Analysis of the factors limiting the performance of small-to-medium scale sawmills in the copperbelt of Zambia

Abstract

Small-to-medium scale softwood sawmills in the Copperbelt of Zambia are operating below 50% capacity. The timber supply is uncertain as demand continues to increase in tandem with economic activities and population growth. This study identified the financial, i.e., access to finance and operating costs, and non-financial, i.e., raw material, transport, skilled labor, and sawn timber recovery, as the limiting factors affecting performance. The authors benchmarked various financial ratios, i.e., gross profit margin, net profit margin, return on investment, return on capital employed, and working capital turnover, of the small-scale sawmills compiled from survey data with the average industry ratios. Raw material is the most limiting factor affecting profitability/success of small-scale sawmills. A Cobb-Douglas model demonstrated that sawn timber recovery depends on operator skills, particularly in non-automatic machinery, which are common. Strategies currently employed are value addition, multiple sourcing, equipment acquisition and modernization, and labor cost reduction. Measures proposed to enhance profitability are credit guarantee schemes, collaboration, tax reduction, lesser-used timber utilization, and timber auction floor.