Impact Fund Denmark Invests $25M in African Forestry

Impact Fund Denmark has committed DKK 160 million (USD 25 million) to New Forests Company (NFC), a significant capital injection aimed at bolstering sustainable forestry operations across East Africa. This strategic investment is set to dramatically expand NFC's plantation footprint and establish new local processing facilities, addressing a critical deficit in regional wood product manufacturing.

The initiative directly confronts the growing timber trade imbalance in East Africa, where demand consistently outstrips local supply. Historically, the region has relied heavily on imports, leading to a substantial trade deficit estimated at approximately DKK 80 billion (USD 12.6 billion) between 1991 and 2020. This reliance not only drains valuable capital but also places undue pressure on existing natural forests. NFC's expansion seeks to reverse this trend by cultivating commercial forests domestically, thereby capturing economic value and creating employment opportunities within the continent.

Under the terms of the agreement, NFC plans to scale its FSC-certified plantation area from the current 30,000 hectares to a substantial 100,000 hectares. A key component of this expansion includes dedicating half of the new area, or 50,000 hectares, to nature conservation and biodiversity restoration, focusing on rehabilitating former natural forest lands. The investment will also fund the construction of new plants designed to produce high-demand wood products such as plywood and glulam, items currently sourced predominantly from international markets.

This venture is projected to yield substantial environmental benefits, with the expanded plantations expected to sequester approximately 12 million tonnes of CO2 over their lifecycle. The carbon credits generated will be certified under the latest international standards, aligning with global climate mitigation efforts. Beyond carbon capture, the project is anticipated to generate income for thousands of local families, fostering economic independence and contributing to long-term development goals in Uganda and Tanzania, where NFC operates.

The investment benefits from a crucial guarantee scheme provided by EDFI Carbon Sinks, managed by EDFI Management Company and financed by the European Union through the EFSD+ programme. This support underscores the EU's Global Gateway strategy, which aims to foster sustainable development and economic partnerships worldwide. Lars Bo Bertram, CEO of Impact Fund Denmark, highlighted the alignment of this investment with the fund's mission, stating, "This is exactly the type of investment we aim to make," emphasizing its role in building a more self-reliant Africa.

The East African forestry sector represents a growing market, and this infusion of capital positions NFC to become a leading player in sustainable timber production and processing. By localizing manufacturing and promoting responsible forest management, the initiative promises to create a more resilient and economically vibrant regional supply chain for wood products, reducing import dependency and enhancing value creation within Africa.