The forestry industry is built on partnerships, and indeed the future of the industry relies heavily on commercial growers, small woodlot owners, end users and government working together to maximise the country's resources and empower the communities those resources occur in.

Vincent Kunene of Kusasa Harvesting with Jarrett Pech, Managing Director of Busby Oils.

Eucalyptus oil production in KwaZulu-Natal is a model of partner engagement and resource management. Based in Pietermaritzburg, Busby Oils Natal (Pty) Ltd is South Africa's largest Eucalyptus oil producer and has been producing it for over 30 years, supplying oil for use primarily in cold and flu remedies, as well as for products such as Vicks, Zam-Buk and Deep Heat, and toothpaste, cosmetics and fragrances. "Busby Oils is one of the largest producers in Africa," says Managing Director Jarrett Pech. "Over the years we have established ourselves as the leading supplier of premium quality Eucalyptus oil."

Partnerships in development

Busby works closely with their BBBEE partner, Vincent Kunene. Vincent is the controlling member of Kusasa Harvesting and has been with the business since 2003, and between Busby and Kusasa some 100 people are employed. Busby's crude oil factory based just outside Richmond in KZN processes about 20-30 tons of E. Smithii leaf per day, which means that they need large amounts of leaf material coming in to the factory on a regular basis. Some of the leaf comes from trees on a number of local woodlots owned by Busby, but much of it comes from other growers. Busby has formed partnerships with a number of commercial growers such as Sappi and NCT, as well as a few small private growers. Rather than growers going to the expense of doing coppice reductions on their trees, Kusasa Harvesting does all their thinnings at no charge and then transports the thinnings to Busby's crude oil factory – a win-win situation.

These partnerships work incredibly well, and there is an opportunity for growers – especially developing growers – to sell their thinnings to Busby or save money by getting Kusasa Harvesters to do their coppice reductions for them. Growers of E. Smithii are encouraged to contact Busby Oils on 033 343 1767 for more information.

The production process
There are some 300 different kinds of Eucalyptus worldwide, but of those only ten are economically viable for the production of Eucalyptus oil, and of those only about three or four are suitable for medicinal purposes. Busby only use E. Smithii leaf, which they distil at their crude oil factory. Steam is driven through the leaf matter, which extracts the oil. This then passes through a heat exchanger which turns it into a liquid composed of oil and water. The liquid goes through a separation phase, leaving behind crude Eucalyptus oil. The crude oil is sent to Busby's refinery in Pietermaritzburg, which refines the crude oil through fractionation (separating chemical compounds by their boiling point by heating them to a temperature at which several fractions of the compound will evaporate) to a purity of 90%.

Eucalyptus oil production is a bulk process with low yields. There is only a 1% return on wet material i.e. from 20-30 tons of leaf, only about 200-300 kg of crude oil is extracted, and when the crude oil is refined, 20% of it is lost. Interestingly, this 20% is not wasted. It is sold as a biofuel (it burns better than diesel) to a petroleum company who blend it into their diesel.

Demand
Next to citrus oil, Eucalyptus is the second biggest essential oil produced in South Africa. It accounts for approximately 5% of the world's supply, competing with the likes of China and Australia. "Australia has a well developed, sophisticated industry. They mainly produce from E. Polybractea and their production accounts for approximately 8% of world supply," says Pech.

But the main competition comes from China, which dominates the world market for most essential oils, including Eucalyptus, accounting for about 60% of world supply. "Eucalyptus oil is a very difficult market to get into – and to stay in – as China keeps prices very low. Chinese Eucalyptus oil trades between US$5 and US$7.50 per kg, depending on order sizes."

China's ability to sell oil at low prices makes it incredibly difficult for South African producers to find new markets. But the low cineol content of Chinese oil (80%) works to Busby's advantage. "Chinese quality can vary considerably and they often have to blend other oils into their Eucalyptus oil to ensure that the cineol content meets the minimum British Pharmacopoeia (BP) requirements. Persuading new customers to change to our high grade Eucalyptus oil, which has a cineol content of about 90%, is not easily achieved but once they convert they are inevitably with us for life."

Jarrett says Busby's key to producing high quality Eucalyptus oil, which is consistent from batch to batch, is keeping a very close watch on quality control, from distilling crude oil, to refining the crude oil into pharmaceutical grade Eucalyptus oil.

South Africa's eucalyptus oil requirements are fully met by the existing producers and exports are hard to come by as a result of stiff competition from China and Australia. This coupled with the high barriers to entry (in respect of capital set up cost and quality control issues) make it a very difficult industry to enter into and be successful in. But opportunities are there for growers of E. Smithii to provide the leaf material that drives the Eucalyptus oil industry in real partnerships that benefit all parties.

Published in November/December 2008