Oil palm growers push for protection

Government needs to urgently introduce fiscal measures to protect the oil palm industry so as to attract investors and rural dwellers, oil palm outgrowers and smallholder farmers in the Eastern Region have said.

 

The farmers argued that if adequate protection is not given to the palm sector, the country will risk losing local production of 135,000 tonnes that needs to be replaced by imports -- which will cost the country more than US$95million and also risk eliminating the livelihoods of 290,000 farmers.

Mr. Charles Lawrence Twumasi-Ankrah, an executive member of the Smallholders/Outgrowers’ Association of Oil Palm in the Eastern Region, told B&FT in an interview that without the implementation of duty protection, most investors would prefer importation of cheap crude Palm Oil (CPO) to the establishment of plantations which render a lot of employment to thousands of people in the rural communities. 

“Oil palm plantations raise the living standards of rural people by providing employment to thousands and alleviating poverty. Palm plantations, schemed smallholders, independent farms, outgrowers and individual farmers create employment in the palm segment for more than 7,000 people within some five districts of the region.

“With 50% low yield and high cost of infrastructure, maintenance and electricity, it would be very difficult for local farmers to compete with CPO imported from the Far East without the duty protection.”

He urged government to expedite action on implementation of the 10 percent Import Adjustment Tax (IAT) on CPO.

Government is expected to impose a 10 percent IAT in addition to the 10 percent ECOWAS Common External Tariff (CET) on imports of crude palm oil. 

This is in line with a global movement toward Customs unions, wherein ECOWAS is introducing a CET to allow the same Customs duty to apply for all goods entering ECOWAS members, regardless of which country within the area they are entering.  ECOWAS is due to implement the CET this year.

Mr. Twumasi-Ankrah explained that with implementation of IAT, the price of CPO in the country will increase -- and this will have a direct and proportionate increase in the price of Fresh Fruit Bunches (FFB), which accrues to the benefit of farmers who are the largest stakeholder group in the oil palm industry.

He said Nigeria has initiated a lot of measures to protect the local palm sector and encourage farmers, as the sector holds tremendous potential to create jobs and reduce poverty in the rural areas. 

Among some of the measures initiated by Nigeria to protect and sustain the oil palm sector is imposition of 25% additional import adjustment tax on imports of CPO.

Moreover, the Nigeria government has included CPO/Vegetable Oil on the list of items which importers cannot apply the country’s foreign exchange earnings to finance importation. This means importation of crude palm oil will be 10% more expensive owing to the exchange rate difference between the interbank and open market. 

“We the farmers are more than certain that the imposition of IAT on crude palm oil will have a positive effect on growth of the oil palm sector while increasing government revenue, and in the long run neutralise the threat that is draining the economy of much-needed revenue and thereby affecting the livelihood of farmers -- which constitute the largest stakeholder group of the industry. 

“We the outgrowers and smallholder farmers believe that government has clear objectives and intentions to ensure the livelihoods of local farmers in the oil palm sector are safeguarded through various interventions, of which the IAT is part.”

The yield of Ghanaian oil palm farmers is 50% lower than their counterparts in the Far East. With the high labour cost, it is difficult for local farmers to compete without duty protection. “The inability to compete will deter most farmers from engaging in cropping Oil palm, and thus further decrease our already insufficient production,” he said.

“We are over 7,000 farmers cultivating approximately 13,000 hectares of oil palm plantation within five districts in the Eastern Region; namely Kwaebibrim, Birim North, AkyemManso, Denkyembour and Attiwa.”

According to the Ministry of Food and Agriculture (MOFA), palm oil was the principal export from the then-Gold Coast and accounted for 75% of the country’s export revenue in the 1880s.

B&FT has gathered that about 48,000 tonnes of sub-standard palm oil has been illegally imported into the country without appropriate duties.

Approximately 305,700 hectares of oil palm plantation is being cultivated nationwide, and an additional 20,000 hectares of oil palm farm is needed to meet the local demand. 

In 2010, processing groups projected a production output of 260,000 metric tonnes of palm oil, which indicates a deficit of 35,000 metric tonnes -- leaving government with no option but to spend US$100million annually on importation of oil palm to make up the deficit.

The estimated unmet demand for oil palm in the ECOWAS sub-region is between 850,000 metric tonnes and 1,000,000 metric tonnes annually, a huge market the country can take advantage of if properly managed.

More than 80 percent of this is cultivated by private small-scale farmers who mostly use unimproved planting materials. This has contributed to very low productivity in the Ghanaian oil palm industry.

The rising trend of international demand has been precipitated by increasing demand for palm oil for bio-fuel purposes.

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