New strategy to boost Palm Oil production

A new global strategy that could raise Ghana’s competitiveness in palm oil production is being developed by experts from the World Bank Group and International Finance Corporation (IFC).

The strategy, to be ready in September 2010, is expected to quick-start a multi-million dollar oil palm programme for policymakers and government and will focus on access to financing, certification, land-use policy, technology transfer, and infrastructure development from the farm to the port, as well as pricing mechanism and marketing.

This is aimed at maximising development outcomes for the communities while minimising adverse social and environmental impacts of the sector and supporting smaller businesses, as well as alleviating poverty.

Analysts say the strategy is timely as Ghana is expected to export 36,000 metric tonnes of palm oil to China next year, following the conclusion of a US$21.6 million deal between Chyuan Chya Ghana Limited and China-Africa Economic Trade Limited.

The palm oil to be exported by Chyuan Chya will mainly be purchased from small and medium-scale smallholder producers across the country.

Current forecasts anticipate the country being faced with a net deficit of up to anywhere between 20,000 and 100,000 tonnes of the valued oil palm commodity, estimated at about US$35 million annually, following slippages in the production of the commodity.

Outlining the set of principles to guide the IFC's future engagement in the palm oil sector at a news conference in Accra, after a consultative process aimed at helping to identify key issues affecting the sector, Mary-Jean Ndlovo, Country Manager, IFC, said: “IFC believes that investing in the palm oil sector results in many development benefits for local communities.

Oil palm can be readily cultivated in many developing countries and is highly efficient in producing a valued commodity with a variety of uses.”

The IFC has to date invested US$132 million in palm oil projects in West Africa, Asia, Central America and the Ukraine.

“Palm oil production can be the basis of a thriving local economy, producing jobs and other benefits for local populations,” Ndlovo said.

Mr. Mark Constantine, Principal Strategy Officer, International Finance Corporation (IFC), said the process is aimed at supporting smaller businesses to undertake their activities in an environmentally friendly manner.

IFC recognises that the palm oil industry poses a number of social and environmental challenges. These include the impact of palm oil production on local communities, forests, wildlife habitat, and endangered species.

These challenges, the IFC believes, can be managed within its sustainability framework which provides guidelines on how to address and resolve issues related to community engagement, as well as protection of biodiversity and wildlife.

The World Bank has identified the palm oil sector as holding tremendous potential to create jobs and reduce poverty.

Recent trends in world price suggest that crude palm oil when properly nurtured could easily become a major foreign exchange earner for the country.

Average Crude Palm Oil (CPO) prices increased 76 percent in 2007 from the 2006 level of US$473.9 per tonne.

The rising trend in world demand has been precipitated by increasing demands on the commodity for bio-fuel purposes.

Crude petroleum price determinants continue to push upwards pressure on the price, and demand for CPO is steadily rising in India, China, Europe and the America for bio-fuel. In view of this development, investors have been diverting their investment portfolios into CPO.

Ghana’s major producers, Benso Oil Palm Plantation (BOPP) and Twifo Oil Palm Plantation (TOPP), Ghana Oil Palm Development and Norway Palm turn out around 80,000 tonnes per annum as against 90,000 tonnes demanded by Unilever alone.

Land area cultivated by the four is barely 30 percent of the national endowment. The rest is either lying fallow or cultivated on subsistence basis by individual smallholder farmers.