals Key provisions relevant to the charcoal industry 1. Agriculture Increasing productivity and  Increasing agricultural productivity and Policy income growth, especially incomes, especially for small-holder for smallholders; enhanced farmers; food security and equity,  Emphasis on irrigation to reduce over- emphasis on irrigation to reliance on rain-fed agriculture in the face introduce stability in of limited high potential agricultural land; agricultural output,  Encouraging diversification into non- commercialization and traditional agricultural commodities and intensification of production value addition to reduce vulnerability;

17 Analysis of the Charcoal Value Chain in Kenya

especially among small  Enhancing the food security and a reduction scale farmers; appropriate in the number of those suffering from and participatory policy hunger and hence the achievement of formulation and MDGs; environmental  Encouraging private-sector-led sustainability. development of the sector.  Ensuring environmental sustainability. 2. National Land To guide the country The policy emphasizes the need to address Policy through the sustainable and environmental degradation and the need for equitable use of land. security of tenure for all Kenyans, including all marginalized groups, communities and women.

3. Draft To help the government  Identify and raise awareness of Environmental combat climate change opportunities for adaptation measures Policy through mitigation and through promotion of appropriate adaptation technology transfer and capacity building;  Develop and implement under the Kyoto Protocol’s Clean Development Mechanism (CDM) programmes and projects that encourage significant levels of investment and technology transfer for sustainable development;  Build and strengthen research capacity on climate change and related environmental issues. 4. Environmental Provides the legal Recognizes the need to promote renewable Management framework for energy. and environmental concerns Coordination within Kenya Act (EMCA) 1999

2.5 National Development Plans

2.5.1 Vision 2030 – Long-term and Medium Term Plan Vision 2030 is Kenya’s development blueprint covering the period 2008 to 2030. It aims at making Kenya a newly industrialized, “middle income country providing high quality life for all its citizens by the year 2030”. The vision is based on three “pillars” namely; the economic pillar, the social pillar and the political pillar. The Vision is implemented through successive five year Medium Term Plans (MTPs), with the first MTP launched simultaneously with the Vision

18 Analysis of the Charcoal Value Chain in Kenya

expiring in 2012 and second MTP (2013-2017) to be launched in June 2013. The envisioned target growth in gross domestic product (GDP) of 10 per cent over the next three decades will inevitably result in heavy demand for energy.

2.6 Overview of specific projects, plans and programmes relevant to charcoal

2.6.1 The Kenya Charcoal Policy Handbook A charcoal policy handbook was prepared in 2011 by Practical Action through its consulting firm Practical Action Consulting. The handbook is intended to make it easier to understand policies and legislation affecting the charcoal sector. It also aims to create awareness and understanding of the provisions amongst key players in the charcoal value chain. The Handbook postulates that once the charcoal policies and rules are fully understood, adopted and implemented, the following benefits are expected:  Increased investment in sustainable charcoal  Increased wood supply  Open and increased charcoal trade  Elimination of un-official taxes (bribes)  Time savings, i.e. transporters will save time previously spent making stops at many police posts along the road between the collection points and selling points.  Increased contribution to government revenue through legal taxation of charcoal.  Improved environmental health  Incentives for improving efficiency: a stable and well-regulated market will make it attractive to invest in improved technology for charcoal production.

2.7 Synergies and conflicts between existing plans, development policies and legislation and charcoal production All the plans, policies related to environment and natural resources management including the Forests policy and Act, the Energy policy and Act, etc. strongly advocate for commercial and sustainable tree growing. The major goal is to ensure increased tree cover, improved community and reduced pressure on gazetted forests. The new constitution also advocates for a minimum 10 percent tree cover in the country.

However, shortage of wood for charcoal production still looms as there has been no effort to invest in the growing of trees in Kenya so as to meet the rising demand for charcoal. Unsustainable charcoal production has continued unabated in natural woodlands, especially in arid and semi-arid areas, which has led to severe environmental degradation (Mugo and Ong, 2006).

There exist many government Ministries and agencies mandated to ensure sustainable supply of woodfuel. These include the Ministries of Energy, environment, Agriculture and the Kenya Forest Service. There is a lack of coordination among these different agencies on who assumes overall responsibility for production of feedstock , carbonization and distribution of charcoal.

19 Analysis of the Charcoal Value Chain in Kenya

Charcoal production inefficiencies lead to massive wastages. Efficiency not only depends on the type of kiln used, but also on the type of wood, its moisture content, density and diameter as well as the experience of the operator and even climatic conditions (Mugo and Ong, 2007). The traditional earth kilns, which are the most commonly used by charcoal producers in Kenya, have a very low efficiency of 10-20 percent in converting wood to charcoal (Mutimba and Barasa 2005).

20 Analysis of the Charcoal Value Chain in Kenya

3 The Charcoal Value Chain

3.1 Overview The charcoal value chain analysis identified all relevant chain links (elements, or stages/functions of the charcoal production, transportation, marketing and consumption) and corresponding categories of stakeholders. From literature reviews, questionnaire surveys and case studies, the Kenyan charcoal industry players were identified and followed upstream from consumers, along the market chain and back to the producers. This was then enriched with participatory value chain mapping process through FGDs of government officials, CFAs, CPAs, Charcoal producers, transporters, traders and civil society groups within the five conservancies (Coast, Eastern, North Rift, South Rift and Nairobi) visited. Analysing the charcoal value chain provided an understanding of the economics of the industry and its functions.

3.1.1 Charcoal production Findings from the study revealed that charcoal is produced throughout the year, though quantities varied with seasons. Even though its demand within the urban areas peaked during the rainy season, most producers reported a disruption in charcoal production either due to increased logistical problems, or abandonment in favour of farming activities. The average amount of charcoal per producer is approximately 30 bags per month. The number of producers operating within CPAs as envisaged in the Charcoal Regulations across all the counties comes to about 28, 201. Assuming a ratio of 1 to 8 of the registered to the non registered producers belonging to CPAs (established from FGDs) the total number of producers is estimated at 253, 808, an increase of 27% from the estimate provided in 2005 (Mutimba and Barasa 2005).

The estimated number of bags produced annually based on the survey is 70,000,000 bags, translating to about 2,500,000 tonnes of charcoal being produced (Refer to Table 11 in Annex 1). This represents an increase of 53% from the figure of 1.6 million tonnes reported for 2005 (Mutimba and Barasa 2005). The figure is slightly lower than the figure of 3,632, 663.44 tonnes that was projected by Kamfor (MoE, 2002) for the same population (44 million) under the business as usual scenario, but higher than the projected figure of 2,070, 649.89 tonnes with the introduction of policy, legislative and institutional changes within the sector. Working from the assumption that the Kenya Forest Service collects a licence fee of KES 20 per bag of charcoal produced and legally transported, the annual revenue collected by the regulator 1 therefore exceeds KES. 200 million (i.e KES 20/bag X 10,152,334.88 ). This represents 15% compliance. If the compliance rate is increased to 50% the revenue due to Government approaches KES 700, 000, 000 annually. At 100% compliance the annual revenue from the forestry sector easily rises to over KES 1.3 billion (i.e KES 20/bag X 697000002 bags) from charcoal alone.

1 This is the number of bags of charcoal accounted for through the KFS licensing system from the survey

2This is the estimated annual charcoal production level from all the counties from the survey

21 Analysis of the Charcoal Value Chain in Kenya

Considered holistically the annual contribution of charcoal to the economy is estimated at about KES 135 billion (i.e. KES 19493 per bag X 69,700,000 bags). The contribution to the economy is much higher than the KES 32 billion annual contribution presented by Mutimba and Baraza in 2005) as would be expected but also exceeds any projections that would be drawn from the 2005 data. This is mainly due to the increase in total quantity of bags produced annually as well as the disproportionate increase in the price per bag of charcoal (see Table 4 below). Table 4 shows that whereas production grew by about 53% from 2005-2013, the unit price increased by 178% over the same period. Table 4: Summary charcoal statistics for 2004 and 2013 Year 2004 Year 2013 Number of producers 200,000 253,808 Number of people involved in 500,000 635,483 charcoal trade Annual charcoal production 1.6 million tonnes 70,000,000 bags (2.54 million tonnes) Annual total income from KES 32 billion (US$ 0.4 KES 135 billion (US$1.65 charcoal Billion) Billion) Estimated government KES 5.1 Billion (US$63.7 KES 21.6 B (US$254M) revenue lost per annum Million) (16%VAT) Average monthly income: KES 4,496 KES 8,4006 Producers Average monthly income: KES 11,298 KES 189,0007 transporters Average monthly income: KES 7,503 KES 48,8008 Wholesalers Average monthly income: KES 7,503 KES 12,6249 retailers Average price KES/bag: KES 201 KES 438 Producers Average price KES/bag: KES 700 KES 1,949 Vending (Retail)

The study also revealed that most trees used for charcoal production are sourced from producers’ own farms, private and trust lands. For example, in Kwale country, where charcoal is mainly produced from trust lands (Samburu) and range lands (Lunga Lunga and Mwereni), CPAs have signed resource consents for charcoal production with the ranch managers. In Kitui zone within

3 This is the prevailing average retail price for a bag of charcoal in the major marketing points from the survey 4 1 bag of charcoal weighs 35Kg from survey 5 Exchange rate is 1US$= KES 85 6 Income=30 bags per month X KES 280 per Bag 7 Income=900 bags per month X KES 210 per bag 8 Income = 200 bags per month X KES 244 per bag 9 Income = 16 bags per month X KES 789 per bag

22 Analysis of the Charcoal Value Chain in Kenya

Kitui County, charcoal is produced from individually owned farms within the areas of Mutomo, Muthaa and Katene. However, charcoal production in Kitui zone within Kitui County has been banned by KFS since 2012. In Baringo, most of the charcoal is from Prosopis juliflora growing on private farms. In Kajiado County, majority of the charcoal is produced from trees on farmlands. This is in agreement with Mutimba and Baraza (2005) who reported 44% of charcoal being produced from trees on producer’s own farm and 38% from private land. In some of these areas, land is managed for livestock production; squatters clear trees, shrubs and bushes to free up the land for pasture production; charcoal is then produced from the cleared wood (Mugo and Ong, 2006). Figure 3 below summarizesthese findings. The pie-chart indicates that about 16% of charcoal feedstock comes from outside the country including neighboring countries such as Uganda, Tamzania, Ethiopia and Somalia.

Figure 3: Main sources of wood for charcoal produced as reported by KFS officers The Kenya Forest Service imposed a total ban on charcoal production in 2012 in Kitui Zone. An unintended outcome of this ban according to the local community and the Forester has been an increase in illegal production of charcoal including from protected areas such as the Kitui South National Forest reserve (Where charcoal production is prohibited as per the Forest Act). A likely explanation for this is that since no permits/licenses are issued for charcoal production or movement for the duration of the ban, any charcoal production that is taking place will happen without due regard to the established regulations. Furthermore it opens avenues for corrupt practises and for as long as the perpetrators can evade the law there is no reason to observe sustainability measures. Even before the ban the local charcoal traders expressed dissatisfaction with some restrictions introduced by the regulatory authority which further undermines adherence to the regulations. For example, the Kitui District DEC limits charcoal production to not more than 50 bags per year for each CPA member. The limitation appears to be arbitrary and not is not based on any

23 Analysis of the Charcoal Value Chain in Kenya

empirical data (e.g. to indicate that 50 bags is the sustainable production level). The desire by members to increase their production beyond this limit also creates opportunities for corruption and ultimately resulting in further degradation.

This situation was also reported in Kajiado County, where Forest officials had recently stopped the issuance of charcoal movement permits to address forest resource sustainability concerns. However the locals consider the move punitive as it denies them the only source of income. Predictably there is no adherence to the ban as witnessed by the researchers during the study.

Figure 4: Percentage of tree species utilised for charcoal prodution for charcoal passing through the KFS permit system

It was established that species choice for charcoal production was highly dependent on tree availability rather than the quality of charcoal. Due to their availability, Acacia species were the most widely utilised tree species based on the information collected from the counties (Figure 4). Mutimba and Baraza (2005) identified Acacia tortilis, A. nilotica, A. senegal, A. mellifera, A. polyacantha, and A. Xanthophloea as the most widely used (38 per cent) and preferred (45 per cent). In Baringo County, charcoal is produced from an invasive tree species known as Prosopis Juliflora (Mathenge). Past studies have reported use of Mathenge in Garissa, Lelechwa shrub (Tarchonathus camphoratus) in Narok and from multipurpose trees in high potential areas including Meru, Lugari, Kilifi and Mt. Elgon (Mutimba and Baraza 2005).

24 Analysis of the Charcoal Value Chain in Kenya

Figure 5: Prosopis juliflora stacked and left to dry in readiness for carbonization in Baringo County

The main method for converting wood to charcoal is the earth-mound and pit kilns with 10-14% wood-to-charcoal conversion efficiency. Past studies have also reported use of the above methods (Mutimba and Barasa 2005, Mugo and Ong, 2006). In the recent past, KFS in collaboration with KEFRI, UNDP, Miti Mingi Maisha Bora Project (MMMB), Micro Enterprise Support Program Trust (MESPIT) and others have been promoting more efficient (improved) technologies such as improved earth Kiln, casamance and Brazillian masonry (or “beehive”) kiln. These technologies have efficiencies of up to 30% (Bailis R., 2009). Within the sites visited most producers had been trained on using these kilns with Kitui and Baringo counties having demonstration Kilns set up within specific locations. However, their actual use in charcoal production in the sites visited was very minimal. High costs of establishment were the main reason given by most of the producers interviewed.

25 Analysis of the Charcoal Value Chain in Kenya

Figure 6: A KFS supported brick kiln in Mutomo, Kitui

Figure 7: Charcoal production using a traditional kiln in Kajiado

26 Analysis of the Charcoal Value Chain in Kenya

Figure 8: Charcoal production using an improved kiln in Baringo

3.1.2 Transportation and Marketing From the national census of 500,000 (Mutimba and Bazara, 2005) and assuming an annual growth rate of 2.77% the number of people involved in transportation and marketing is estimated to be 635,483 in 2013. At the production site, charcoal is packaged into second hand maize or sugar sacks with twine ropes weaved on top to secure the charcoal. Since there are no standards for the weight of a bag of charcoal, casual observation within the different sites visited revealed variations in bag sizes and weight filled with charcoal. PISCES (2010) summarises variations in weight as follows: in Kitui a bag of charcoal weighs 42 kilogrammes, in Kakuzi (a large scale charcoal producer in Central Kenya) a bag weighs 35 kilogrammes on average, while in Bondo a bag weighs about 45 kilogrammes. An average weight of 35kg/bag has been used in all the calculations presented in the report.

In order to transport more than 3 bags of charcoal, one has to get a movement permit from the forest officer. However, these bags can only be transported between 6.00 am and 6.00 pm. Charcoal is always transported either directly to the next market or to the roadside to await buyers, with transportation from the production site done by the person who is selling at the next stage. However, findings from this study revealed otherwise. In Kwale, Kitui and Baringo Counties a large number of producers through their CPAs ferried charcoal from production sites to designated collection points for transporters to pick up from. On the other hand, transporters had to ferry charcoal from production sites in Kajiado County.

27 Analysis of the Charcoal Value Chain in Kenya

Figure 9: Taru charcoal collection point for Samburu CPA in Kwale County

Within the study sites, the most common forms of transport observed were Lorries, with motor bikes replacing bicycles as the most preferred means for short to medium distance movement within peri-urban centres such as Kajiado. Donkeys were used to ferry charcoal from remote locations and carts were mainly found in urban centres. Motor bikes were also used as a way to avoid obtaining charcoal movement permits; as these motorbikes usually carried 3 bags per trip as stipulated within the rules but would go for more than two trips in a day. Within Kajiado County, some motorists were observed hiding close to 5 bags in the boot of tinted Toyota Probox cars. This was also another way of transporting charcoal clandestinely without obtaining a movement permit.

28 Analysis of the Charcoal Value Chain in Kenya

Figure 10: Charcoal being transported on a motorcycle from farmlands to the market in Kajiado

A survey of charcoal transporters within Nairobi County revealed that 10% Bicycles, 30% Carts, 70% Lorries and Canters were used for transporting charcoal. 90% of the transporters interviewed were male. Findings from this study thus concur with those of Mutimba and Baraza (2005) which reported the common means of transport as (Motorised) Lorries and pick-ups and (Non-Motorised) bicycles, donkeys and carts.

Figure 11: Percentage of different modes of transport within Nairobi

29 Analysis of the Charcoal Value Chain in Kenya

3.1.3 Charcoal consumption Charcoal is sold in most of the major markets and on the roadside as well as out of kiosks. It is sold in either 35 kg bags or 2kg tins. It is mainly consumed by the poor and middle class within urban areas. For them, charcoal is a reliable, convenient and an accessible source of energy for cooking at a stable cost when compared to other sources such as electricity and kerosene (BTG, 2010, Mugo and Ong, 2006). Consumers can be classified into; households which refer to charcoal for household use, commercial businesses such as hotel, restaurants, Jua Kali shades, institutions including schools, hospitals.

Figure 12: The main urban markets for charcoal passing through the KFS permit system

From the Nairobi questionnaire survey; retailers’ main markets were households (20%), Households and commercial enterprises (67%), Households, commercial enterprises and institutions (10%), households and institutions (3%). The retailers’ source of charcoal was 7% from producers, 80% from transporters, 7% from wholesalers (depots) and 7% from both producer and transporter.

30 Analysis of the Charcoal Value Chain in Kenya

Figure 13: Percentage of retailers’ main market in Nairobi

Figure 14: Percentage of retailers’ sources of charcoal in Nairobi

31 Analysis of the Charcoal Value Chain in Kenya

Figure 15: Charcoal being sold along the roadside in Baringo County

In the recent past there have been initiatives to ensure energy efficiency in charcoal utilisation through the introduction of improved cookstoves. The development of the Kenya Ceramic Jiko (KCJ) has been regarded as one of the most successful innovations ever, with about 85% of households in urban areas using it. The KCJ is a charcoal-burning stove consisting of a ceramic liner fitted inside a metal case. It uses between 25 – 40% less charcoal than any of its predecessors (Mary Njenga et al. 2013).

3.1.4 Briquette production from charcoal dust During charcoal production, transportation, at wholesale and retail stalls some charcoal ends up as waste in form of dust. Mary Njenga et al., (2013) estimated between 10 to 15% of charcoal end up as waste, with Nairobi alone producing tonnes of charcoal dust daily from wholesale and retail stalls. The dust can be compacted into briquettes; a combustible material used as a supplement or alternative to firewood and charcoal for heating or cooking. Utilising briquettes as an alternative form of fuel makes use of a waste product and reduces pressure on forestry resources.

Charcoal briquette production in Kenya is well documented, with about 82 per cent of briquette producers in the country using manual machine presses, 25 per cent using electricity, and 10 per cent using other means (Mary Njenga et al., 2013). One of the best-known companies in the industry is the Nairobi-based Chardust Ltd. Since 2000, Chardust Ltd has developed innovative techniques to convert biomass wastes into low-cost charcoal briquettes. Its production has grown steadily from a low of 0.4 t/ day in 2003 to the current production capacity of five tonnes of briquettes daily. The company sells its standard product at KES. 780 per 50 kg sack with a minimum order of 20 bags. The briquettes are used in homes, food kiosks, and hotels,

32 Analysis of the Charcoal Value Chain in Kenya

institutions such as schools, chicken hatcheries, and bakeries (EEP / SEA, 2012), even though the percentage of the population using briquettes is currently considered to be very low when compared to the potential.

In all the sites visited, charcoal dust was not being utilised as would have been expected. In Kwale, Kitui, Kajiado and Baringo counties no producers were found to be making use of the charcoal dust even though there was plenty of it at the collection points. In Nairobi County, a casual observation of the retailers’ charcoal selling places revealed a collection of large amounts of the dust. The survey revealed that the producers and traders considered the dust a ‘menace’ to their businesses and had therefore not put in place any plans for its utilisation or conversion to briquettes.

Figure 16: Accumulation of charcoal dust within a collection centre in Kwale

3.2 Key Actors and practices along the charcoal value chain

In Kenya, charcoal represents the main energy source for urban households. Its production, transportation and marketing is mostly organised in an informal system. However, formalisation has begun to take shape, albeit slowly, through implementation of the charcoal rules 2009. According to the rules, commercial charcoal producing individuals or groups organise themselves into CPAs. Sometimes producers within a particular area first organise themselves into CPGs and join together to form CPAs. CPGs are registered with the ministry of social services as community based organisations (CBOs). Whereas CPAs register with the AG’s office and the KFS and are charged with facilitating sustainable production of charcoal by the membership and ensuring the implementation of reforestation and conservation plans. A

33 Analysis of the Charcoal Value Chain in Kenya

description of the key actors in the value chain is given below. They include: wood producers (tree growers), charcoal producers, transporters, wholesalers, retailers and consumers.

3.2.1 Wood Production Wood producers either manage the trees for charcoal production or own the tree resource and sell it to charcoal producers. In line with the chief’s Act and the Forest Act 2005 the wood producer is required to obtain a letter confirming land ownership status from his/her Area Chief, before being issued with a permit for cutting trees for commercial charcoal production by the Forest officer. The permit is issued free of charge.

In Kwale County, this study reveals that trees for charcoal production are sourced from range lands, ranches and trust lands. The Lunga Lunga and Mwereni group ranches which are approximately 146,000 hectares in size account for about 90% of charcoal produced from the county. The charcoal producers through their CPA sign resource consents with the Ranch Managers after payment of a monthly fee of KES, 2500. There is no restriction on the amount of charcoal produced from these ranches.

The situation is a lot different in Kitui, Kajiado and Baringo Counties. In these counties, trees for charcoal production are sourced from private forests. Most wood producers are the owners of these private forests and also double up as charcoal producers. In rare cases, these private forest owners normally sell trees on their land to charcoal producers, who pay according to the estimated size of trees. However, since 2012 there has been a ban on charcoal production in Kitui zone of Kitui County. At the moment, most of the charcoal from Kitui is believed to come from the Kitui South National Reserve.

Other key actors within the wood production include; Chiefs, Forest Officers, Local Authorities, DECs and transporters. The chief confirms the land ownership status and the forest officer issues harvesting permit. The county governments (formerly local authorities) are responsible for managing community land on behalf of the people resident in their counties. As per EMCA 1999, the District Environment Committee (DEC), which is composed of the then District Forest Officer (DFO), District Environment Officer (DEO), District Commissioner (DC), and other relevant district heads, is charged with ensuring sustainable environmental management at the district level10. Consequently, DEC has control over harvesting of trees for timber, charcoal and wood fuel within its area of jurisdiction.

Table 4: Summary of the actors within the wood production chain link

Stakeholder Role Gaps Kenya Forest Service  Under the Forest Act 2005 is in charge  Limited resources to roll out of the establishment, development and implementation of charcoal sustainable management, including regulations in the entire country conservation and rational utilization of  Lack of capacity to enforce

10 The designation of the members of the DEC or its current version under the devolved system of government is not clear as EMCA is yet to be revised to be in line with the 2010 constitution.

34 Analysis of the Charcoal Value Chain in Kenya

forest resources for the socio-economic  Lack of resources and difficulties development of the country. This is in mobility during supervision reinforced in the KFS service charter  Contradictory policies i.e. and strategic plan 2009/10-2013/14 officers do not have control over  Licensing of charcoal production private land CPAs, CPGs and  Manages/owns tree resources  Unsustainable sources of raw individual tree resource  Sources trees for charcoal production materials owners  Obtains production licence  Lack of knowledge on forest  Participate in the issuance of certificate resources management of origin thereby confirming the source  Weak associations of wood and species  Limited resources  Surveillance and supervision to ensure  Limited understanding of roles that the right species are harvested and  Limited business skills informing KFS officers of law breakers  Inadequate alternative livelihoods  Limited authority to enforce laws Chiefs  Confirming land ownership status  Contradictory policies  Corruption DEC  Regulation of tree harvesting for  Lack of accurate estimates of charcoal production biomass quantities in helping  Approval of conservation plan regulate wood production  Approval of resource use consent  Lack of necessary skills  Lack of functional monitoring and evaluation systems County governments  Manages community land on behalf of  Lack of resource use plans the local people Ranch managers /land  Lease out ranches/farms for tree  Lack of resource use plans owners harvesting Transporters  Train and promote tree planting.  Limited skills on tree planting Through their associations distribute and management free tree seeds/seedlings  Weak groups Civil Society  Awareness creation, capacity building  Uncoordinated activities Organisations  Dependent on donor goodwill  Do not always support charcoal (whether sustainable or unsustainable)

3.2.2 Charcoal producers Charcoal producers are the main stakeholders within the carbonisation sector of the CVC. As a result of the new charcoal rules, most charcoal producers have organised themselves into CPAs. Current figures obtained from KFS reveal an estimated 150 CPAs registered countrywide. In Kwale county 3 CPAs; Samburu, Kinango and Msambweni have been formed and registered with the AG as well as the KFS. In Kitui Zone of Kitui County; Mutomo, Muthaa and Katane CPAs have been established. Lokasacha CPA and Maa Agroforestry Charcoal association have been formed in Baringo and Kajiado counties respectively. Membership within the CPAs ranged from 30 to about 1000 members, even though some charcoal producers in the counties visited were yet to join. Despite having sent their applications for registration to KFS in line with the Charcoal rules 2009, none of the CPAs had been registered so far.

35 Analysis of the Charcoal Value Chain in Kenya

In Kajiado, Baringo and Kitui Zone of Kitui County, charcoal producers incurred no costs in acquiring trees for charcoal production as most trees were ‘freely’ obtained from their own farms. On the other hand, producers in Kwale County through their CPAs had to pay a monthly fee of KES 2500 to the Ranch Managers so as to access the trees within the range lands. In all the counties visited, most of the small scale charcoal producers were directly involved charcoal production and had no other alternative sources of income apart. Whereas, medium and large scale producers engaged labourers in cutting the wood, transporting it to the kiln, digging the kiln, firing up the kiln, ensuring completion of carbonisation, extracting the charcoal once cooled and packaging into bags.

Other key actors within charcoal production are KEFRI, Kenya police service, KFS, transporters and Middlemen. KEFRI has been undertaking research on improved charcoal production technologies. KFS issues tree cutting permits for charcoal production and also have a role in ensuring sustainable production of charcoal. In some instances middlemen connect producers to transporters. For example, within Samburu CPA of Kwale County, charcoal is bought by middlemen from the Taru collection point and sold to transporters at Meli Kubwa on the main Nairobi-Mombasa highway.

Table 5: Summary of key actors within the charcoal production chain link

Stakeholder Role Gaps CPAs  Manages/owns tree resources  Not all producers have joined CPAs as  Sources trees for charcoal required by the charcoal rules production  Have minimal information in regards to  Supervision and surveillance effective technologies of the members to ensure  Costs of improved kilns is prohibitive that right species and  Not registered with KFS technologies are used and  Weak associations with minimal that producers sell from capacities and resources collection points, high  Limited understanding of roles quality standards are kept  Limited business skills  Coordinate and manage the  Inadequate alternative livelihoods charcoal collection centres on behalf of the producers  Bargain for better prices for the produce, sell and facilitate payment for the charcoal deliveries  Obtains production licence KEFRI  Undertakes research in  Information dissemination to the charcoal production stakeholders technologies  Documentation of research on charcoal  Research not informed by the needs

36 Analysis of the Charcoal Value Chain in Kenya

 Little research on the quality of charcoal from different species KFS  Issues charcoal production  Lack of capacity to enforce license  Lack of resources, especially for mobility during supervision and monitoring  Contradictory policies i.e. no control on private land Middlemen  Connects producer to  Offer low prices to producers transporter  Leads to increased prices of charcoal Ministry of  Grant licenses, in  Are they harmonised with similar Energy coordination with other provisions within the Forest Act and statutory Policy? For example licenses for  authorities, for sustainable sustainable charcoal production can only charcoal production be issued by the Energy Regulatory  Promote rational and Commission upon submission of efficient use of energy statutory documents. Which documents  Promote sustainable biomass are these? Could ERC be duplicating the energy plantations/woodlots role of KFS? Is it possible that ERC can issue a licence which is later rejected by KFS or vice versa? Or does possession of KFS permits mean one does not need ERC licence? Under what conditions would a potential investor in sustainable charcoal production require a license from KFS or ERC? Are both necessary or would only suffice? Which one? Why? Kenya Police  Harass producers demanding  Limited understanding of the charcoal Service bribes policy and laws governing charcoal production  Low integrity Transporters  Promote tree planting among  Limited understanding of the charcoal the producers through policy and laws governing charcoal trainings and provision of production seedlings  Weak associations with most  Key in determination of transporters operating independently charcoal pricing  Some double as producers  Buy charcoal producers and transport to markets

37 Analysis of the Charcoal Value Chain in Kenya

3.2.3 Charcoal Transporters Transporters buy and transfer charcoal from producers to either wholesalers and/or small scale retailers or even directly to consumers. Charcoal prices at this level vary with the season, food security status, tree species (quality), with the presence or absence of a production ban by the government and the strength and bargaining power of the CPA for members. However the prices range from KES250-450 a bag. The prices are mainly determined by the transporters with the prices being lowest during the bans and during drought and hunger seasons, when the producers become vulnerable

For transportation to take place transporters have to secure movement permits from KFS, normally at a fee of KESs. 20 per bag, for the transportation of more than 3 bags of charcoal. Within Kwale County, Kitui Zone of Kitui County and Baringo charcoal producers ferry the charcoal to designated collection points at their own cost, where they are loaded onto Lorries and personal vehicles for transportation to urban centres. While in Kajiado County, transporters pick up their charcoal from within the production area. In Kitui County, transporters have formed a Transporters Association-Kitui County Charcoal Transporters Association (KCCTA). KCCTA is registered by the Ministry of Gender as well as the AG’s office. They mainly transport charcoal to Nairobi, but have been seriously affected by the current ban on issuance of movement permits within Kitui County.

Other key actors include; KFS, local authorities, police and provincial administration and middlemen. The police and provincial administration are charged with ensuring traffic rules are adhered and maintaining law and order. Local authorities licence charcoal transportation (cess). Middlemen buy charcoal from transporters to sell to wholesalers or small scale retailers.

It was estimated from the study that each Lorry transported an average of between 200 and 350 bags of charcoal twice weekly. Fees paid by the transporters varied within the counties. In Kitui County, they pay cess of KES. 50 per bag up from KES. 20 that was reported by PICSES in 2010, and KES. 1,500 per lorry to the Nairobi County. The transporters were also forced to pay illegal taxes at police checkpoints along the highways. These illegal taxes vary from place to place, from over KES 20,000 as documented during the study to KES. 80,000 per trip for a lorry carrying 350 bags as reported by traders transporting charcoal from Kajiado and Kitui to Nairobi. These unofficial payments accounted for between 5% to 13% of the final value of a bag of charcoal. A study by Bailis (2006) reported that illegal taxes accounted for between 20% and 30% of the final value of charcoal. The lower range reported in this study represents a reduction in illegal taxes by between 15% and 17% mostly likely due to legalisation of charcoal following the enactment of the Charcoal Rules 2009.

Table 6: Summary of the actors within charcoal transportation

38 Analysis of the Charcoal Value Chain in Kenya

Stakeholder Role Gaps Charcoal transporters,  Buy charcoal from producers  Lack of reliable means of Charcoal transporter  Transport charcoal from transport associations production sites to urban  Have in place weak transport areas, sell charcoal to either associations brokers, wholesalers or  Not registered with KFS retailers  The charcoal rules do not explicitly recognise transporters or their associations  Weak associations  Limited resources  Limited understanding of roles  Limited business skills  Inadequate alternative livelihoods CPAs  Facilitate the issuance of  Limited capacity to offer certificate of origin to upfront payment to producers transporters  Limited capacity to transport  Consolidate charcoal at the charcoal to the market collection/bulking sites for  Not all producers are transporters registered with CPAs  Sell charcoal to transporters and receive money on behalf of the producers  Keep records of charcoal deliveries to collection centres and give payments to producers KFS  Issues movement permits  Lack of capacity to enforce  Lack of resources  Contradictory policies i.e. no control on private land County governments  Licensing of transportation  Variation in licence fees Police and Provincial  Maintains law and order  Corruption administration including ensuring  Lack of understanding of the adherence to traffic rules charcoal rules Middlemen  Buys charcoal from  Offer low prices to transporters and sells to transporters retailers  Leads to increased prices of charcoal

39 Analysis of the Charcoal Value Chain in Kenya

3.2.4 Charcoal Vendors: Wholesalers and Retailers Wholesalers purchase charcoal either from producers or transporters or brokers and sell to retailers in bags. They usually buy and sell their charcoal in bulk. Retailers buy their charcoal from either producers or transporters or wholesalers and sell to consumers. In some cases both wholesalers and retailers might sell their charcoal directly to consumers. Retailers sell their charcoal in 35kg bags and smaller units of ‘Debes’ and 2kg Tins at retail markets. Most of the retailers visited during the Nairobi questionnaire charcoal survey were engaged in other businesses in addition to selling charcoal. County governments which were formerly municipal councils are other key actors within the marking sector. They issue business licences to traders operating within their jurisdiction.

Table 7: Summary of the actors within Charcoal marketing

Stakeholder Role Gaps Wholesalers and  Purchases charcoal from the  Limited business skills Retailers transporter and middlemen  Inadequate alternative  Sells the charcoal at markets or livelihoods in Kiosks to consumers  Lack of storage facilities

County governments  Issuance of annual business  Corruption (formerly municipal licences  Lots of bureaucracy and county councils)

3.2.5 Charcoal consumers Most of the charcoal in Kenya is consumed in urban areas. A study by the Ministry of Energy (MoE, 2002) reported 82% charcoal consumption in urban areas compared to 34% of rural households in Kenya. The key actors in charcoal consumption are the consumers, KEFRI, MoE, NEMA, MoE and Non-governmental organisations including PRACTICAL ACTION, PISCES, AFREPREN/FWD, Green Africa Foundation. From the survey, it was realised that the majority of consumers were households, others were commercial businesses such as hotel, restaurants, Jua Kali shades, institutions including schools, hospitals. Charcoal is sold to the commercial businesses in 35kg bags, and for majority of households in 35 kg bags and 2kg tins.

Table 8: Summary of actors within charcoal consumption

Stakeholder Role Gaps Consumers  Burn charcoal of cooking  Lack of affordable alternative energy sources

MoE  Renewable energy policy  Information dissemination

40 Analysis of the Charcoal Value Chain in Kenya

formulation and implementation  Promoting alternative  Promoting renewable energies sources NGOs (PRACTICAL  Creating awareness on energy  Information dissemination ACTION, PISCES, efficient technologies and to the stakeholders AFREPREN/FWD, alternative energy sources  Documentation of research Green Africa  Piloting of alternative energy on charcoal Foundation). sources KEFRI  Undertakes research on improved  Information dissemination stoves to the stakeholders  Documentation of research on charcoal  Research not informed by the needs  Little research on the quality of charcoal from different species

41 Analysis of the Charcoal Value Chain in Kenya

4 Economic Analysis of the Charcoal Value Chain

4.1 Charcoal production Channels It emerged from this study that there are different and sometimes complex channels through which charcoal moves from producers to consumers. Five different channels identified from the study are summarised here with figure 15 below providing an illustration. Kambewa et al., 2007 reported similar channels in 2007

6. Channel 1: Wood producer to charcoal producer to transporter to retailer to consumer: Wood producer sells trees to charcoal producer. Small-scale buyer purchases charcoal from transporter and sells to consumers. 7. Channel 2: Wood Producer to charcoal producer to transporter to wholesaler to retailer to consumer: Wood producer sells trees to charcoal producer, who sell charcoal to transporter on carbonation. Wholesaler buys charcoal from transporter and sells to retailer who then sells to consumers. In this option there are both wholesale and retail markets. This is the most common channel in the market with the retailers selling charcoal to consumers in smaller quantities, usually 2Kg tin capacity packages. The compliance levels are high where the CPAs are stronger. The efficiency can be improved by empowering the CPAs to monitor and supervise the production processes to ensure the right species are harvested and that better prices are paid for the charcoal. The CPAs should also have better marketing strategies for the produce. There is enhanced environmental conservation when charcoal is sold to transporters at the joint collection point as the transporters do not have to burn fuel looking for charcoal from different points across the villages 8. Channel 3: Wood Producer to charcoal producer to broker to transporter to broker to wholesaler to retailer to consumer: A more complex option in which brokers link the producer to the transporter and the later to the wholesaler. The broker’s roles in the chain are mainly loading and off-loading, linkage to buyers and negotiation of prices with the buyers (either transporters or wholesalers). By ensuring ready markets are available to charcoal on production and/or delivery, the brokers facilitate faster sales and higher rates of stock turnover. The brokers earn about KES 50 per bag for the services. While the entry of the brokers ensure faster transactions the brokers at times interfere with the prices and offer lower prices especially to the producers 9. Channel 4: Producer to consumer: Usually a small-scale producer takes the charcoal directly to the consumer. In most cases the producer may have established customers or sells to whoever wishes to buy. This is mostly common along the highways and in places where the production sites are not far from towns. The buyers are the travellers and lorry drivers along the highways who buy in bags (35 kg bags). The consumer prices are much lower owing to reduced costs of transportation and shorter channels. The rates of stock turnover are however much lower. The producers and the consumers benefit from the trade with producers getting higher prices and consumers lower costs compared to other channels. However in terms of compliance to the charcoal rules and regulations, this channel has the highest rate of non- compliance with most of the producers not securing the transport permits

42 Analysis of the Charcoal Value Chain in Kenya

10. Channel 5: Wood producer to charcoal producer to retailer to consumer: Wood producer sells trees to charcoal producer. A small-scale buyer purchases charcoal from the producer and sells to consumers. In most cases the retailers meet the costs of transporting charcoal from the producer to the market. However a few producers are able to transport charcoal to the retailers at the market in which case the profits are higher.

While the first three channels are common in places where strong charcoal producer associations exist, the last two options are mostly practiced along the roadside with the people involved not having the requisite permits and documents to trade in charcoal.

The costs increase with the length of the chain. The charcoal prices also vary depending on the season with lower prices registered during the dry season and higher prices in the rainy season owing to low supplies and high cost of transport. Charcoal pricing increases from a low of KES 250/bag at the producer level to a high of KES 2800/bag at the consumer level, with the latter being realized where charcoal is sold to households in small 2kg-tins (Figure 18 and individual case studies). Producer costs include cost of wood amounting paid to the ranch owners by the charcoal producer groups (CPGs), the conservation fee payable to associations and labour. Most of the wood used to burn charcoal is either obtained freely from on-farm sources, or illegally from government sources. Overall charcoal production cost amount to an average of KES 100/bag. With the sales price of KES 250-350, the producers net income amounts to KES 150-350/bag. Transporters costs include the movement permit fee payable to KFS at a rate of KES 20/bag, Cess fee of KES 20-50/bag, cost of vehicle hire which varies with the size of the lorry and the distance to the market, the county council charges and the bribes paid to the police and the county council security.

43 Analysis of the Charcoal Value Chain in Kenya

Households

Retailers

Wholesalers

Local Authorities

Police

Road Side Middlemen

KFS

Production Site (wood and Charcoal)

Figure 17: Marketing channels for charcoal in Kenya

44 Analysis of the Charcoal Value Chain in Kenya

Charcoal value chains identified

Wood Charcoal Households Transporter Transporter (to Producer Producer Wholesaler (Middleman) market) Industrial

Retailer Commercial

Transporters Vendors Consumers

Total cost: 100/bag Total Costs: 810/bag Total Costs: 1400/bag Sales Price: KSh250-450/bag Sales Price: At Yard: 1000-1150/bag Sales Price:

Profit=KSh 150-350/bag Profit: 65-215/bag  Households 1600-2800/bag Profit range: 350-950/bag  Commercial/institutions: 1400-1800/bag-profit range 150-650/bag

Figure 18a: Wood producer to charcoal producer to transporters to vendors charcoal production chain

Charcoal Retailer Households Producer

To tal cost: Ksh 100/bag Total cost: Ksh 375-875/bag Sales Price: Ksh 250-750/bag Sales Price: KSh 1000-2000/bag Profit=150 -650/bag Profit=125-1625/bag

Figure 18b: Charcoal producer to retailer to consumer charcoal production chain Charcoal is at times sold by the producers directly to consumers, usually along the highways and by the roadside in bags at an average price of 600-750 per Bag attracting a profit of 300%-400% (Figure 18c). Here the total profit goes to the producer. The charcoal at this point is fairly cheap to the consumer as the cost of transportation is born by the consumer. However where the producer sells to a retailer who then sells to the consumer by the roadside the profit drops to 250%-300% for the producer with the retailer 33%-112% (Figure 18d), the producer market profit share drops from 100% to 48% with the retailer enjoying 52% of the market profit share. These sales are mostly illegal with the traders not acquiring the required documents. A part from the illegal status the production levels are difficult to monitor as individuals produce and sell independently and this can lead to high levels of degradation

Charcoal Producer Consumer Charcoal Producer Retailer Consumer

Total cost: Ksh 150/bag Total cost: Ksh 100/bag Total cost: Ksh 400-450/bag

Sales Price: Ksh 600-750/bag Sales Price: Ksh 350-400/bag Sales Price: Ksh 600-750/bag Profit=450-600/bag Profit=250-300/bag Profit=410-450/bag

Figure 18c and d: Producer to consumer/retailer charcoal production chain (for roadside sellers)

46 Analysis of the Charcoal Value Chain in Kenya

Wood Charcoal Retailer Consumer Producer Producer

Price received per 125 1400 1949 bag(KSh) Share Value 6% 66% 28%

Market Profit Share 7% 45% 48%

Figure 18e: Wood producer to charcoal producer to retailer to consumer charcoal production chain

The inclusion of the broker into the value chain however reduces the profit share enjoyed by the transporters as the brokers are paid on average KES 100/bag for loading and off-loading and looking for customers. The market share of the transporters in the chain drops from 13% to 11% with the brokers getting the 2%.

Wood Charcoal producer producer Broker Transporter Broker Wholesaler Retailer Consumer

Price received per 125 438 488 1104 1154 1400 1949 bag(KSh) Share Value 6% 16% 3% 32% 3% 13% 28%

Market Profit 7% 17% 1% 11% 1% 15% 48% Share

Figure18f: Wood Producer to charcoal producer to broker to transporter to broker to wholesaler to retailer to consumer charcoal production chain

47 Analysis of the Charcoal Value Chain in Kenya

4.2 Analysis of Selected Value Chains

4.2.1 Kajiado Value Chain Wood owner In Kajiado most of the woods come from private land. The wood owners sell standing trees to the charcoal producers and/ or transporters who then convert to charcoal. The average price of wood is KES 25000 for 10 trees able to produce 200 bags of charcoal. This translates to an income of KES 125 per bag to the producer (Figure 18a and 18b).

Charcoal Producer: Production is done by either the wood owners, transporters who buy the trees and then hire the services of charcoal burners or by charcoal producers who produce and sell to transporters. Overall producers produce on average 300 bags monthly. The average cost of production being KES 70000 per 200 bags or KES 350 per bag. The sales price per bag averages between KES 700-750 with permit and KES 400-450 without permit. This translates to a gross profit of KES 350-400 per bag. With average production 200 bags per month the average income totals KES 70000-80000/month. The charcoal prices during charcoal ban or whenever there is no permit falls to a low of KESs 450 per bag. This leads to a gross profit margin of KES 100/bag or KES 20000 per month. The low margins during the ban has been noted to lead to more forest destruction as producers have to cut more trees to raise significant charcoal to support financial needs.

Transporters Transporters mostly buy charcoal from the producers at price ranging from KES 700-750 per bag and sell to wholesalers or brokers at KES 1000/bag in Kajiado, KES 1100/bag in Kitengela and KES 1300 /per bag in Nairobi. The average costs per bag from the producer to wholesaler ranges from KES 972 to Nairobi, KES 930, Kitengela and KES 862/bag for Kajiado. This attracts a profit of KES 327, KES 135 and KES 170 per bag respectively. However during the ban, without permit, costs increase due to increased bribes to authorities mainly the police and the county council leading to a fall in profit per bag to KES 127, KES 107 and KES 113 per bag for Nairobi, Kajiado and Kitengela respectively. On average transporters handle about 3000 bags per months making between 2-3 trips to the market each 250 bags per trip

Wholesalers and retailers Wholesalers buy charcoal from transporters and sell to retailers at KES 1500, 1200 and 1500 per bag in Nairobi, Kajiado and Kitengela attracting a profit of KES200 per bag. The retailers on the other hand sell to consumers (Households, institutions and commercial business at varied prices ranging from KES 1300-2800/ bag depending on the town and units of sale. The highest prices attained when sales are done to households at 40-70/2kg tin of charcoal.

Roadside retailing Roadside retailing is a common practice with the retailers buying charcoal directly from the producers and selling to the households, mainly passengers and vehicle owners along the road. The purchase price of charcoal from producers is at KES 700-750 per bag. With a total average cost of KES 125 per bag being cost of packaging bag, license from county council, transport, and bribe to police, the overall cost per bag increases to KES 875. The sale price to households ranges from KES 1000/bag to KES 2000/bag when sales are done in 2Kg tins. This amounts to a total profit of KES 125-1125/bag (14-129%) or KES 10000-90000 per month assuming a daily sale of 20 bags

4.2.2 Baringo Value Chain Charcoal production in Baringo is mostly based on Prosopis tree species growing on private land. On average the total cost of charcoal production is KES 160 per bag, with the cost elements being labour, transport to yard and fees for charcoal producer associations. The sales price to transporters averages KES 450/bag this yields a profit (income) of KES 290 per bag and overall household income of 14500 per month taking an average production rate of between 40-60 bags per month. Transporters buy charcoal from producers through the CPA at a price of KES450 per bag. The transporters costs include cost of packing bags, License fees to KFS, loading charges, county council fees, fees payable to CPA, cess Fee, police bribes and Transport to market mainly Nakuru, Naivasha and Nairobi. The overall costs average KES 229, 267, 295 per bag for Nakuru, Naivasha and Nairobi markets respectively. With a whole sale price of 750/bag, 850/bag and 1,000/ a bag for Nakuru, Naivasha and Nairobi respectively, the profit averages KES 71, KES 133 and KES 255 respectively. However most transporters handle an estimated 3,000 bags per month leading to an income of KES 213,000, KES 399,000 and KES 765,000 per month (translating to 10, 19 and 34% net profit) respectively. The transporters sell to wholesalers who in turn sell to retailers at KES 1,000 in Nakuru, 1,200 in Naivasha and 1,500 in Nairobi attracting a gross profit margin of 42% over the selling price.

4.3 Economic Analysis of the Charcoal Value Chains Fuelwood Feedstock Prices Charcoal production starts with feedstock supply. The scope of this study did not permit collection of enough information for proper analysis of the impact of fuelwood feedstock pricing on the charcoal value chain. A number of observations however provide useful insight. A key observation is that there is no standardised unit for measuring fuelwood quantities used in charcoal production (such as stère, etc). It is therefore not easy to compare for example the feedstock prices in Kajiado and Baringo. Another observation is that the parameters (e.g. species, tree size, age, etc.) used to determine pricing are not very clear. It would be interesting to know

49 Analysis of the Charcoal Value Chain in Kenya

how the fuelwood feedstock would be priced if the pricing KFS pricing guidelines for various forest material and products were to be applied. Based on the observations above, it is therefore likely that the prices quoted for fuelwood feedstock are not a true reflection of their value and in all likelihood, are grossly under quoted. For instance wood producers in Kajiado receive KES 125 for wood able to yield 1 bag of charcoal. In Lunga Lunga, Kwale County, a group of 25 producers pay KES 2,500 annually to the ranch owner and are allowed to produce 150 bags per month. Considering that these are indigenous slow-growing species, it is unreasonable that a tree that takes 20 years to mature could be sold for only KES 125.

These unrealistically low prices of fuelwood for charcoal discourage investment in commercial production and help perpetuate the widespread perception that wood-based fuels are cheap and therefore unworthy of serious policy interventions.

Prices and quantities of charcoal along the value chain Prices of charcoal vary significantly along the value chain and with the regions. The average prices for wood material used for charcoal production was KSh 125 for wood able to produce one (1) bag (35 Kg bag of charcoal).This figure is low considering the time taken to grow the trees. The low costing is because wood is usually obtained as a ‘free commodity’ on farm, from salvage materials from wind falls, clearance of land to pave way for agriculture and settlements, illegally from government forests, trustlands or from private ranches. There is limited commercial wood growing with the few commercial wood producers being limited to large companies.

Charcoal producer prices average KSh 438 per bag. The survey results report a range from KSh 250-450 per bag with the highest prices fetched in areas with strong charcoal producer associations. Producer prices depend on the quality of charcoal and the season with charcoal from Acacia species fetching higher prices owing to perceived better quality, and on whether there is a ban from the government or not, with prices being lower during the ban due to the illegality of the charcoal. Producer prices are heavily influenced by transporters who ‘push’ producers to charge low prices quoting the high bribes to the police. Producers on the other hand are forced to yield to the demand for low prices by transporters to raise funds to fend for pressing family needs of food, clothing and school fees, especially during drought. During the wet and planting seasons most producers halt production and engage in land preparation for agriculture thereby leading to low supplies of charcoal hence higher prices.

50 Analysis of the Charcoal Value Chain in Kenya

Figure 19: Determinants of producer and transporter prices

Transporter prices to vendors often vary depending on the quality of charcoal based on the weights and presence or absence of dust, soil particles and unburnt wood and twigs, the market with the towns providing the major market to the charcoal, the status of charcoal with prices being higher during the ban owing to increased bribes from county council and police officers.

4.3.1 Distribution of income along the value chain Profits are concentrated in the hands of the vendors and transporters, with the producers and the consumers suffering. The non-equitable revenue (benefit )-sharing along the value chain results in revenue circulation in loops between traders and consumers with minimal cash flows to the charcoal burners – and wood producers and communities, whose forest areas are being depleted in the process.

Revenue accruals and distribution varied significantly along the value chain with the vendor (wholesalers and retailers) controlling 41% of the market share, transporters 37% and producers (wood and charcoal) only 22% (Figure 20). A greater portion of the profits (63%) in the charcoal value chain goes to the vendors with the wood and charcoal producers enjoying only 24% of the total profit. Retailers’ average monthly income is KES 12624 (i.e. 30 bags per month X KES 789 per bag) lower than that of transporters and wholesalers; this is despite the high market profit share at 48%. This is mainly because retailers sell mainly to the households in small measures (using 2Kg tins) each selling at between KES 40-70 per tin which results in high selling price. However the rate of stock turnover is low leading to lower overall income.

51 Analysis of the Charcoal Value Chain in Kenya

Price received 125 438 1154 1400 per bag(Kshs) 1949 28% Share Value Figure6% 2: Charcoal16% production chain37% 13% Market Profit 48% Share 7% 17% 13% 15%

Monthly Income 8400 189000 48800 12624

Figure 20 Distribution of income along the value chain

4.3.1 Market Response to Charcoal Pricing Price elasticity of supply and demand is a good way to determine how sensitive the supply/demand of a good is to a price change. The higher the price elasticity, the more sensitive producers, sellers and consumers are to price changes. A very high price elasticity suggests that when the price of a good goes up, sellers will supply a great deal less of the good and when the price of that good goes down, sellers will supply a great deal more. A very low price elasticity implies just the opposite, that changes in price have little influence on supply (i.e., the price is inelastic). Observations during the study indicate that charcoal prices are inelastic. Charcoal prices in Nairobi differ depending on the origin. Transporters from Kajiado sell at KES 1,300 and those from Baringo KES1,500. This makes charcoal from Kajiado cheaper by KES 200 in Nairobi. The expectation from this observation would be that there would be higher demand for Kajiado charcoal at the expense of Baringo charcoal. However, this was not observed to be the case. There are two main reasons for this seeming anomaly: 1. Charcoal is a popular cooking fuel in low-income areas and the consumers have no readily available and affordable alternative. 2. The charcoal market in Nairobi is highly controlled by cartels which dictate where specific transporters sell or supply their charcoal. Charcoal from Kajiado is typically sold in Pangani and its environs, that from Kitui is sold mainly in South B, from Tana River is sold in Kiambu while that from Baringo is sold in Dagoretti Corner, Satellite, Kawangware and surrounding areas. A transporter from Kajiado however, can never be allowed by the cartels to sell his/her charcoal in South B or Kawangware so as to take advantage of the higher prices there.

52 Analysis of the Charcoal Value Chain in Kenya

The conclusion is that there is very limited market response to charcoal prices as it is entirely in under the control of the cartels.

Main Challenges along the value chains  Unregulated/illegal charcoal trade: Wood harvesting, charcoal burning, transport and trade are still unregulated despite the enactment of the charcoal policy in 2009. Ninety (90) percent of charcoal is produced by groups outside the CPAs. This makes the regulation of the charcoal business difficult.  Corruption is rampant and systemic in the trade. The situation worsens during the ban where producers have to part with huge amounts as bribe to the police and county council security to deliver charcoal to the market. This diminishes the legitimacy of the charcoal business, and leaves many producers and transporters vulnerable to economic exploitation.  Inefficient conversion technologies are the logical consequence of the unregulated & insecure setting, clandestine operation and overall capacity deficits. There is need to link the producers to other sources of finance to invest in more efficient technologies  Declining amount of high quality species- most of the preferred charcoal species are indigenous mainly Acacia spp, Combretum spp. and Terminalia spp. with continued exploitation and none replacement there has been a decrease in the species and the producers resort to other low value species  Limited feedstock material for charcoal production-From the survey charcoal is produced from existing naturally growing stocks. An overwhelming response was that the preferred indigenous growing species are fast getting depleted. This observation is backed by previous studies such the MoE Kamfor report (2002), ESDA National charcoal survey 2005 and Bailis (2009).  Unsustainable fuelwood resource exploitation-following from the above observation, serious sustainably issues with regard to charcoal production arise. Several studies including MoE Kamfor report (2002), ESDA National charcoal survey 2005, Mugo and Ong (2006) and Bailis (2009) indicate that exploitation of fuelwood resources far outpaces their replacement. Observations from this study are in agreement with their conclusions. Generally no strategies exist for sustainable fuelwood exploitation within the charcoal sector. The charcoal regulations (2009) require the development and implementation of reforestation conservation plans within CPAs before being granted charcoal permits. Currently the regulations are still being piloted in few areas (Kwale, Kitui and Baringo) with varying levels of success. However, even within these pilot areas the conservation plans exist only on paper with no evidence that they are being implemented on the ground. On the demand side adoption of improved cooking stoves is still low and PSDA estimated it at 38% in 2011 by (PSDA 2013). For a country where traditional biomass accounts for 97% of national domestic energy requirement this is still quite low.  Exploitation along the chain- At the moment charcoal production, transportation and marketing is mostly organized in an informal system. However, formalization has begun to take shape, albeit slowly, through implementation of the charcoal rules 2009. Profits are currently concentrated in the hands of the vendors and transporters, with the producers and the consumers suffering. Revenue accruals and distribution along the value chain show the vendors (wholesalers and retailers) control 41% of the market share, transporters 37% and

53 Analysis of the Charcoal Value Chain in Kenya

producers (wood and charcoal) only 22% A greater portion of the profits (63%) in the charcoal value chain goes to the vendors with the wood and charcoal producers enjoying only 24% of the total profit.  Efficiency of the value chain: From analysis of field data, the charcoal value chain is far from being efficient. The study identified five different and sometimes complex channels through which charcoal moves from producers to consumers. The costs and income vary with the length of the chain. The study showed that the final price paid by the consumer is the same irrespective of the length of the chain. Shortening the chain will reduce the costs and redistribute the revenues and profits more equitably. Furthermore elimination of corruption which forms a significant proportion of the costs will result in lower final prices. Full implementation of the Charcoal Regulations will eliminate subtleties in the various permutations of the identified value chains that make it difficult for example for producers to negotiate for higher prices for their charcoal. This is best illustrated in Samburu CPA where members complained of inability to control the price because there exist independent producers who do not incur permit and storage fees and therefore can afford to sell their charcoal at cheaper prices to transporters to the disadvantage of the CPA. This charcoal is sold for the same prices in Nairobi, resulting in a disproportionately higher margin for the transporters buying from them compared to those who buy from the CPA. Land tenure- The study revealed that most trees used for charcoal production are sourced from rangelands under various forms of ownerships (freehold, trustlands or group ranches). Freehold land presents unique issues; whereas the owner has the legal mandate to make decisions regarding land use the requirement for KFS to issue a charcoal production licence has potential for conflict. Trustlands and group ranches present even more unique issues: since the people who jointly own or have legal mandate on the land are most likely not the charcoal producers conflicts can arise as to who is responsible for reforestation or whether there is even any motivation for doing so by either party. This was found to be the case in Kwale County. Even though the CPAs reported charging producers a conservation fee of KES 10 per bag of charcoal sold it is not clear where this “conservation” will take place or who will own the trees so reforested.

Summary of factor affecting charcoal pricing Technical factors: This set of factors hinges on the quality of charcoal determined by the weights and presence or absence of dust, soil particles and un-burnt wood and twigs. High density charcoal is usually from indigenous species like Acacia sp, Terminalia sp. While lighter species earning lower prices in the market include Prosopis juliflora. Other quality issues include the mixing of charcoal with soil and dust and un-burnt twigs, with charcoal with high percentages of the mixtures fetching lower prices than clean charcoal. High quality charcoal is associated with improved charcoal kilns, poor charcoal handling skills and mode of transport leading to breakages. There is need for more intensified research in the charcoal qualities and more sensitization to remove the perception of indigenous species having the best charcoal. This would reduce the current high pressure and degradation of perceived high quality species. Training on charcoal handling and bracketing is required i to reduce breakages and make use of the charcoal dust produced.

54 Analysis of the Charcoal Value Chain in Kenya

Economic factors: these factors include poverty and hunger in the families with the families lacking alternative livelihoods. The producers engage in charcoal production to raise money for basic needs. Producer prices are lowest during food insecurity seasons. The producers then become vulnerable and are forced to accept lower prices from transporters and vendors. Some producers fail to transport charcoal to the collection centres citing longer time taken before the sales and subsequent payments are made. There is need for alternative livelihoods and initiation of microfinance schemes where the producers can get upfront loans and/or payments to cushion them during such times. This would make them more resilient and be able to wait for better prices.

Supply and demand: Major towns offer better prices compared to smaller centres. This is mainly due to the high concentration of the demands in such centres. Other marketing factors here include bulking at collection centres and packaging and the scale of purchase. Institutions and commercial dealers buy charcoal in large quantities and at cheaper prices compared to households buying in 2kg tin quantities at an average price of KES 40-70/tin, translating to between 1600-2800 per bag

Climatic factors: prices are normally higher during the rainy season than the dry season. This is partly because during the wet season most roads become impassable making the deliveries difficult to the market hence low supply. Also during the wet season it takes long for the carbonization to complete and that most producers turn to land preparation for agriculture. This further reduces the supply thereby pushing up the prices

Policy and Institutional factors: temporary bans, rampant corruption especially along the highways by police officers, county council taxes which vary from one town to the other and weak CPAs and CPGs as some of the factors that affect charcoal pricing. The payment of illegal taxes on the roads has found to contribute to up to 15% of the cost of each bag.

55 Analysis of the Charcoal Value Chain in Kenya

5 Mapping Charcoal Hotspots

5.1 Identification and Analysis of Hotspots Even though charcoal production is carried out across the country, the highest levels of production occur in Arid and semi-arid areas which are dominated by pastoralism due to low rainfall. The major charcoal producing counties include; Kajiado, Makueni, Kitui, Kwale, Baringo, Elgeyo Marakwet and Tana River. Other counties where significant charcoal production takes place are; Kilifi, Garissa, Laikipia, Machakos, Marsabit, Meru, Narok, Tharaka and Turkana. The study showed that charcoal production is characterised by the use of traditional inefficient technologies and unsustainable harvesting of trees.

Bisil area, which is close to the Namanga border, was identified as the main hot spot for charcoal production in Kajiado County. Charcoal is carbonised using traditional earth kilns from Acacia spp trees growing on individual farms by either the farm owners through hired labour or by way of leasing out land to charcoal producers. After which about 90% is transported to Nairobi City and the rest sold in Kajiado town and other small shopping centres along the Namanga-Kajiado highway.

In Makueni County the major hot spots are farmlands in Kibwezi, Makindu, Kathonzweni and Makueni districts, with very little charcoal coming from Mbooni East. Within Kitui County, the identified hot spots are Mutomo, Muthaa and Katene locations. There has been an increase in illegal charcoal production within the Kitui South National Reserve as result of the 2012 ban on charcoal production from farmlands within the county. Production within the reserve is mostly carried out by members from other ethnic communities especially from Meru and Tharaka Nithi Counties. Such charcoal is transported at night to avoid law enforcers. The main market for charcoal from both Makueni and Kitui counties is Nairobi City.

The identified hot spots within Kwale County are Lunga Lunga and Mwereni group ranches in Lunga Lunga and Mwereni respectively. The two ranches account for about 90% of the charcoal produced within the county. The other 10% is produced in Kilibasi and sold mainly along the main Nairobi-Mombasa highway at Samburu and Taru in Kwale County. Mombasa city is the main consumer of charcoal from Kwale County, with some of the charcoal being transported all the way to Nairobi.

Within Marigat District of Baringo County, Charcoal comes from Salabani, Ng’ambo, Ilinarwa, Ilchamus and Loboi locations. 50% of this charcoal is transported to Nakuru, 40% to Nairobi and 10% to other areas including Kisumu city. Within Koibatek Zone in the same county, charcoal production is mainly carried out within the lowlands especially in Mogotio District. There have been few instances of illegal charcoal production from Maji Mazuri forest most of which the KFS has been able to control. The charcoal is transported to Nakuru, Naivasha, Nairobi and Kisumu. In both Marigat and Koibatek zones, charcoal is produced on individual farmlands from an invasive tree species popularly known as Mathenge (Prosopis juliflora). The main charcoal

56 Analysis of the Charcoal Value Chain in Kenya

hot spots within Elgeyo Marakwet County are trustlands found along the Kerio Valley. There are few instances of illegal charcoal production within Kaptagat, Kessup, Kapchemutwo and Kiptaber forests within the County more so in areas that are in close proximity to communities and shopping centres. Charcoal from Elgeyo Marakwet is transported to Kisumu, Kakamega and Eldoret towns. In Tana River county 90% of the charcoal is produced from trustlands within the county. However, cases of illegal charcoal production have been reported within Pangale, Mbalambala, Wayu, Kokani, Hewani and Mwina forest blocks. Most of the charcoal is transported to Nairobi, Mombasa, Garissa and Malindi.

Table 9: Main charcoal producing areas destined for major cities and towns

City/Town Major sources Nairobi Kitui, Makueni, Tana River, Kwale, Narok, Baringo, Kajiado, Garissa Mombasa Kwale, Tana River, Kilifi Kisumu Elgeyo Marakwet, Turkana, Narok Nakuru Narok, Baringo Eldoret Elgeyo Marakwet, Turkana Kakamega Kakamega, Turkana Bungoma Mt. Elgon, Turkana Nyeri Laikipia, Nyandarua Garissa Garissa environs Embu Tharaka, Kitui Meru Tharaka

57 Analysis of the Charcoal Value Chain in Kenya

Charcoal Sources by County

Turkana Mandera

Marsabit

Wajir

West West Pokot Samburu

Baringo Isiolo

Keiyo-Marakwet Kakamega Laikipia

UasinGishu Meru

Kisumu^_Kisumu ^_Nakuru Tharaka Homa Bay Garissa

Bomet Nyandarua Murang'a Migori NAIROBI

Narok Machakos ^_ Kitui Tana River

Lamu

Kajiado Makueni

Kilifi Ü Taita Taveta

Mombasa Qnty of charcoal permits for Fyr2012- 2013 (Bags) Kwale ^_ no data

< 42000 80 40 0 80 160 240 320 Kilometers 42001 - 156000 156001 - 385230 385231 - 1404000

Figure 21: County map showing the charcoal hotspots

58 Analysis of the Charcoal Value Chain in Kenya

Past charcoal related studies in Kenya have reported several charcoal producing areas in both high and low potential areas. The Kamfor report (MoE 2002) identified Narok, Machakos and Nyandarua Districts, as the main areas supplying charcoal to Nairobi. Also, a more recent study by Bailis (2011) reported that Narok supplied 70%, Ukambani 22% and Kajiado 4% of the charcoal consumed in Nairobi. Findings from this study identified Ukambani-Kitui and Makueni Counties, as some of the major sources of charcoal for Nairobi which is in agreement with the conclusions of the two studies. In Kitui and Makueni, charcoal production is frequently undertaken as a primary activity by households with few other income generating opportunities and is usually a fall back during drought.

Kajiado County seems to have overtaken Narok as a major supplier of charcoal to Nairobi, as most transporters interviewed indicated sourcing their charcoal from Kajiado County. The study was however not able to quantify charcoal production within Narok County, due to the ongoing ban on production within the county.

The study observed a decline in charcoal production in some of the areas that had been identified as major sources in the previous studies. There was less charcoal heading to Nairobi from Nyandarua County than previously reported by the Kamfor report (MoE 2002). This was also the case for Eldoret (Uasin Gishu) which had previously been reported as main charcoal producing area (Mutimba and Baraza 2005). In the past, large quantities of charcoal came from clearing large farms targeted for re-settlement, particularly in the former Rift Valley Province including Laikipia (MoE, 2002). Also, charcoal from these areas was previously being supplied by the Former East African Tanning Extract Co. farms from the Acacia mearnsii trees. These farms were located within the town’s environs including Kipkabus, Cheptiret and Mosoriot. It is most likely that there has been a depletion of the Acacia mearnsii trees on these farms over time without replacement strategies.

59 Analysis of the Charcoal Value Chain in Kenya

6 Selected Case Studies

6.1 Charcoal Production by CPAs in Kwale County Three charcoal producer associations have been formed within the county as per the charcoal rules, 2009. These are Samburu CFA, Kinango CFA and Msambweni CFA. Charcoal production by the membership is done within trust lands (Samburu) and group ranches (Lunga Lunga and Mwereni) as per existing conservation plans. Most members within these CPAs have been trained by MMMB and UNDP on improved charcoal production technologies. Each CPA has established a charcoal collection centre where all producers take their charcoal to for purchase by transporters. As part of the conservation initiative CPAs deduct Kshs 5 to 15 for every bag of charcoal from producers and transporters. Some of the challenges they face include variations in prices of charcoal and inadequate financial capacity to adopt new production technologies. Below are the costs and profits incurred during charcoal production, transportation and retailing in Kwale County.

Producer Transporter: To yard Transporter: To Market Costs: Total 100/bag Total Costs: 110 Costs: 361 Wood: 2500/per month for KFS -20/ bags KFS -20/ bags 25 producers, labour, Transport to yard 35/bag Mu nicipal-50/bag conservation fee of 10/bag Bag-20/bag Ferry-600/100 bags= 6/bag Produce 150 bags per yard (Storage) fee: 20/ bag Police-2000/trip of 100 bags=20/bag month Conservation fee-15 (5- Transport to market 180-200/bag Sales price: 250/bag CPG, 10-CPA) Loading and off loading-20/bag Profit=150/bag Sales price: Brokerage=15/bag At Yard: 600 Driver- 2000/trip of 100 bags= 20/bag profit of 250/bag Packaging=20/bag Sales price: Wholesale- 900-profit 300/bag Retailers-1000-Profit 400/bag Institutions: 780/bag-Profit 180/bag

Retailer Costs: 250 Council-20/day Consumer: Storage-50/day Households: 40-70/2kg Packaging: 20/bag, 40/bag for

tin=1600-2800/bag polythene bags Commercial/Industrial: Sales: 1400-1800/bag Consumers: 40-70/2kg tin=1600- 2100/bag- Profit range -350-950/bag Consumers: 1400-1800/bag Profit range 150-650/bag

Figure 22: Value chain for Msambweni CPA in Kwale County

60 Analysis of the Charcoal Value Chain in Kenya

6.2 Charcoal production by CPAs in Kitui Zone within Kitui County Three charcoal producer associations; Mutomo, Muthaa and Katene CPAs have been formed as a result of the charcoal rules, 2009. These CPAs are registered with the AG and their membership range from 100 to 2000, with the percentage of women being higher than that of men. Charcoal production within the county is on individual farms with production being higher during the dry season due to increased levels of poverty. In consultation with KFS, CPAs have developed conservation plans for charcoal production on their farms. However, the Kitui District Development Committee has capped charcoal production at 50 bags per year for each CPA member so as to help maintain tree cover within the county. Despite efforts by KFS to promote use of improved charcoal production technologies, charcoal producers within the county have continued to use the tradition earth kiln. In 2012, KFS banned the issuance of charcoal movement permits within Kitui Zone due to unsustainable charcoal production. This has led to an increase in illegal charcoal production within Kitui South National reserve. On the other hand, transporters within the county have formed Kitui County Charcoal Transporters Association (KCCTA). KCCTA is registered by the Ministry of Gender as well as the AG. It has about 100 members 70% of whom are women. The association members transport most of their charcoal to Nairobi, but are facing huge challenges due to the current ban on charcoal production from farms. Below are the costs and profits incurred during charcoal production, transportation and retailing in Kitui County.

Producer Transporter Costs: Total 210/bag Total Costs: 642.5+300=942.5/bag Wood sources: own farm, Transport to Nairobi (Lorry)- Retailer illegal wood from Kitui 30000-35000/200bags=175 per Costs: 250 Game Reserve bag Council-20/day Costs: labour, conservation Fuel: 20000=100/bag Storage-50/day fee of 10/bag KFS -20/ bags Packaging: 20/bag, 40/bag for Produce 150 bags per Bag-20/bag polythene bags month Municipal council: 50/ bag Sales: Sales price: 250-300/bag Loading/offloading-20/bag Consumers: 40-70/2kg Profit=150 bribe during transport of KSh tin=1600-2100/bag- Profit 10000-40000=200/bag range -350-950/bag Brocker: 50/bag Consumers: 1400-1800/bag- City council-1500/lorry=7.50/bag profit range 150-650/bag Sales price:

At Yard: 1000-1150 profit of 57.5-207.50/bag

Consumer:

Households: 40- 70/2kg tin=1600- 2100/bag Commercial/Industrial: 1400-1800/bag

Figure 23: Charcoal value chain for Mutomo CPA in Kitui County

61 Analysis of the Charcoal Value Chain in Kenya

6.3 Documentation of illegal payments during charcoal transportation from Namanga to Nairobi The Lead Field Researcher was allowed to accompany one of the transporters ferrying 350 bags of charcoal, using a lorry, from Bisil (Namanga) to Ngara (Nairobi) on 19th June 2013- a 150km journey. The main objective was to document the amount and nature of illegal payments as well as experience firsthand the process of transporting charcoal from producer to the market. The transporter was issued with a charcoal movement permit by the Kajiado Ecosystem County Coordinator after paying the requisite fees of KESs 20 per bag. The truck had six passengers including the consultant, the charcoal transporter, driver, turn boy and two labourers. The Researcher sat between the turn boy and the charcoal transporter. It had all the necessary paper work including police inspection certificate, insurance etc. The driver had a valid Driving Licence. Below are details of illegal payments witnessed during transportation of the charcoal from Bisil in Namanga to Ngara in Nairobi. (The police officers immediately became alert on spotting the lorry; the crew on the other hand seemed accustomed to paying the bribes)

62 Analysis of the Charcoal Value Chain in Kenya

Table 10: Documentation of illegal payments during charcoal transportation (Namanga-Nairobi route)

Payment point To whom Description Amount Comments (KES) 1. First Road Block at Bisil Kenya Police, In full police uniform. 6,000 Each of the units got paid by the turn boy by Administration Police and Each police unit handed approaching the passenger side. No permit asked or Regular Police 2000 vehicle inspection done 2. About 20 km from the first Traffic police (1) In full police uniform 200 Road block 3. About 5 km after the second Traffic police In full police uniform 2,000 encounter 4. About another 5 Km after the OCS accompanied by One Had police Land Rover, 1,000 Policeman was initially offered 500, declined and the third encounter police officer dressed in brown police crew out of the lorry-menacingly (“Leo Mtajua mimi ni uniform (symbolising nani” – Swahili for “Today you’ll know for sure who I higher rank) am!!”), but released the crew after being given KES 1000

5. W Traffic In full police uniform 2,000 6. Fifth encounter a few km after 1 female and 1 male traffic In full police uniforms-the 1,000 She was offered KES 500 but declined to take it saying: Kajiado town police officers lady stopped the lorry and “inakuwanga 1000” approached from the (i.e. The usual fee is KES 1000) passenger’s side

7. Check unit-just 2 km after the Check unit 2 plain clothes (ladies) 1,000 Offered 500, but refused and asked for 2000-confiscated last encounter and one uniformed police driver’s licence and ordered for the parking of the lorry officer with a land rover till full amount is given. Later agreed to take KES 1000

8. 1 km later 2 traffic cops In full police uniform 2,000 9. Weighbrige at Isinya 3 police officers and 2 Police officer in full 2,000 The driver had tried to avoid the weighbridge but was male weigh bridge uniform stopped by the police and ordered back attendants

10. Kitengela police In Plain clothes with two In Plain clothes with two 400 cars cars 11. Athi river bridge Traffic police Police officer in full 2,000 uniform 12. Mlolongo weigh bridge Weigh bridge police 1,000 Done so as to avoid the weigh bridge where presumably higher bribes could be demanded. 13. Close to Nation stage 1 Traffic policeman 500 (Nation manufacturing plant) 14. Industrial area-At the 1 Traffic policeman Police officer in full 800 Boarded the lorry and sat on the passenger’s side next to roundabout on Lusaka road- uniform. Acted as escort the consultant. Escorted the lorry all the way to city Mater Hospital junction – for the Lorry. stadium roundabout-the trick is to accompany the lorry escorted the lorry up to the so that the other police officers do not stop it. city stadium roundabout. 15. City stadium-escorted the 1 traffic policeman Traffic officer in full 500 Boarded the lorry and sat on the passenger’s side next to lorry up to somewhere close uniform. Acted as escort the consultant. Was able to ‘save’ the driver from five to Ngara for the Lorry other police officers along the way.

16. First customer point in 1 traffic policeman Traffic policeman on 1000 Policeman on motorcycle by when lorry had already Ngara motorcycle been parked and blocked it. Alighted from his motor bike and boarded the lorry on the passenger’s side. Researcher had to flee the scene after being spotted by the said policeman photographing the police officer taking a bribe! Total 23,400

64 Analysis of the Charcoal Value Chain in Kenya

6.4 Charcoal import and export Anecdotal evidence from discussions with key informants indicates that there is a thriving market for both imports and exports of charcoal. However, documentation of either practice is practically non-existent especially given the illegal nature. Some of the noted instances where imports and exports take place include:

 Mandera-imports from Somalia and Ethiopia  Kisumu- imports from Uganda  Kajiado- Imports from Tanzania  Kwale –imports from Tanzania

This trade apparently takes place with the connivance of the local government officers although this was not confirmed as the practices are illegal although it is provided for in the Charcoal Regulations. It emerged that the current policy is to outlaw both charcoal imports and exports.

From the figures reported, this is likely to be a big market which requires detailed study to enable proper regulation. This was therefore identified as a major gap which needs to be addressed in future charcoal studies.

7 Conclusions and Recommendations

7.1 Conclusions Charcoal Hotspots: Charcoal production in Kenya mainly takes place in counties within the Arid and semi-arid areas. These include; Kajiado, Makueni, Kitui, Kwale, Baringo, Elgeyo Marakwet and Tana River. Other counties where significant charcoal production takes place are: Kilifi, Garissa, Laikipia, Machakos, Marsabit, Meru, Narok, Tharaka and Turkana.

Charcoal Sources: Most of the charcoal is produced within private farms, rangelands and trust lands although some producers interviewed admitted to producing charcoal illegally from gazetted forests and other protected areas.

Charcoal Value Chains: There are five different and sometimes complex chains through which charcoal moves from producers to consumers. Costs, income and complexity increase with the length of the chain. The chains are largely inefficient with revenues and profit shares skewed in favour of the transporters and vendors (wholesalers and retailers). However, the transporters and vendors also bear much of the costs.

Business Skills: There is evident lack of business skills among the lower actors of the chain (i.e., wood producers and charcoal producers) indicated by the way wood feedstock for charcoal is priced in the case of wood producers and how charcoal production costs are estimated in the case of charcoal producers (charcoal producers for example tend to overlook labour costs especially if labour is provided by family members). As a result of this the prices of wood feedstock and charcoal at the production point tend to be lower than would otherwise be expected if all costs were taken into account. This in turn means that more charcoal has to be produced to meet the producers’ income needs. It is also possible that higher producer prices would encourage more charcoal production but this can be addressed if it is combined with strict regulation.

Charcoal Feedstock supply: The preferred species are fast diminishing in supply while the existing stocks are being exploited unsustainably. Additionally, even though the existing CPAs, CPGs and transporter associations have articulated plans to promote tree planting by, there are no actual tree planting initiatives taking place. Thus, the current wood supply is not enough to meet the demands for charcoal production.

Economic significance: The most detailed study on charcoal in Kenya by ESDA in 2005 estimated the annual production at 1.6 million tonnes. This has since grown to 2.5 million tonnes representing an increase of 156% within 8 years (or almost 20% growth per annum). On the other hand the economic significance over the same period grew from KES 32 billion to KES 135 billion representing 422% growth. The price increase is 2.7 times more than the increase in the quantity of charcoal. Total charcoal consumption would be estimated by summing up all charcoal produced locally and charcoal imports less the exports (both imports and exports are reported anecdotally). Since there is no data on either imports or exports, there could be a lot of much more revenue from charcoal not reflected in the country’s economic data.

66 Analysis of the Charcoal Value Chain in Kenya

Charcoal data: There is still a dearth of charcoal data with the ESDA national charcoal survey of 2005 being considered the most comprehensive study to date. Although other charcoal studies have been done since then they have tended to address specific issues such as technologies and marketing and the findings have not been well publicised.

CPAs: Charcoal production through CPAs has got the potential to benefit the sector as seen in Kwale, Kitui and Baringo. However the level of adoption at the moment is currently too low to show significant benefits. The level of support offered to the CPAs by KFS and other regulators is key to the implementation of the Charcoal Rules 2009. For example in Kwale where there is a markedly high level of interaction between CPAs and KFS there is more evidence of progress in implementation of the rules compared to Kitui where the CPAs appear to have been abandoned to their own devices. No CPA at the time of the study had been registered by KFS as provided for in section 5 (2) of The Forest (Charcoal) Rules, 2009.

Key Factors that Impact on the Value Chain: The operation of the charcoal value chain is dependent on five key factors that manifest themselves through their influence on price including; Technical, Economic, Supply and demand, Climatic factors and Policy / Institutional factors.

Carbonization Technologies: Current charcoal production technologies by the producers are inefficient resulting in massive wastages during wood conversion to charcoal. The situation has been worsened by low adoption levels of new and improved technologies due to high initial investments required among other factors.

Briquettes: During the production, transportation, wholesaling and retailing of the charcoal, a significant proportion of it ended up as waste in form of dust. Cumulatively this totals to tonnes of charcoal ending up as waste daily. This waste could potentially be turned into briquettes and reduce the demand for lump wood charcoal.

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7.2 Recommendations A number of recommendations are proposed to address issues related to the charcoal value chain in Kenya with the recommendations having been categorized in relation to the levels and approaches for implementation as those necessitating focus on policy and legal measures, implementation at institutional level and local community levels. Implementation of the recommendations will need active involvement of the central government, county governments and local resource users including the CFAs, CPAs, CPGs and other interest groups. It is important to ensure that the proposed recommendations are in harmony with existing policies, statutes and sectoral planning tools such as the Forest Policy, The Forests Act, The KFS Strategic Plan, the REDD+ Strategy, EMCA, Energy Policy and Act, as well as national development strategies notably the Vision 2030.

7.2.1 General Recommendations It has been demonstrated that charcoal in Kenya is a multi-billion shilling industry. Under the current laws, the only revenue from charcoal that goes either to the central or county governments is the KES 20 per bag levied as licensing and/or cess fees. If the sector is well- regulated, a structured system could be developed for enhanced revenue collection.

There is need to access the potential benefits of a regulated charcoal sector by scaling up the implementation of the Charcoal Rules and strengthening the capacities of existing CPAs and speeding up the process of their registration by KFS.

Reducing the massive wastages during carbonization will go a long way in reducing deforestation. This can be achieved by partnering with research organisations like KEFRI to ensure the development of cheaper and user friendly wood carbonisation technologies.

There is need to adopt a business model approach to charcoal production and trade: Charcoal production should be done as a legal and formal business along the value chain. The participants along the value chain need capacity building on entrepreneurship and should have business plans and proper records for their operations.

In order to avert cases of corruption and harassment along the value chain there is need for more sensitization on the legal provision of The Forest (Charcoal) Rules, 2009. All responsible institutions including KFS, CFAs, CPAs, CPGs, Kenya Police Service, County Governments and Environment committees need to work closely together for cumulative benefit.

To ensure consumers are protected and therefore motivated to participate in sustainable practices there is need to widen the scope of consumer protection law by for example standardising the quantities in which charcoal is sold and introducing quality standards for charcoal.

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The use of briquettes from charcoal dust and waste has potential to reduce the demand for lump charcoal although briquettes are currently not a widespread fuel. A few studies have been commissioned in recent years to understand the briquettes value chain as well as encourage their use. There is need to take forward these studies by developing a comprehensive strategy for promoting briquettes use in Kenya.

Lastly, information on charcoal imports and exports is lacking, even though a thriving market for charcoal importation and exportation has been reported to be thriving in Kenya. There is need for a study to determine the extent of charcoal movement in and out of the country. Unaccounted-for charcoal imports and exports make it difficult to determine the true value of charcoal to the Kenyan economy and ultimately complicate the planning process for proper management of the sector.

7.2.1 Specific Recommendations to Strengthen the Value Chain

Table 11: Specific recommendations to strengthen the value chain

Area of Recommended Action Time-frame Intervention  Full roll-out and implementation of the Charcoal Rules Short term  Harmonize Energy and Forest Acts in relation to licensing of Medium term charcoal production  Align legal provisions on charcoal to new constitution (e.g., with the creation of county governments, does the District Medium term Environment Committee which is represented in the charcoal licensing committee still exist?)  Ensure implementation of ordinances that stipulate tree planting Policy, Legal Short term and and replacing after harvesting for charcoal Institutional  Enhanced vigilance in identified hotspots to ensure no illegal Long term activities take place  Implementation of requirements that charcoal sales are done at Short term collection centres only  Standardization of charcoal quality and packaging units Medium term  Facilitate access affordable and clean energy alternatives  Promote research including detailed study on charcoal imports Long term and exports  Empower local resource user groups to tract and report illegal Short term activities  Promoting alternative sources of income Long term CFAs, CPAs,  Strengthening producer associations by ensuring that all the CPGs producers join the associations Medium term  Facilitate start-up of micro- finance schemes and mobilize for funds to enable producers access better technologies Long term Consumers  Promotion of energy saving technologies Long term

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8 References

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Bailis, R. (2009). Modelling climate change mitigation from alternative methods of charcoal production in Kenya.Biomass and Bioenergy, 33 (2009) 1491-1502.

CHAPOSA (2002). Final report CHAPOSA research project-Tanzania. Swedish Environment Institute (SEI).

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Food and Agriculture Organization of the United Nations, (2004). Unified Bioenergy Terminology –UBET.FAO Forestry Department.Wood Energy Programme.VialedelleTerme di Caracalla, Rome, Italy.Accessed through the web: ftp://ftp.fao.org/docrep/fao/007/j4504e/j4504e00.pdf

Gomaa, H.A., P. Steele and Y. A. Hamdy, (2011).Charcoal Industries Egypt.Food and agriculture Organization of the United Nations Regional Office for the Near East Cairo, Egypt.

Government of Kenya (1986).Sessional Paper No. 1 of 1986 on Economic Management for Renewed Growth, Nairobi: Government Printer.

Government of Kenya (1997).The Electric Power Act, 1997. No 11 of 1997. Nairobi: Government Printer

Government of Kenya (2004).Sessional Paper No. 4 on Energy.Ministry of Energy. Nairobi: Government Printer

Government of Kenya (2006).The Energy Act, 2006. Nairobi: Government Printer

Government of Kenya (2007). Kenya Vision 2030.Ministry of State for Planning, National Development, & Vision 2030 and Office of the Deputy Prime Minister and Ministry of Finance. Nairobi, Kenya

Government of Kenya (2007).Sessional Paper No. 1 of 2007 on Forest Policy. Ministry of Environment and Natural Resources. Nairobi: Government Printer.

GTZ, (2009). Biomass Energy Strategy (BEST) Wood Fuel Supply Interventions: Lessons and Recommendations. EUEI, GTZ, April 2009. Eschborn, Germany.

Kakuru, W. (2010). A study of Timber, Charcoal and Fuel Wood value chains in the districts of Mubende, Kyenjojo and Kyegegwa in Western Uganda. CARE international.

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Kambewa, Mataya, Sichinga and Johnson. (2007). Charcoal: the reality – A study of charcoal consumption, trade and production in Malawi. Small and Medium Forestry Enterprise Series No. 21. International Institute for Environment and Development, London, UK.

KFS, (2010). Brief assessment of land use and forest policies and governance in the forest sector in Kenya

KIPPRA (2010). A Comprehensive Study and Analysis on Energy Consumption Patterns in Kenya. A Synopsis of the Draft Final Report by Kenya Institute for Public Policy Research and Analysis (KIPPRA) for the Energy Regulatory Commission (ERC).

Kituyi, E. (2002). Lost Opportunities: Woodfuel Data and Policy Development Concerns in Kenya. African Centre for Technology Studies (ACTS). Nairobi, Kenya.

Knopfle, M. (2004).A study of charcoal supply in Kampala. Kampala: Ministry of Energy and Mineral Development, Energy Advisory Project.

Mary Njenga , Nancy Karanja , Cristel Munster , Miyuki Iiyama , Henry Neufeldt , Jacob Kithinji & Ramni Jamnadass (2013): Charcoal production and strategies to enhance its sustainability in Kenya, Development in Practice, 23:3, 359-371

MENR, (1994). Kenya Forestry Master Plan: Development programmes. Forest Department, Ministry of Environment and Natural Resources (MENR), Republic of Kenya, Nairobi, Kenya.

MoE, (2002).Study on Kenya’s Energy Demand, Supply and Policy Strategy for Households, Small Scale Industries and Service Establishments. Final Report for the Ministry of Energy.May, Kamfor Company Ltd.

Mugo, F. and C. Ong (2006).Lessons of eastern Africa’s unsustainable charcoal trade.ICRAF Working Paper no. 20.World Agroforestry Centre. Nairobi, Kenya.

Mugo, F., R. Nungo, F. Odongo, N. Chavangi, and M. Abaru. (2007). An assessment of the energy saving potential and heat loss pattern in fireless cooking for selected commonly foods in Kenya. CARPA Working Paper series, No. 2.

Mutimba, S., and M. Barasa. (2005). National charcoal survey: Summary report. Exploring the potential for a sustainable charcoal industry in Kenya. Nairobi: Energy for Sustainable Development Africa (ESDA).

Mwampamba, T.H., Has the woodfuel crisis returned? Urban charcoal consumption in Tanzania and its implications to present and future forest availability, Energy Policy (2007), doi:10.1016/j.enpol.2007.02.010

NEMA, (2010) State of Environment report. National Environmental Management Authority. Nairobi, Kenya

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NL Agency, (2010). Making charcoal production in Sub Sahara Africa sustainable. BTG Biomass Technology Group BV. Netherlands.

PISCES (2010), Bioenergy and Poverty in Kenya: Attitude, Actors and Activities. Working Paper Prepared for PISCES by Practical Action Consulting in Eastern Africa, May 2010 PSDA, (2013).Energy Saving Stoves – The Significance for Kenya. http://www.gtzpsda.co.ke/index.php?option=com_content&view=article&id=52&Itemid=77. Accessed 26/08/2013

Republic of Kenya (2002). Study on Kenya’s energy supply and policy strategy for households, small-scale industries and services establishments, final draft report. Ministry of Energy, Nairobi, Kenya.

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Shively, G. P. Jagger, D. Sserunkuuma, A. Arinaitwe and C. Chibwana, (2011). Profits and margins along Uganda’s charcoal value Chain. International Forestry Review Vol.12(3). van Beukering, P., G. Kahyarara, E. Massey, S. diPrima, S. Hess, V. Makundi, and K. van der Leeuw. 2007. Optimization of the Charcoal Chain in Tanzania.Poverty Reduction and Environment Management (PREM) Programme. Institute for Environmental Studies, Amsterdam, The Netherlands.

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9 Annexes

Annex 1: Summary of charcoal key statistics in counties where data was provided for the study

County Main sources of charcoal Main species No. Of CPAs Actual number of bags Main charcoal destination (farms, private, etc) registered within licensed through the permit the county movement system Baringo Nakuru, Naivasha, Nairobi, (koibatek Farmlands, institutional Kisumu zone) land conversions Acacia spp and other shrubs 164,519 Baringo Farmlands Prosopis Juliflora 1 CPAs 123,483 Nakuru, Naivasha, Nairobi, (Marigat Kisumu Zone) Elgeyo Farmlands (Private Farm), Acacia Mearnsii 310,000 Kisumu, Kakamega, Eldoret Marakwet Trustlands Garissa Trustlands Acacia Spp 78,000 Garissa, Nairobi Kajiado Farmlands Acacia spp 780,000 Nairobi Kakamega Farmlands Eucalyptus 5,021 Kakamega Kisumu Private farms, Nandi Acacia spp and Eucalyptus 2,002 Kisumu county, Kericho county, Uganda Kilifi Farmlands, Group ranches Acacia spp 1 registered CPA 156,000 Mombasa Kitui Acacia Tortilis, Acacia seyal, 3 CPAs, I transporter Terminalia and Tarmarindus association Farmlands indica 1,044,489 Nairobi, Thika and Kiambu Laikipia Ranches Acacia spp none 12,000 nyeri, karatina, nyahuru, naivasha Lamu Community lands, Acacia spp 1 Registered CPA 770 Mombasa Farmlands Machakos Farmlands Acacia spp 21,234 Nairobi Makuenu Farmlands Acacia spp, T. Brownii, Nairobi, Kiambu Mango 385,230 Mandera Farmlands, Trustlands, Acacia spp, Prosobis juliflora 9,625 Mandera Somalia, Ethiopia

County Main sources of charcoal Main species No. Of CPAs Actual number of bags Main charcoal destination (farms, private, etc) registered within licensed through the permit the county movement system Marsabit Trustlands Acacia spp 30,000 Isiolo, Moyale, Marsabit, Laisamis

Meru Farmlands Acacia spp 152,778 Meru Muranga Farmlands Mangifera indica, Croton 129 Muranga megalocarpus, Acacia spp Nyandarua Farmlands Nairobi, Kiambu, Nyeri, Eucalyptus, Acacia mearnsii 11,022 Nanyuki Samburu Community lands Acacia Spp, Olea Africana No data Maralal, Bargoi Taita Taveta Ranches Acacia spp 4,089 Mombasa, Nairobi Tana River 90% Trustlands Prosobis juliflora, Chilensis 9 CPAs registered, 1 150,000 Nairobi, Mombasa, Garissa, transporter Malindi association Tharaka Nithi Farmlands Acacia spp Meru, Nanyuki, Embu, 96,827 Chuka, Nyeri Turkana Trustlands Prosobis juliflora, Chilensis 41,281 Nairobi, Lodwar, Eldoret, Kitale, Bungoma, Kisumu, Busia

Uasin Gishu Wareng and Eldoret East Acacia Mearnsii 132450 Western and Nyanza District Bomet No data Bungoma Minimal (except for Mt. Elgon) Isiolo Community lands, Isiolo Farmlands Busia No data Embu No data Homabay No data Nairobi,Kisumu, Uganda, Homa Bay

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County Main sources of charcoal Main species No. Of CPAs Actual number of bags Main charcoal destination (farms, private, etc) registered within licensed through the permit the county movement system Kericho No data Kiambu No data Kirinyaga No data Kisii No data Kwale Trustlands, Rangelands Acacia spp 1,404,000 Nairobi, Mombasa Migori No data Mombasa No production Nairobi No production Nakuru No production Narok No data Nyeri No production Siaya No data Nyamira No data Trans Nzoia No production Wajir No data Vihiga No data West Pokot Trust lands/farmlands Acacia spp. 20 72,000 Eldoret, Kitale, Kisumu

Total from 24 Counties 5,186,949 Total from 47 10,152,335 counties Formulae=(5,186,949*47)/24

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Annex 2: Questionnaires used collect data from Charcoal producers, transporters and wholesalers QUESTIONNAIRE FOR CHARCOAL PRODUCERS Completed by the Questionnaire No: Date: enumerator Name of County: Town:

Details of the Name: respondent Telephone: Email: PART 1: SOURCES AND COSTS OF RAW MATERIALS i Trees use for charcoal Indigenous  Exotic  preparation Name of the trees Name of the trees

Source of Trees Source of the Trees Government forest...... Government forest...... Private forest...... Private forest ...... Trust land...... Trust land ...... From own land...... From own land...... Others...... Others...... ii Cost of trees Do you Purchase the trees?

In what quantities do you purchase them?

And, for how much?

Does the price vary with the species?

If yes, please elaborate

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PART 2: CARBONISATION (Describe the equipment used for charcoal production) i How do you harvest your trees? ii How do you carbonize (burn) your charcoal? Do you use wet or dry wood? Earth Kiln Cassamance Kiln Metal Kiln Half orange Kiln  Roller presses  Hand/manual extruders  Other (please describe):

Using a tape measure the Enumerator will take the dimensions of the kiln and record them in the space below iii What is your production capacity per run? How long (days) does it take you to produce one run? How many runs do you have per month? How many runs per year? I. How many people do you employ? Are they full time or temporary? Please elaborate How much do you pay them; per run? Per month? PART 3: MARKET i Who is your MAIN client (please tick only one): (a) Households  (b) Institutions  (c) Industrial  (d) Commercial  (e) Other (please describe) 

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Ii At what price and in what quantities do you sell to them? Households...... Institutions...... Industrial ...... Commercial ...... Others (please describe)...... PART 4: GENERAL QUESTIONS i Is Charcoal making your main source of income? Yes  No  iii List the licences and fees required to operate this business (a) (b) (c) (d) How long have you been getting charcoal from your current source?

What are the main challenges while undertaking the charcoal production work?

What do you think should be done to make your work easier?

Do you see yourself sourcing charcoal from the same place in the next 10 years?

If not, what do you think should be done to ensure you have charcoal supply for a long time? iv What programmes/policies/incentives by government or development partners if put in place would enable growth in the charcoal business?

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v Any other comments:

QUESTIONNAIRE FOR TRANSPORTERS (Motorised and Non-Motorised respondents) Completed Questionnaire No: Date: by the Name of County: Town: enumerator Details of Name: the Telephone: respondent Email: PART 1: SOURCES OF CHARCOAL i Means of Lorry  Cycle  Transport Cart  Others (please describe) ii Source, quantity Do you Purchase the charcoal? If yes, from where? and price In what quantities do you purchase? And, for how much per unit? Do you prefer charcoal from a particular tree species? If yes which one? PART 2: MARKET i Do you have a ready market for your charcoal?

Who is your MAIN client (please tick only one): (a) Households  (b) Institutions  (c) Industrial  (d) Commercial  (e) Other (please describe)  ii At what price and in what quantities do you sell to them? Households...... Institutions......

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Industrial ...... Commercial ...... Others (please describe)...... PART 3: LICENCES OR FEES i Do you pay for any fees, road levies or licences (legal or illegal) for transporting your charcoal? If yes, how much and to whom?

Forest officers...... Provincial administration...... County/municipal councils...... Police ...... Others (please describe)...... PART 4: GENERAL QUESTIONS i How long have you been getting charcoal from your current source? What are the main challenges while undertaking the charcoal transportation work? What do you think should be done to make your work easier? Do you see yourself sourcing charcoal from the same place in the next 10 years? If not, what do you think should be done to ensure you have charcoal supply for a long time? ii What programmes/policies/incentives by government or development partners if put in place would enable growth in the charcoal business?

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iii Any other comments:

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QUESTIONNAIRE FOR RETAILERS Completed by the Questionnaire No: Date: enumerator Name of County: Town:

Details of the Name: respondent Telephone: Email: PART 1: SOURCES AND SCALE OF OPERATION i Scale and source Small scale  Large scale  ii Where do you source your charcoal from?

Producer 

Transporter 

In what quantities do you purchase them?

And, for how much?

Do you prefer charcoal from any particular tree species?

If yes, which tree (s)?

PART 2: MARKET i Who is your MAIN client (please tick only one): (a) Households  (b) Institutions  (c) Industrial  (d) Commercial  (e) Other (please describe)  Ii At what price and in what quantities do you sell to them? Households......

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Institutions...... Industrial ...... Commercial ...... Others (please describe)...... PART 3: LICENCE OR FEES i Do you pay for any fees, or licences (legal or illegal) for selling your charcoal? If yes, how much and to whom?

Forest officers...... Provincial administration...... County/municipal councils...... Police...... Others (Please describe)...... PART 4: GENERAL QUESTIONS i How long have you been getting charcoal from your current source? What are the main challenges while undertaking your charcoal selling business? What do you think should be done to make your work easier? Do you see yourself sourcing charcoal from the same place in the next 10 years? If not, what do you think should be done to ensure you have charcoal supply for a long time? ii What programmes/policies/incentives by government or development partners if put in place would enable growth in the charcoal business?

iii Any other comments:

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QUESTIONNAIRE FOR CHARCOAL CONSUMERS Completed Questionnaire No: Date: by the County: Town: enumerator

Indicate the type of consumer (please tick only one): (a) Household  (b) Institution  (c) Industrial  (d) Commercial  (e) Other (please describe)  Details of Name: the Telephone: respondent Email: i Is charcoal your only source of Yes  No  cooking and heating fuel? ii If no, please Kerosene  LPG (gas)  indicate ALL the Firewood  Other (state type)  other sources Agro-waste  (please tick and state where applicable) iii Please rank the Kerosene  Charcoal  following sources in terms of Firewood  LPG (gas)  preference (1 being most preferred and Agro-waste  Briquettes  6 being the least preferred) iv What is your MAIN reason for using charcoal (please tick only one) Affordable (cheaper compared to other sources)  Easily available  Environmentally friendly  Higher energy content 

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Other (please state)  v What is the MAIN disadvantage for using charcoal (please tick only one) Not affordable (expensive compared to other sources)  Not easily available  Difficult to light/use  Produces a lot of waste  Other (please state)  vi How much do you Unit: Local currency Equivalent in USD pay for a unit of ($) charcoal? (a) (b) vii How long have you been getting charcoal from your current source?

Do you see yourself sourcing charcoal from the same place in the next 10 years?

If not, what do you think should be done to ensure you have charcoal supply for a long time? viii Any other comments:

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