PALM OIL
Africa’s oil palm sector
Long before palm oil flourished in the humid tropics of Malaysia and Indonesia, West Africa was home to the crop, according to former Roundtable on Sustainable Palm Oil (RSPO) CEO Datuk Darrel Webber. Evidence of palm oil’s use as a staple food crop dates back as far as 5,000 years. “Palm oil provided a vital food source for local communities and was one of the region’s earliest traded commodities.” Throughout the 1800s, British traders imported African palm oil, using it for a growing number of products, from soap to margarine to candles, according to National Geographic. Once scientists discovered how to isolate glycerine from the oil, its applications multiplied to take in pharmaceuticals, photographic film, perfume and even dynamite. By the turn of the 20th century, oil palms had been shipped to Malaysia and Indonesia, and commercial plantations began to take hold there. Today, the two Asian countries are the largest palm oil producers in the world, while the oil palm sector in Africa remains largely overlooked.
Outdated views
“What comes to mind when you think of palm oil in Africa?” Akwaaba Ventures director Ranveer Chauhan asked delegates at the International Palm Oil Congress and Exhibition (PIPOC) in 2019. He said some outdated views included: • The oil palm sector does not even exist • Maybe there are just natural groves and all palm oil is imported • Africa is too primitive for sustainability initiatives • The continent is not ready for investments or partnerships Africa, however, is not only the original
Photo: Ranveer Chauhan, PIPOC 2019
Palm oil accounts for some 70% of edible oil consumption in Africa, with around 22M ha of land available to convert to oil palm plantations. However, challenges face companies and communities involved in developing the crop on the continent Serena Lim
home of the oil palm tree (Elaeis guineensis), it is the only consumer of the unrefined red palm oil, Chauhan said. “Palm oil is the largest edible oil produced, imported and consumed in African markets today.” Palm oil accounts for around 70% of edible oil consumption in Africa and it is estimated that up to 22M ha of land in West and Central Africa could be converted to oil palm plantations by 2021, says Webber. According to Chauhan, there are 19 countries lying in the equatorial zone where palm oil can be produced (see map, p16). Eleven of these countries are best suited for foreign direct investment (FDI), having enough suitable available agricultural land, rural labour, and existing markets serviced through imports. The countries marked in dark green on the map indicate where foreign investment can be made while light green nations show where local investment should be boosted. Of the 19 countries, Nigeria is the biggest producer and consumer of palm oil. Nigeria produces around 1M tonnes/year of palm oil. Its government announced in June 2019 that it was planning to invest 180bn naira (US$500M) to increase palm oil production to 5M tonnes/year by 2027 by offering low interest loans to farmers and erecting barriers on crude palm oil imports, a Bloomberg report says.
Nigeria ranks third in the world in terms of land area planted with oil palm but it is only the fifth largest palm oil producer due to low yields as much of its oil palm cultivation is grown by smallholders. The policy aims to double the oil palm planted area from 3M ha to 6M ha to meet all of the country’s domestic palm oil demand by 2027. Nigeria spent about US$500M importing 600,000 tonnes of palm oil in 2018, Bloomberg says. Africa also imports much of its edible oil needs, consuming some 10-12M tonnes/ year and producing around 4M tonnes/ year, Chauhan told the PIPOC 2019 conference. This level of consumption is “dangerously low” and the market should be consuming some 25M tonnes/year to achieve healthy levels, he said.
Investment challenges
Factors supportive of edible oil consumption growth in Africa are its urban population growth of 50% and its upward GDP per capita growth. “Africa also has the fastest population growth in the world today,” Chauhan said. However, as Africa becomes the new frontier of industrial palm oil production, many challenges remain for the companies and communities involved. “Investment and expansion in palm oil is growing – and growing fast – in
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