17 June 2019

Liberia: J-Palm Facilitates Sustainable Market for Smallholder Farmers

Pacha Soap's Team, the World Bank's Sr. Agricultural Specialist, and Smallholder farmers from Koon Town, Montserrado County, during the occasion.

The challenges facing Liberian agriculture sector, including smallholder farmers, are well documented. Among the top obstacles facing the farmers is a limited or lack of access to profitable markets. This serves as a disincentive to farmers from investing their scarce resources into increasing farm productivity. With low productivity - both in terms of production and quality efficiency, farmers' options for market access are in turn limited as a vicious cycle.

To gain access to markets, farmers must be able to respond to market requirements, which are rapidly evolving to include changes in market demand that are driven by multiple factors, including increasing incomes, population growth, increasing urbanization, and growing social consciousness.

Expanding international trade and communications further accelerates changes in demand. At the same time, changes in agro-product systems are shifting the basis for competitiveness. Increasingly, competitiveness is being determined by factors such as economies of scale, efficiencies in logistics, compliance with stringent grades and standards, and capacity to reach global markets with differentiated products.

Studies have shown that countries that have integrated in global markets with high-value products, or countries with large high-value domestic markets seem to have advanced the most in terms of the contribution of agriculture to economic development.

J-Palm Liberia, an enterprise started in 2013 by Mahmud Johnson, a young Liberian agro-entrepreneur, is promising to be a bridge for linking Liberian oil palm smallholder stakeholders to domestic and global markets, with expected benefits of improved livelihoods, increased incomes, technology transfer, and social and environmental sustainability.

Mahmud Johnson's innovativeness won him the Johnson and Johnson Africa Innovation Challenge award in 2017. He is also one of the few Liberians, who is adding value to primary agricultural products in response to the growing market demand; not only in the traditional food sector, but in rapidly growing sectors such as in the health and wellness and beauty industries.

The oil extracted from the kernel is highly valued by international companies producing natural skin care products.

A 2018 Global Wellness Institute report shows that health and wellness is now a US$4.2 trillion global industry, with a 12.8% growth from 2015-2017, of which the personal health care and beauty market accounts for US$1,083 billion. These industries offer strong growth opportunities for emerging, innovative, small- and medium- enterprises like J-Palm Liberia.J-Palm has responded to the increasing demand from multinational companies for palm oil by putting to use the estimated 220,000 tons of palm kernels discarded annually as waste after extraction of oil from the fruit of wild palm trees, known as dura palm.

J-Palm works with rural households across Liberia to ensure a regular supply of palm kernel oil from dura palm trees. According to its CEO, the company "has set up mini-mills in rural communities, which have allowed participating households to realize a 90% reduction in time needed for oil extraction, a 50% increase in palm oil production, and a 50% increase in income." Additionally, he said the company has created more than 600 off-farm jobs, primarily for young people, in sales, marketing, and product development."

The budding Liberian enterprise uses the kernel oil to produce a line of skin care products, which are sold primarily in the domestic markets. Apart from skin and hair care products, the company also produces, on a smaller scale, palm oil for domestic consumption and palm kernel cake, which is sold to domestic pig farmers as a fiber-rich feedstock. It is also researching the potential commercial use for palm kernel shells as a cleaner source of biomass charcoal briquettes for cooking and heating.

The oil extracted from the kernel is highly valued by international companies producing natural skin care products. One such company, Pacha Soap, has been in discussion with J-Palm on a potential partnership. Representatives from the US company visited Liberia during the first week of June to continue discussions and to visit with J-Palm suppliers in the rural communities.

A partnership between J-Palm and Pacha Soap is an opportunity for Liberia to penetrate global markets with value-added agro-products. Discussions focused not only on the potential for Pacha to source its palm kernel oil needs from J-Palm but also on the possibility of facilitating J-Palm's access to some of the largest natural and health-related product retailers in the United States.

Andy Thornton, Director of Sourcing and Impact, expressed that his company thinks carefully about how they source their ingredients. According to him, an objective is to obtain palm oil "in a way that creates more value in the supply chain, particularly for smallholder farmers."

Under a partnership, J-Palm Liberia and Pacha Soap will deploy block chain technology to ensure transparency and traceability across the supply chain, and to track the impact of the companies' supply chain activities on smallholder farmers' incomes over time.

Mr. Mahmud indicated that to deliver on any commitment he may have with Pacha Soap, he "will have to give assurance of his ability to reliably supply the volume and quality of the material required by the American company, while demonstrating social and environmental responsibility." With the right support, the company is well-positioned to deliver on this mandate, given its success to date with its value-added products, its mutually beneficial relationship with suppliers in rural communities, and the environmentally-friendly nature of its oil extraction process.

The potential for larger-scale, higher-value product and job market opportunities offered by J-Palm Liberia's business model and potential partnerships with global companies would be realized more readily with the appropriate support from the public sector, including from development intervention programs. An efficient policy and regulatory business environment that facilitates exports, particularly at customs, and reduces transaction costs, particularly in transport and logistics, is a priority.

Market facilitation and related policy and investment support is expected under the World Bank-financed Smallholder agriculture Transformation and Agribusiness Revitalization Project (STAR-P), prepared in collaboration with the Ministry of Agriculture, the Ministry of Commerce, and the Ministry of Finance and Development Planning.

The Bank's Sr. Agricultural Specialist, Jeanette Sutherland, who participated in the meetings and field visits with J-Palm and Pacha Soap, encouraged J-Palm's CEO to submit a business proposal to the project for consideration, once it becomes effective. She showed interest in the possibility of the project partnering with the company as an anchor firm to help establish out-grower schemes for rural producers and in replicating the company's business model to deliver on the STAR-P's increased productivity and market facilitation objectives for smallholder producers in oil palm and other value chains.

Daniel Dukuly, who operates the mill J-Palm set up in Koon Town, confirmed that a more enhanced out-grower relationship with J-Palm would be beneficial to the community, as already they are experiencing benefits from the use of the mill. "We are getting more oil than before," he said. The sale of which is used to "take care of my family."With or without public sector support, J-Palm Liberia is going places and, in the process, is creating good practices for transforming Liberia's agribusiness sector. The call, however, is for the Government to expedite the process for J-Palm and the many other Liberian agri-enterprises by enabling a competitive business environment.

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