Black Gold is a model case study of how the successful creation of commercially viable small to medium enterprises can foster the development of sustainable hubs of economic activity in historically disadvantaged communities.
In November 2002, South African company Black Gold was established to convert waste timber into value added charcoal for sale at a profit to larger charcoal distributors. Integrated forestry and paper manufacturer Mondi held a 30 per cent stake, a local community trust 10 per cent and a consortium of local entrepreneurs called Firing Trading held 60 per cent.
The BLCF, together with Mondi, provided investment to finance the construction of 70 kilns at eight sites to produce charcoal plus the extensive training of local entrepreneurs and their employees in skills ranging from forestry business, supervision, chainsaw operation and maintenance, health, safety, first aid and driving.
For each active kiln site Black Gold employed a local entrepreneur to lead the business, manage the collecting and processing and consequently build their management and human resources skills.
All services from collecting waste timber, charcoal production and bagging to transportation for sale in supermarkets were contracted out from local communities.
The kiln sites employ their own timber collectors who are then given access to Mondi's Forest Stewardship Council certified commercial timber operations. They collect any timber deemed as waste material (too small for the paper making process). The entrepreneurs also control quality by ensuring that smaller pieces of charcoal and ash are sifted out and used to make charcoal briquettes.
Black Gold's first female entrepreneur, who employed an 80 per cent female workforce, ran the single bagging site.
Black Gold proved to be one of the biggest charcoal manufacturers in South Africa, serving some 16 markets locally and internationally with high quality product.
The model was developed in line with South Africa's black economic empowerment initiative as the local entrepreneurs represent people from a previously disadvantaged background.
In the first year of operation, Black Gold issued dividends to the entrepreneurs who are part of Firing Trading. By the second year, turnover had doubled and the production capacity was 2200 metric tonnes of charcoal per month.
With the entrepreneurial ethos behind the project, opportunities for scaling up have been identified in an additional refinement stage to produce charcoal for water filters and some medicinal purposes.
Capturing the diverse market for charcoal will be a good way to keep the company in high production levels and with an assured market. Black Gold can also market its products to environmentally conscious buyers, as the firm has a Forest Stewardship Council certification, which guarantees high environmental standards in its forestry practice. In addition to this, Black Gold won an environmental award at the eighth World Health and Environmental Congress in Durban, South Africa.
In 2007, Mondi transferred its share to the local community trust and, by general agreement, the stakeholders decided each entrepreneur was skilled enough to run their own businesses while forming an association to speak and negotiate with one voice. Black Gold was closed down as an intermediary and the returns split among shareholders.
In a few short years the community transformed its fortunes. Huge unemployment, community infrastructure and nonexistent small businesses has given way to improved water and sanitation, increased access to transport, 286 direct and 386 indirect jobs (each of these in turn supports 10 people,) a high level of business skills and other local entrepreneurs building up business opportunities. The added benefit is that Mondi reports a 30 per cent reduction in fires in the participating forests.
For more information contact BLCF fund manager, the Emerging Markets Group at this address