ATTACHMENT_17_-_Proland_Private_Sector_engagement_for_conservation_DRC.pdf

PROLAND REVISED REPORT 1

PRODUCTIVE LANDSCAPES

(PROLAND)

Assessment of Private Sector Approaches to Achieving

Conservation Objectives in CARPE – USAID/DRC

JULY 2018

This publication was produced for review by the United States Agency for

International Development. It was prepared by Tetra Tech.

Prepared for the United States Agency for International Development (USAID) contract number AID-

OAA-I-13-00058/AID-OAA-TO-14-00050, Productive Landscapes (ProLand), under the Restoring the

Environment through Prosperity, Livelihoods, and Conserving Ecosystems (REPLACE) Indefinite

Delivery Indefinite Quantity Contract. This report was produced by ProLand team member David Miller, and consultants Eric Derks, Leon Zabiti, and Dominique Bikaba.

Tetra Tech Contacts: Mark Donahue, Chief of Party

Mark.Donahue@tetratech.com

Korinne Nevins, Project Manager

Korinne.Nevins@tetratech.com

Tetra Tech

159 Bank Street, Suite 300, Burlington, VT 05401

Tel: (802) 495-0282, Fax 802 658-4247 www.tetratechintdev.com

COVER PHOTO: Sacks of Charcoal Waiting for Transport on the Congo River, DRC. Courtesy of

David Miller.

mailto:Mark.Donahue@tetratech.com mailto:Korinne.Nevins@tetratech.com

PRODUCTIVE LANDSCAPES

(PROLAND)

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO

ACHIEVING CONSERVATION OBJECTIVES IN CARPE—

USAID/DRC

JULY 2018

DISCLAIMER: The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States

Government.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE i

TABLE OF CONTENTS

ACRONYMS AND ABBREVIATIONS ....................................................................................................................... III

EXECUTIVE SUMMARY .................................................................................................................................................. V

I.0 BACKGROUND AND PURPOSE OF THE ASSESSMENT

1.1 CARPE and PROLAND

1.2 Purpose

2.0 INTRODUCTION

2.1 Statement of the research challenge

2.2 Review of current state of knowledge

2.3 Description of the research and analytical framework

2.3.1 Approach to the assessment of market systems

2.3.2 Approach to the assessment of rural forest-based enterprises

3.0 METHODS AND IMPLEMENTATION

4.0 OVERVIEW OF THE DRC AND CARPE CONTEXT

4.1 Status and location of critical natural capital

4.2 Overview of the study political and economic context

4.3 Summary of related donor efforts

4.4 Overview of CARPE conservation enterprise efforts and lessons learned

5.0 PRIVATE SECTOR OPPORTUNITIES TO MITIGATE DEFORESTATION AND PROMOTE

GROWTH

5.1 Private sector overview: business environment, and characteristics of current enterprises

5.2 Assessment of opportunities

5.2.1 Liquid Petroleum Gas

5.2.2 Improved cook stoves (ICS)

5.2.3 Reusable and durable construction materials

5.2.4 Commercial tree plantations

5.3 Recommended interventions to catalyze the emergence of the strongest opportunities

6.0 THE GENERATION OF RURAL INCOMES THROUGH COMMUNITY FOREST

CONCESSIONS

6.1 Community forestry overview: experimentation in sustainable community concessions

6.2 Assessment of opportunities in the rural context

6.2.1 Ecotourism

6.2.2 Planted wood-fuel

6.2.3 Cocoa Agroforestry

6.2.4 Non-Timber Forest Products

6.2.5 Wood-fuel sustainably harvested from natural forests

6.2.6 Small-scale logging

6.3 Recommendations on working in community forest concessions

7.0 CONCLUSION

REFERENCES

ANNEX I: STATEMENT OF WORK (DRAFT)

ANNEX II: KEY INTERVIEW QUESTIONS

ANNEX III: SUMMARY OF ITINERARY AND INTERVIEWS

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE ii

ANNEX IV: LIST OF PERSONS INTERVIEWED

ANNEX V: BRIEF BIOS OF TEAM MEMBERS

ANNEX VI: RELEVANT SECTOR DEVELOPMENT PROGRAMS IN THE DRC

ANNEX VII: TOOLS FOR WORKING WITH COMMUNITIES FOREST ENTERPRISES

ANNEX VIII: SILVICULTURAL PRESCRIPTIONS FOR COMMUNITY BASED MANAGEMENT

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE iii

ACRONYMS AND

ABBREVIATIONS

ACEFA Artisanal Logging Association

AfDB African Development Bank

AWF Africa Wildlife Foundation

CAFI Central Africa Forest Initiative

CARPE Central Africa Regional Program for the Environment

CBFF Congo Basin Forest Fund

CBP Congo Basin Program

CERERK Center of Studies and Research on Renewable Energy

CCAFS Climate Change, Agriculture, and Food Security

CGIAR Consultative Group for International Agricultural Research

COMIFAC Commission des Forêts d’Afrique Centrale

DFID Department for International Development

DRC Democratic Republic of Congo

EU European Union

FCPF Forest Carbon Partnership Facility

FGMC Forests Governance Markets and Climate

FIP Forestry Investment Program

FLEGT Forest Law Enforcement Governance and Trade

GHG Greenhouse Gases

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit

GoDRC Government of the DRC

HCV High Conservation Value

ICS Improved Cookstoves

IDA International Development Association

IP Implementing Partner

ISTA Higher Institute of Applied Technique

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE iv

KfW Kreditanstalt für Wiederaufbau

LPG Liquid Petroleum Gas (LPG)

MW Megawatt

NTFP Non-Timber Forest Product

OCC Office Congolaise de Contrôle

PES Payment for Ecosystem Services

PGAPF Projet de gestion améliorée des paysages forestiers

PPP Public-Private Partnership

RIL Reduced Impact Logging

SADC Southern African Development Community

SNEL Société Nationale d’Electricité

SOW Scope of Work

USAID United States Agency for International Development

USG United States Government

VPA Voluntary Partnership Agreements

WCS Wildlife Conservation Society

WRI World Resources Institute

WWC Wildlife Works Carbon

WWF World Wildlife Fund

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE v

EXECUTIVE SUMMARY

In the last months of 2017, the USAID Sustainable Landscapes Office and the USAID/Democratic

Republic of the Congo (DRC) Mission provided the Productive Landscapes (ProLand) project with a

Statement of Work (SOW) for an assessment to identify new approaches to achieve the conservation objectives of the Central Africa Regional Program for the Environment (CARPE), a long-term initiative of the United States government (USG) to promote biodiversity conservation and climate change mitigation in the Congo Basin. ProLand was to assess which private sector actors, activities, and public-private partnerships (PPPs) could contribute to rural economic growth and conservation at meaningfully large scales in the CARPE landscapes. The SOW also specifically requested recommendations regarding the generation of income through the management of community forest concessions.

ProLand assembled a four-member assessment team to implement the SOW. Team members participated in briefings with USAID Washington and USAID/DRC, reviewed relevant literature, and conducted interviews with over 100 key informants in the cities of Kinshasa, Mbandaka, and Goma, as well as in the World Wildlife Fund (WWF) sites to the east of Lac Tumba. Interviewees included representatives of donor organizations, implementing partners, national and provincial government offices, civil society, and the private sector working in timber, charcoal, gas, construction, cocoa, coffee, furniture, and transportation sectors.

USAID implements CARPE in a challenging context that inhibits forms of business development seen in countries with greater stability and less predatory, more equitable and effective governance systems. In urban and rural settings in the DRC, people tend to manage their enterprises informally, often as discreetly as possible. They invest capital opportunistically across broad and varied portfolios of activity.

Market system actors connect through poorly developed, unstable networks that rely on cash transactions to generate short-term gains. Together, this context and these practices undercut the growth of market systems and reinforce extractive behaviors that do not add value to products. They undermine the practices and institutions that would otherwise promote the sustainable management of natural resources.

Private sector opportunities differ based on their potential to mitigate impacts on forests, attain greater scale, and counterbalance the extractive tendencies of current economic behavior by adding value:

Potential to mitigate: the likelihood that an investment will dampen demand for unsustainably harvested forest products, discourage practices detrimental to forests, create incentives to improve forest management, or improve forest management systems.

Potential to scale: a supportive commercial, social, and institutional context, and the presence of emerging innovations and technologies, and influential actors.

Potential to add value: the likelihood that actors will collaborate to upgrade value chain performance through common grades and standards; and the potential or presence of clear and transparent trading practices, openness to new actors, and investments in business systems.

Given the unregulated extractive nature of DRC’s economy, growth in the private sector will drive greater deforestation unless it also dampens demand for unsustainably harvested forest products through substitution, or the introduction of new institutions to manage the impacts of growth. The four strongest opportunities for sustainable growth through products that substitute for timber and wood-fuel are (1) liquid petroleum gas, (2) large-scale production of high quality fuel-efficient cook stoves, (3) reusable and durable construction materials, and (4) commercial tree plantations for wood-fuel and

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE vi construction materials. In all four cases, increased sales volume could mitigate deforestation and/or forest degradation through the reduction of demand on wood harvested from natural forests. Each could also be scaled up—although all present distinct challenges to doing so. These opportunities could be used to upgrade value chains to be less extractive through support for innovative marketing strategies or payment methods, complementary service providers, and a demand for quality standards.

Upgrades could also result from investments in technical quality or processing facilities, or mobilization of constituencies for reform.

Four types of interventions could be used to catalyze growth in these sectors: (1) PPPs to perform new or currently underserved functions; (2) challenge grants that create incentives for existing businesses to invest in upgrades; (3) accelerators that attract more entrepreneurs or enable existing businesses to add services or products through financing or capacity development; and (4) enabling environment platforms that engage civil society and public and private sector actors to collaboratively advance policy and improve its implementation.

Employing these approaches in urban settings to dampen demand for forest products will do little to improve rural incomes, an objective of this assessment. In the DRC, the government and donor community employ four main approaches to increase rural incomes in ways that manage impact on forests: conservation enterprises, certification, jurisdictional approaches, and community forestry. The assessment considers the application of these approaches to six economic sectors. To identify opportunities for USAID investment, the assessment applies the criteria described above to each. What is the potential to mitigate, to scale, and to add value?

Ecotourism: Challenges to reaching scale hamper any potential for this sector to mitigate forest impacts. Poor infrastructure and insecurity currently place clear constraints on the potential for expansion. Ecotourism, where successful, may drive some economic development and introduce improved practices in a variety of value chains.

Planted wood-fuel: Wood-fuel plantations dampen demand when located on degraded lands.

Unlike urban investments, they generate rural incomes. However, the sale of wood-fuel from planted trees competes with wood-fuel that does not entail the same, sometimes significant, investment and management costs. The Payment for Ecosystem Services (PES) approach now used to create wood-fuel plantations does not constitute a market transaction. It is a costly approach to scale, and not an opportunity that taps market forces to drive larger economic development.

Cocoa: Managing the expansion of cocoa cultivation into forests has proven to be a challenge in

DRC. Certification has not succeeded, and management by community forest concessions has yet to be tested. The sector’s strong potential for growth, and to generate income for rural households, contributes to this challenge. Expansion would be more market-driven in the east of the country; in the west it would follow substantial donor investment. Private sector investments in the cocoa sector have been demonstrated to drive improvements in the value chain.

Non-timber forest products (NTFPs): Strengthening market systems for NTFPs is likely to increase community appreciation of the value of their forests if the NTFPs are harvested in the wild, and not domesticated. The majority of NTFPs currently being commercialized in the DRC are sold in domestic markets, and are unknown outside of the region. The sector consists principally of low-value products and no individual NTFPs have been identified that have the potential to generate significant incomes. NTFP value chains are smaller than either timber or wood-fuel and substantial investment in market development would be necessary to develop unknown NTFPs to the point that they sell on international markets and generate significant income.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE vii

Wood-fuel from forests: The greatest driver of forest degradation in DRC, improvements in managing this sector could result in significant improvements in forest health. Wood-fuel from natural growth has attained scale; it currently generates income relied upon by households across the country. There are many opportunities to upgrade the value chain: new technologies, better regulation and enforcement, and improved infrastructure. Within their forest concessions, communities may adopt harvesting plans to sustainably harvest wood-fuel for sale.

However, application of market system approaches upstream will be difficult to apply to this diffuse and low-value sector.

Small-scale logging: The damage to forests in the DRC caused by wood-fuel harvesting far surpasses the impact of small-scale logging. Nevertheless, improved management of the methods used in this growing sector could contribute to forest health. It is also more likely that investments in this sector would influence practice and policy within and beyond the communities themselves, in a way that investments in the more diffuse and less intensive wood-fuel would not. Engagement in logging also provides an opportunity for communities to generate income for the community to support community forest management.

The Government of the DRC (GoDRC) currently considers community forestry to be an experiment.

USAID should support the government and partners to encourage continuation of this effort—critical to sustainably generating rural incomes in the DRC. Efforts should begin with the most promising activity for each location, which across much of the DRC will be small-scale logging or charcoal production, as a lead activity, and introduce additional products and services over time.

Diversification not only reduces market risk and supports a greater distribution of benefits, it also enables a more efficient exploitation of forest resources. Harvesting various timber, wood-fuel, and

NTFP products should strengthen the long-term health and productivity of forests through silvicultural practices, as opposed to the current artisanal approach of simply targeting of the largest trees of specific species.

To sustainably increase rural incomes, the assessment recommends an approach that focuses on the interaction between communities and the private sector in the context of community forest concessions. Interventions would resemble those employed in product-substitution sectors in urban settings:

PPPs could establish a consulting firm to provide technical support to community concessions in such areas as product inventories, development of harvesting plans, and ongoing monitoring.

Challenge grants to domestic logging firms could help establish a protocol and standard for logging contracts between community concessions and a domestic logging partner.

Enabling environment platforms for ongoing engagement between government authorities, private sector actors, and community concession holders to monitor the evolution of activities in their areas and shepherd a process of crafting and reviewing regulations to alleviate pressures on community concessions from expanding sectors.

Resolving the fundamental question of green growth of DRC’s economy will be an ongoing process of evolution and discovery. This assessment has indicated directions for exploration. Important additional topics for research remain.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 1

I.0 BACKGROUND AND

PURPOSE OF THE

ASSESSMENT

1.1 CARPE AND PROLAND

The Central Africa Regional Program for the Environment (CARPE) is a long-term initiative of the

United States government (USG) to promote biodiversity conservation and climate change mitigation in the Congo Basin through increased local, national and regional capacity for natural resources management, conservation of critical habitat, and protection of globally significant forest carbon stocks.

The current phase is implemented largely in nine forest landscapes of high conservation importance and focuses on strengthening and implementing the conservation and monitoring approaches developed over 20 years.

Like many development initiatives with land conservation objectives, CARPE’s multifaceted approach to conservation and climate change includes investment in conservation enterprises as a way of reducing pressure on forests, and hence on biodiversity and carbon stocks. (For a recent discussion of the use of conservation enterprises in USAID, see Boshoven, J., 2017.) Conservation enterprises as practiced in

CARPE III include the introduction of improved crop varieties, crop substitution, honey production, small livestock husbandry, fish farming, and cultivation of cacao and crafts. Despite its widespread use, many development practitioners question the effectiveness of this approach, and although some of these

CARPE activities have potential to grow to a scale where they can achieve significant impact, most do not. Several initiatives are locally successful; however, they are almost uniformly small-scale, raising questions about the influence of these activities on biodiversity and climate change mitigation benefits that depend on large-scale landscape conservation. Even where an activity has been able to reach scale, the linkage between the activity and positive conservation or reduced forest conversion has not always been clear (Integra, 2017).

1.2 PURPOSE

CARPE needs fresh ideas and new partnerships if rural livelihood improvements are to help conserve biodiversity and forest carbon storage in CARPE landscapes. Despite the clear need for enterprises that can engage the rural poor in activities that do not lead to unsustainable extraction of the natural resources upon which they depend, USAID lacks a roadmap to private sector activity in CARPE landscapes. USAID also lacks a clear idea of related analysis or activities that other donors may have completed or in which they may currently be engaged, although we know other donors are active in

DRC. Such a roadmap would identify potential avenues for connecting smallholders with value chains, opportunities for public-private partnerships, and/or the extent of private sector resources in

Corporate Social Responsibility programs for which CARPE objectives and frameworks might provide attractive opportunities.

As a first step in developing this roadmap for CARPE, on September 20, 2017, USAID transmitted a draft Statement of Work to the management of the Productive Landscapes (ProLand) project, attached here as Annex I. ProLand is implemented by Tetra Tech, WRI, and ACDI/VOCA under USAID’s Office of Global Climate Change in USAID’s Bureau for Economic Growth, Education, and Environment

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 2

(E3/GCC) through the Restoring the Environment through Prosperity, Livelihoods and Conserving

Ecosystems (REPLACE) Indefinite Quantity Contract IDIQ. USAID developed ProLand to develop guidance on approaches that catalyze change in land management systems so that people and institutions in developing countries can make informed, actionable, and effective development decisions. The goal of

ProLand is to develop tools and evidence that demonstrates that by sustainably intensifying land uses with best management practices, it is possible to achieve multiple gains simultaneously including increasing food production, reducing biodiversity loss, reducing greenhouse gas emissions (mitigating climate change), enhancing adaptation to climate change, and increasing inclusive broad-based economic growth.

As USAID intends to use this review to identify opportunities for greater emphasis in technical areas relevant to ProLand’s mandate. Follow-on research and guidance by ProLand regarding these topics may be an additional outcome of this activity.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 3

2.0 INTRODUCTION

2.1 STATEMENT OF THE RESEARCH CHALLENGE

Briefly stated, the research challenge for this assessment is as follows:

Provide guidance to USAID regarding interventions to strengthen the private sector in the DRC at scale and in ways that increase incomes to rural smallholders and result in a positive impact on the conservation of biodiversity and reduction of greenhouse gasses (GHGs) in target areas.

To identify approaches that can be adopted to achieve CARPE’s livelihood and conservation objectives, this assessment must: (1) investigate approaches, models and systems that successfully provide sustainable livelihood and economic growth opportunities to rural communities in the DRC/Congo

Basin, and that also protect the natural capital; (2) identify conditions that enable and constrain such practices and enterprises; and (3) building on the first two elements, identify potential activities that would plausibly contribute to rural economic growth and conservation at meaningfully large scales in the

CARPE landscapes, as well as private sector actors and potential public-private partnerships that could offer promising opportunities for leverage and integration between economic growth and landscape conservation.

The SOW also specifically requested recommendations regarding the generation of income through the management of community forest concessions.

2.2 REVIEW OF CURRENT STATE OF KNOWLEDGE

Governments and their partners in the development community have employed a variety of approaches to create incentives to improve the management and conservation of forests and the biodiversity they contain. Four approaches dominate such efforts in the DRC: conservation enterprises; community forests; certification schemes; and, more recently, Payments for Ecosystem Services (PES) schemes embedded within jurisdictional projects. Each has its strengths and weaknesses.

Conservation Enterprises. Since the 1980s, conservation practitioners have employed income-based strategies to reduce environmental degradation and provide viable livelihood options for natural resource-dependent communities. The hypothesis is that if participant income is increased, then that increased income provides the motivation and ability for participants to discontinue unsustainable activities and exclude others from uses that result in threats to biodiversity (Baker & Boshoven, 2017).

Despite multiple decades of practice, little is known about the necessary steps and conditions to use this approach effectively (Roe et al., 2015). It is nevertheless clear that conservation enterprise efforts often fall short of delivering the intended outcomes. Target populations do not always adopt the practices promoted, and when they do, the newly adopted occupations often turn out to be either economically or environmentally unsustainable.

Community forestry: The fundamental rational undergirding the community forest management approach mirrors that of the conservation enterprise approach. Supporters of community forestry also cite the twin goals of conservation and rural income generation. Yet community forestry, tightly bound with questions of governance and tenure, has its own history.

In theory, communities can commercially exploit forests, even log them, and cause little reduction in biodiversity. Reduced impact logging (RIL) in tropical forests has negligible impact on species diversity

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 4

(Chaudhary, et al., 2016) . However, in actual application, establishing sustainable community forest is not so easy. The variety of biophysical and social-economic contexts in which communities manage their forests, and the wide range of institutional relationships between communities and forests -- joined with limitations in the evidence gathered -- have precluded the formulation of reliable models, or even consistent and specific guidelines for supporting community forestry. (See, for example Yin, et al., 2014, reporting “tremendous” gaps in evidence.) Essential components for success have, however, been identified. Most recently, Baynes et al. (2015), conducted a systematic analysis of 45 empirically based case studies and ten broader reviews. They identify five factors associated with successful community forestry projects. Briefly stated, these factors are:

Tenure: secure tree and land property rights;

National government: support for the community forest group in the form of legislation, capacity building, and an absence of patronage and corruption;

Status: avoiding conflict over socioeconomic and gender status;

Group governance: democratic and equitable community governance institutions; and

Benefits: material benefits from the forest, through sale of forest products, rights, or services.

Most critical to our assessment, research supports the conclusion that for a community forestry scheme to succeed it must generate benefits to members. How they should best do this is not obvious; a multitude of options and configurations exists. Communities establish and participate in a wide array of arrangements, each with its own set of challenges. They may sell the right to exploit products or sell the products themselves; they establish various forms of contracts with companies, agreements with the government, and relationships with consumers; and they engage at different points in value chains

(Gilmour, 2015). Governmental promulgation of regulations opening the door to any of these approaches launches a long process of learning and growth by the communities and their partners.

Competitive, sustainable community-based commercialization of forest products requires the transformation of all actors in the market, not only community members, through a process that builds governance, technical and business capacity, often from a very low starting point.2

The amount and nature of benefits, and the manner they are distributed, can determine the long-term viability of community forestry schemes. Benefits must be sufficient to support the institutions needed to manage the community forest and distributed in a way that creates incentives for community managers to back and invest in the community forest scheme (Ostrom, 2000). Continued international donor funding, and support from implementing partners, often necessitates that elites not monopolize investments, funds are managed transparently, and that vulnerable or marginalized populations also benefit. In the end, the creation of community forest schemes often exposes tradeoffs among growth, equity, and forest health. A recent systematic review (Samii, Cyrus, and L Paler, 2014), posits that community forest benefits that reduce poverty correlate with declines in forest health. The generation of benefits may be a necessary element, and equity an important goal, but neither automatically leads to sustainable forest management.

Certification. Nor does current literature suggest that cocoa certification programs—a third approach employed in the DRC -- present a challenge-free path towards the creation of incentives for conservation through rural income generation. For one thing, it may not increase rural incomes. A systematic review of rigorous and high-quality studies on the socioeconomic impacts of certification schemes found that they are not generally associated with higher household income and wealth (Oya, C.

1 The Chaudhary et al. global meta-analysis found RIL to have less impact on species richness than conventional forms of selective logging

(13% reduction), and clear cutting (22% reduction) , and much less than conversion of natural forest to agroforestry (32% reduction), timber plantations and fuelwood plantations (both 40% reduction), and non-timber plantations and swidden agriculture (both 54% reduction), (Chaudhary, et al., 2016).

2 See Gilmore, 2015, for a more detailed list of the typical hurdles communities face, specifically in the commercialization of timber.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 5 et al., 2017; Kroeger et al., 2017). Research has also questioned the impact of the approach on deforestation. Actors tend to employ certification schemes where deforestation has already occurred, or is unlikely for other reasons. Farmers who have cleared forest for their fields, and do not enter certification programs, simply sell to other buyers. Although results vary by location and scheme, for these and other reasons, the approach “does not remove deforestation from the commodity overall”

(Kroeger et al., 2017; Ruf, F. & Varlet, F. 2017).

Given this variation in how certification schemes play out, and the absence of universally proven approaches, any specific implementation of certification requires regular and rigorous monitoring of impacts. Continued engagement by the development community has proven necessary to achieving objectives (Oya, C. et al., 2017).

Jurisdictional approaches: A “jurisdictional approach” contrasts with geographically limited sectoral projects that are not integrated into the government and private sector. As they evolve, these approaches include different types of multi-sectoral landscape planning initiatives that align interventions with administrative jurisdictions. They may include public-private collaboration and integrate conservation goals with strengthened sustainable value chains. Components typically include policy reform and land use planning, support to agricultural production, and market incentives.

The approach is neither complete nor proven. Its strength -- that it recognizes the complex tradeoffs of the conservation/production dynamic—also creates challenges of implementation. Jurisdictional programs attempt to integrate multiple factors and actors over the long term, but the approach, still more of a framework, does not present solutions to the underlying challenges of effective policy reform, stakeholder engagement, certification impact, impact evaluation, and, preventing the incursion of agricultural intensification on forest land (Kroeger et al., 2017; Fishman, A., et al., 2016; Sembres, T., et al., 2017; Meyer & Lujan, 2017).

Jurisdictional approaches are also sometimes joined to climate finance. Jurisdictional programs often leverage corporate climate and zero deforestation pledges or government green economic development objectives. The Mai Ndombe Emission Reductions program takes a jurisdictional approach (World Bank, 2016b). Projects preparing for the Emissions Reductions program have employed a Payment for

Ecosystems Approach to promote planting of trees for the wood-fuel market. A recent systematic review of the literature on PES approaches was unable to find rigorous research addressing the impact of PES policies on either conservation or incomes (Samii et al., 2014). We explore DRC experience with PES in greater depth below.

The Congo Basin Program (CBP), which ended in 2015, also took a large-scale landscape private-public approach. CBP targeted Forest Stewardship Council Certification, and assisted concession holders to gain certification and obtain better market position. Outside the DRC, CBP strengthened the performance of previously certified companies and enabled additional companies to become certified.

The landscape activities in the DRC collapsed under allegations of violence and human rights violations in the concession intended to serve as a model for certification. The company involved, Danzer, soon sold the concession, terminating its investments in the country. CBP abandoned the large-scale approach in favor of working with WWF on “micro-zoning” with communities.3 Jurisdictional approaches depend on effective, transparent participation by local governments. In the DRC, this has proven to be a challenge for both the CBP, and the World Bank’s projects in the Mai Ndombe (interviews: Valiergue, Capdejell).

3 The Congo Basin Achievements Congo Basin Program. http://www.forminternational.nl/wp-content/uploads/2016/02/Key-achievements-

CBP-160129.pdf. The Congo Basin. Our activities in DRC. http://www.congobasinprogram.com/en/our-activities-in-drc http://www.forminternational.nl/wp-content/uploads/2016/02/Key-achievements-CBP-160129.pdf http://www.forminternational.nl/wp-content/uploads/2016/02/Key-achievements-CBP-160129.pdf http://www.congobasinprogram.com/en/our-activities-in-drc

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 6

2.3 DESCRIPTION OF THE RESEARCH AND ANALYTICAL FRAMEWORK

2.3.1 Approach to the assessment of market systems

This assessment has taken a broad perspective of market activity in the DRC to identify opportunities for large scale impact that have not so far been explored through CARPE. This included a scan of sectors to identify market trends and hotspots of current and potential economic growth. The analysis explored market systems, both formal and informal, that significantly impact smallholders and the value chains in which they are engaged.

The team also studied conditions that enable and constrain the growth of identified sectors, communities, and value chains, including factors such as prices and competition, and constraints and opportunities resulting from the policy and regulatory context. We considered the fact that government regulation and obstruction pushes much commercial activity underground. This assessment also explored factors that constrain investment in rural economies, such as conflict, energy and communication, transportation costs, and formal and informal fees and taxation. Research under this topic included social control mechanisms (e.g., accusations of sorcery) that inhibit local elites. The impact of demographics, and migration were also considered.

Through the literature review and fieldwork, the team developed an understanding of factors that create positive and negative incentives for biodiversity conservation and GHG mitigation along market channels. The factors assessed included networks, institutions, roles, and norms that are strictly commercial -- end-market opportunities; business growth strategies; current scope of social or commercial networks; sources of information -- as well as cultural and social factors that influence commercial behavior. Factors influencing incentives were considered at local, regional and national levels. The objective was to identify leverage points, means through which incentives may be created to support actors, organizations, and activities that currently positively benefit biodiversity and GHG mitigation, or to dampen negative incentives.

Given the DRC context, and the scope of the assignment, the assessment employed a narrow definition of public-private partnerships (PPP) to mean potential partnerships between USAID, or its implementing partner, and a lead firm capable of pulling other actors—competitors and service providers—into a new market or sector. The duration of the PPP would be limited to a timeframe agreed upon by partners to achieve a combination of development and commercial objectives.

In the context of this assignment, potential PPPs were assessed based on the following parameters:

Alignment of commercial and developmental interests;

Commercial and other incentives of the potential private sector partner; and

Absence of other private sector actors already operating in the targeted environment: A PPP tends to confer a competitive advantage over other actors as it involves a certain amount of subsidized activity. If other actors exist in the target sector, then other intervention tactics become more appropriate and more likely to generate sustainable outcomes.

The assessment had neither the mandate nor the resources to conduct a detailed analysis and mapping of value chains. Nevertheless, a handful of “focal” value chains were selected to serve to illustrate principles, conclusions, guidance and potential interventions presented in this analysis. Among these, and in discussion with USAID, the timber and wood-fuel sectors were selected for more emphasis. These key products drive deforestation and forest degradation, have established value chains, and respond to significant demand.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 7

Analytical Framework: To answer the main research question, the team evaluated economic opportunities of the private sector and community forest concessions against three parameters, namely, their potential to:

Mitigate forest impacts, Scale up, and

Add value.

Mitigate forest impacts

The team assessed how economic opportunities might:

Dampen the demand for products like charcoal.

Constrain the expansion of practices that unsustainably deplete forest resources.

Shift unsustainable practices to more sustainable ones.

Scale-up

The more an economic opportunity is likely to emerge, attract more new entrants and investors, draw in financial and other support services, and build lasting infrastructure, the more likely it will be sustainable and continue to grow. For economic opportunities to also mitigate deforestation, this growing assembly of actors and market forces must also play a long-term conservation role, well beyond initial donor involvement. To gauge an opportunity’s potential to scale-up, the team looked at the following:

Commercial incentives: the strength of the business case for actors along the value chain to generate revenues and be profitable;

Social and institutional incentives: prestige, influence, desirable social or political connections, risk to social standing (negative incentive);

The presence of actors already in the market or with the intention to enter who have tested the viability of an opportunity with practical investments and operations; and

The emergence of innovations or new technologies that might increase actors’ chances of success such as innovations that save labor, reduce transaction costs, or improve productivity.

Introduce strategies that add value to the political, social, and economic environment

As explained in detail below, commercial practices generally take an extractive approach in the DRC.

This approach, and the forces that reinforce it, impede growth, development, and the sustainable management of resources. For an economic opportunity to thrive, it must both invest in its own growth and collaborate with, and support the development of, its network of partners and other market system actors.

The team gauged the potential and incentives for businesses to adopt growth-oriented, inclusive practices. Indicators included:

Cooperative relationships between buyers and sellers along the value chain where actors have incentives to invest in developing relationships to ensure, for example, product quality, reliable supplies, or access to customers;

Clear grades and standards and transparent trade practices between buyers and sellers to ensure an alignment of incentives and inclusion of anyone capable of meeting market requirements; and

Regular investments or upgrades in business systems to, for example, develop markets, reduce inefficiencies, and be more competitive.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 8

2.3.2 Approach to the assessment of rural forest-based enterprises

The team also studied the sectors that dominate rural market systems and generate incomes to rural populations. We applied the three parameters described above -- potential to mitigate forest impacts, scale-up, and improve the general economic environment—to six sectors important to forest communities across the country. These sectors differ significantly in their potential to contribute to rural economic growth at meaningfully large scales in the CARPE landscapes. One is primarily a non-extractive service—ecotourism. Two are based on products usually produced outside of or in place of natural forest –planted wood-fuel and cocoa. Three are based on the extraction of forest products –

NTFPs, managed wood-fuel harvesting from natural forests and small-scale logging. Because of the absence of effective management systems for the last four of these -- cocoa, NTFPs, natural wood-fuel, and small-scale logging -- investment in these sectors increases deforestation or forest degradation unless they are accompanied by effective incentives.4 We assess the strengths and weaknesses of management efforts by government, traditional systems, and PES and certification approaches. The recent evaluation of CARPE III identified a strategy of reinforcing community forestry concessions as the

“best prospect” for incentivizing stewardship and achieving “large scale” reductions in deforestation.5

We reach this same conclusion. USAID investments in these sectors are best undertaken in the context of community forest concessions. To address the requirement of the SOW to provide recommendations regarding the generation of income through the management of community forest concessions, the team studied recent investment in community forest concessions in the DRC, focusing on the parameters for income generation established in law, and the progress of communities and their partners in identifying and creating enterprises. We assessed the range of private sector approaches to generating rural incomes and achieving conservation objectives, yet focused on community forest concessions as the most promising.

4 Based on an initial review of literature artisanal mining was not included as a focal sector of the assessment due to its comparatively limited role in deforestation. Subsequent inquiry in the field revealed that demand, financing and inputs in artisanal mining in the DRC are largely organized by actors in the regional and global markets outside of the country. Further, armed militia control of mining in forested areas would constrain USAID investment. Field agriculture was also excluded, although it is the country’s primary driver of deforestation. Cocoa has been included as an example of tree crop agriculture nevertheless. ProLand recently addressed the relationship between investment in agriculture and deforestation in the DRC in Miller & Hagan, 2016.

5 The evaluation also identifies three management challenges to this approach:

● CARPE IP staff lack relevant training/experience,

● CARPE IP staff lack trust in this approach, and

● Limited time remains in the CARPE project.

ASSESSMENT OF PRIVATE SECTOR APPROACHES TO ACHIEVING CONSERVATION OBJECTIVES IN CARPE 9

3.0 METHODS AND

IMPLEMENTATION

ProLand assembled a team of four researchers to conduct the assessment. Team members were:

Dr. David Miller, Natural Resources Management Specialist and Team Lead. ProLand

(ACDI/VOCA);

Eric Derks, Private Sector Specialist, The Canopy Lab;

Dominique Bikaba, Conservation Specialist, Strong Roots Congo; and

Leon Zabiti, Private sector development and business consultant.6

Literature review and preliminary interviews: Over several weeks prior to departure to the DRC on March

10, 2018, Dr. Miller and Mr. Derks conducted an initial review of literature and a series of telephone interviews to provide background and orient the assessment. During this time, they gained an understanding of the national and regional contexts of economic growth, and formed preliminary descriptions of the context for private sector activities and the market systems targeted in this analysis.

Value chains relative to this analysis were identified, and overviews of their functioning developed. They identified potential opportunities for income generation by forest concessions in the DRC, drawing also on the experiences in other countries of the Congo Basin and elsewhere in Africa. Based on this review they developed an initial list of key questions (Annex II). And, in discussion with USAID, decided to focus on timber and wood-fuel sectors, key products driving deforestation and forest degradation. They included cocoa as an additional relevant product to review.

Fieldwork: From March 11 to March 16, following an in-brief with the USAID Mission, Miller, Derks, and

Bikaba interviewed key informants in Kinshasa. From the 17th to the 21st, Miller traveled to Mbandaka, and visited WWF sites in the Lac Tumba region and interviewed market actors in Mbandaka itself, while

Derks and Bikaba continued interviews in Kinshasa. From March 25 to March 31, the four team members conducted interviews in and around the city of Goma, where Zabiti had been conducting interviews from early March. Over all, the team spoke with over 100 representatives of donors and their implementing partners, NGOs, National and Provincial government, civil society, and the private sector working in timber, charcoal, gas, construction, cocoa, coffee, furniture, and transportation. Annex III summarizes the team itinerary and interviews, and Annex IV lists all persons interviewed.

Debriefs: On April 10, the team conducted an informal debrief with Noel Gurwick (USAID Global

Climate Change Office) and Diane Russell (USAID Forestry and Biodiversity Office); and on the 16th they debriefed additional USAID/Washington staff and members of the USAID Mission.

Report production: A first draft of the report was submitted to USAID on May 14, 2018. The ProLand team received comments on May 22, and submitted a revised version of the report on June 6, 2018.

6 See Annex V for brief bios of team members.

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4.0 OVERVIEW OF THE DRC

AND CARPE CONTEXT

4.1 STATUS AND LOCATION OF CRITICAL NATURAL CAPITAL

The Democratic Republic of the Congo spans 2.3 million square kilometers, making it the second largest country in Africa. With an estimated 80 million hectares of arable land and over a thousand minerals and precious metals, over half of Africa’s freshwater and forest resources, and the greatest biodiversity on the continent, the DRC is one of the wealthiest countries in natural capital in the world. The country’s natural resources are distributed across three agro-ecological zones: a sparsely populated alluvial basin of equatorial forests and marshes covers the central third of the country; more densely populated plateau savannah borders this central basin to the north and south; densely populated volcanic mountains rise to the east and northeast.

Tree cover extends over approximately 70% of DRC’s land area, most densely in Congo’s central basin, a vast reservoir of native trees and plants providing timber, fiber, oil, rubber, copal and traditional medicines. The Orientale and Equateur regions of central basin contain more tree cover than others, and this region’s peatlands has been found in recent years to store almost a third of the world’s tropical peatland carbon (Dargie, et al., 2017). (For images of forest cover in the DRC from 2001 to 2016 see the CARPE website interactive map here: http://carpe.umd.edu/carpemaps/#.)

The DRC’s dense hydrographic network channels over half of Africa’s freshwater resources in more than 30 large rivers and twenty thousand kilometers of riverbanks. The unexploited hydropower potential is immense. Of the country’s potential of 100,000 megawatts (MW) of hydropower capacity, currently 2,500 MW have been installed (Power Africa, n.d.). A series of four dams have been proposed for the Congo River in the DRC. Progress has not been without setbacks. In 2016, the Mwadingusha hydropower plant, originally commissioned in 1930, came online and began supplying 11 MW of power to the national grid (Poindexter, 2017). The $13 billion Inga 3 project, the world’s largest proposed hydropower scheme, was announced to great fanfare in 2014, and lost its World Bank support in 2016.

The start date has since been pushed back from 2020 to 2025 (Poindexter, 2017, and International

Rivers). Other projects in the works include the Busanga project (170 MW), awarded to a Chinese consortium in 2016 after 10 years of negotiation (Poindexter, 2016); and the 13.8 MW Buffett Foundation financed project in Matebe in eastern DRC (Harris, 2015).

The DRC has the highest number of species in Africa for all groups of organisms except plants, in which it is second to South Africa. Globally, DRC is fifth globally in the importance of its megafauna biodiversity.