Monday, February 28, 2011

Palm oil's new pipeline: Africa

Indonesia's two year moratorium on commercial development of forests and peat lands, expected to come into effect this year, is forcing palm oil producers to look elsewhere for expansion as the demand and price of the controversial commodity soar. And Africa is the new destination for many.

Malaysia-based Sime Darby Plantation, world's largest crude palm oil producer, is said to be considering a $2.5 billion investment in Cameroon to develop 300,000 hectares of oil palm plantation. The company currently has 530,000 hectares of palm oil plantations in Malaysia and Indonesia.

Cameroon government may find the proposal attractive as the project promises to create 30,000 jobs in the impoverished country. But the expansion may alarm environmental groups who have been campaigning against the industry's unsustainable practices including destruction of natural forests.

Sime's expansion plans also include ventures in Liberia where the company has been granted a concession of 220,000 hectares.

Other palm oil giants which have announced plans to expand to Africa in recent months include Wilmar International, Olam International and Golden Agri. While Golden Agri has signed a $1.6 billion project in Liberia, Olam has announced a 300,000 hectares project in Gabon. UK-listed Equatorial Palm Oil already operates 169,000 hectares oil palm plantation in Liberia.

Palm oil prices have now crossed $1100 a tonne, almost doubling from the average $500 a tonne over the last decade. That explains frantic expansion plans by the industry players. The key question is: how will the industry ensure its expansion in Africa is above board, and sustainable?

No comments: