Nana Mensah
22 July 2005
A new plan unveiled in Ghana recently could raise the nation's competitiveness in oil palm production, unrivalled in the sub-region, as Ghanaian authorities quick-start a multi-million oil palm development plan.
Experts say the country could be faced with a net deficit of up to 20 000 to 100 000 tons of the valued oil palm commodity estimated at about US$35 million annually following slippages in the production of the commodity.
But Government's Private Sector Development and Presidential Initiative (PSI) officials say a new package on Oil Palm holds the trump card in eliminating the shortfall and offer employment to thousands of farmers in the country.
In the short term, officials hope to turn 10 000 ha of farmland into oil palm plantations. The figure is expected to hit 100 000 ha in ten years, but the ultimate is to develop an industrial oil palm giant economy with 300 0000 ha plantations to fully absorb and stem rapid rural urban drift.
With 300 000 ha of oil palm plantations, the country's economy will be a net exporter of oil palm as well as achieve self-sufficiency in the industry.
Statistics on palm oil requirements already show that Ghana's domestic market requires about 240 000 metric tons of oil palm, while the west African market consumes some 1.8 million metric tons annually.
Currently, oil palm output is about 100 000 tons, which as against total industry requirement of 240 000 representing a shortfall of 140 000 tons of crude palm.
Ghana's economy has become more robust and competitive, but unequalled is the task set by the nation's president to free her near 20 million populace from harsh living conditions, job cuts and transforming the economy into a middle-income status, with per capita income now around US$440 reaching US$1 000 by 2010.
The PSI on Oil Palm, the latest among a host of President Kufuor's cradle of PSIs, under-developed farmlands are to be turned into medium-scale industrial farmlands, under which Ghana hopes to grow, mill and refine oil palm into a high yielding export earning commodity.
The absence of aggressive marketing has drawn shadowy clouds over the potential of the oil palm deal.
"On the contrary this PSI is deemed as a lower risk with bigger returns, because the commodity is in high demand" industry observers say.
A project committee and a co-ordinating outfit run by the state is already publishing feasibility reports, which proved the viability of the project on oil palm. A scoring point in the reports was that there is already an entrenched indigenous knowledge, cheap labour and abundance skill.
A more proactive effort to woo domestic and foreign investors into the sector's much acclaimed untapped wealth is expected to begin soon.
Government is avoiding direct operational involvement especially in the acquisition of land for social and other related reasons. Fundamentally, the approach is to adopt the nucleus, smallholder, and outgrower model for now.
In the case of the nucleus, at least 5 000 ha is being recommended. Facility would be equipped with mills capable of processing 20 tons of palm fruit bunches per hour.
Specially provided mills are to serve as centres of excellence to customers for the produce of smallholders and outgrowers. Through an arrangement, smallholders will benefit from land acquired for the project, but outgrowers will enter on the basis of their privately acquired lands while retaining community designated lands to smallholders.
Costs
Government and development partners are seriously pushing the idea of facilitating the development of business associations and the co-operative model on the agenda to boost the direct involvement of micro, small and medium scale entities in the PSI, a deviation in the sync qua non.
In the next five years, the oil palm industry is expected to become one of the key drivers of the economy and a net non-traditional commodity export. Traditional councils and over a hundred decentralised district assemblies are being encouraged to provide the minimum 5 000 to 10 000 ha, of land "within a reasonable catchment radius" as contribution to the industrial exercise.
A team of technical experts is already in place offering backstopping to project.
Statistics indicate that over 250 000 ha of planted area, representing 80% are being controlled by mostly rural farmers, usually unorgainsed and turnout just about 4 tons per ha when compared to well-organised smallholder whose output is estimated to be around 16 tons per ha.
An estimated 10 000 ha per year of land are supposed to be planted and the Oil Palm Research Institute (OPRI), a state-owned body is being tasked to generate two million germinated seeds per year to support the project.
Cost for running a 5000 ha-smallholders oil palm plantation is estimated on average around 8.8 million euros per project.
The cost includes internal network of agricultural roads and tracks. Plant, housing and machinery are estimated to attract cost some 730 000 euros; while operator overheads could run into 668 000 euros.
Lifespan
The lifespan of an oil palm plantation is about 22 years, and this form was factored into the computation of the project costs. Farmer's income is pegged around 62 million euros through the lifespan of a 5 000 ha plantation based on a selling price of fresh palm fruit bunches to operator's mill amounting to US$39 per ton.
This computation is closely linked to an estimated Crude Palm Oil International Price of US$300 per ton.
Profitability therefore is based on the internal rate return worked out "consequently, according to various hypotheses, with particular reference to interest rate on loans and also subject to sensitivity analysis".
"And also taking into accounts different levels of agricultural yields and crude palm oil prices", official sources say.
"The project on oil palm development is viable," concluding that taking inter alia an interest rate of 13%, farmers could earn nearly one million cedis from a plantation of 10 ha every month.
But by focusing on growth and wealth creation as a means of reducing poverty the country could avoid the proverbial 'no shortcuts to development'.
Oil palm could become Ghana's major commodity next only to Cocoa.
Investors are still eyeing government, beyond good macroeconomic performance to consider legislations and business law administration in a nation where cost of doing business still eludes the good side of political stability and abundant resources.
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