Unlocking the Palm Oil Potential in West Africa

Indigenous to West Africa, oil palm is an important crop for both industrial, retail and consumer markets. In 2013, West Africa’s palm oil output was 2.2 million metric tons (MT), which accounts for only 3.5% of global output. Today, the demand for palm oil in the West African region exceeds its supply, and the region is a net importer of palm oil, with a deficit of 850,000 to 900,000 tons, per year that is provided for by imports from countries such as Malaysia and Indonesia. Cote D’Iv-oire is the only net exporter in West Africa, and exports an estimated 275,000 MT with about 75% of its export going to West Africa.

The palm products generated in the region include: a) Crude Palm Oil (CPO) which can be further processed or refined into a range of derivative products including olein and stearin, b) Palm Kernel Oil (PKO) is processed from the seed of the palm nut for the industrial market, c) Others: Palm ker-nel cake and sludge are significant by-products that are used by the feed industry. CPO is either deemed to be Technical Palm Oil (TPO) or Special Palm Oil (SPO) based on how it is processed and the quantity of free fatty acid. TPO is low quality palm oil, and it is processed for meal preparation by households, hotels and caterers and for direct sale as unprocessed oil, while SPO is premium grade palm oil, which is processed for use in the food industry and produced and refined by large mills.

The major challenges impeding the growth of the West African palm oil industry include ageing oil palm trees, uncertain land tenure systems that affect allocation of land for cultivation, and produc-tive inefficiencies which lead to less competitive pricing.

Despite the challenges facing the West African palm oil sec-tor, a range of investors, especially multinational compa-nies, have been attracted to the potential in the production and processing of oil palm. This rise in investment interest is driven by oil palm companies from Indonesia and Malay-sia seeking suitable land for oil palm cultivation, while also facing tighter deforestation regulations in their countries. For example, Singapore-based Wilmar International and PZ Nigeria entered into a joint venture called PZ-Wilmar, in December 2010 and is investing $650 mil-lion in oil palm plantations and processing facilities in Nigeria. In addition, Wilmar acquired Benso Oil Palm plantation in Ghana in 2011 and is also invested in Ivory Coast through a JV with Olam In-ternational. Furthermore, Wilmar also acquired a 50.5% stake in the largest Ivorian palm oil refin-ery, Newco. It is expected that other major Asian palm oil producers will follow this example in subsequent years.

While a large part of the investments have been in oil palm plantations, there has also been signifi-cant investment in palm oil processing. Some of these processing facilities include Wilmar’s $16 million 1,000 MT per day palm oil refinery in Tema, Ghana, as well as Sime Darby’s 60 tons per hour oil mill in Liberia that is currently undergoing construction.

March 1, 2015
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