16/08/2010 (Consultancy African.com) - Over the past two decades, improved consumer awareness and information, as well as climate change challenges have led to the increased popularity of palm oil, both as a favoured source of vegetable oil in foods and as a raw material for biofuel. Consequently, palm oil production has increased exponentially, with output having exploded from a few thousand tonnes during the 1980s to over 40,000 tonnes annually in Asia in 2009.(2) This growth trend is expected to continue, with analysts predicting palm oil to become the most internationally traded edible oil by 2012 - particularly considering China and India’s growing affluence and thus increased demand, as well as European states’ investments in palm oil as an ingredient in the subsidised bio-diesel mix. Today, Indonesia is the world’s primary producer of palm oil, supplying 44% of global demand.(3)

Wishing to reap the benefits from this increased popularity of palm oil, the Ivory Coast has attempted to diversify its largely agricultural-based economy away from cocoa and coffee through palm oil.(4) It is interesting to note that while the palm tree actually originates from Western Africa, production of palm oil has remained relatively stagnant in this region over the past two decades. Indeed, sub-Saharan Africa regularly imports palm oil as it faces an average annual shortfall of 800,000 tonnes.(5) Ivory Coast - the world’s top producer and supplier of cocoa - has since the early 2000s embarked on a series of privatisation schemes in an effort to attract foreign investment, particularly in its agricultural sector. Although political stability is considered to be tentative in the West African country, many investors have lauded the apparently enabling business environment, with FDI reaching US$ 353 million and GDP growth at 3.7% in 2009.(6)

Wilmar and Olam: Singapore invests in Ivory Coast
One source of the above-mentioned FDI has been Singapore, with two multinational corporations (MNCs) Wilmar and Olam having formed Nauvu Investments, a 50:50 joint venture, in late 2007 with the aim of setting up new palm oil plantations and managing existing plantations, as well as integrated agribusiness operations in Western Africa. Beginning in Ivory Coast, Nauvu Investments acquired a 25% stake in the Ivorian agro-industry company Sifca  - West Africa’s largest player in the palm oil industry - which in turn possesses a 51% controlling stake in Ivory Coast’s largest group of plantations, Palm-CI. Palm-CI controls almost 40,000 hectares of palm plantations, 9 processing plants and supplies 80% of Ivory Coast’s palm oil requirements.

In addition, the Wilmar-Olam joint venture acquired a 50.5% stake in Newco (the other 49.5% being owned by Sifca), Ivory Coast’s dominant palm oil refiner with an 80% market share locally and 30% share within the Economic Community of West African States (UEMOA).(7) By 2010, the joint venture between Wilmar and Olam became the largest palm oil company in West Africa, recording an annual turnover of just over half a billion US$ in 2009.(8)

The arrival of the Singaporean joint venture in Ivory Coast brings with it welcome technology and skills as well as expertise in production techniques, marketing systems and integrated value chain management.(9) A stated goal of the new owners of the Palm-CI plantation is to increase productivity levels in Ivory Coast to those found in Asia. This is to be achieved through investments in large-scale modernisation, the utilisation of fertilisers and pesticides, intensification of land usage (i.e. by increasing the number of palm plants per hectare) reducing the costs of procurement and maximising the efficiency of supply and distribution channels.(10) In merely two years, the production cost of palm nuts has been halved in Ivory Coast, while productivity on the industrial level has increased by almost 25%. The Palm-CI plantation aims to produce 1 million tonnes of palm nuts by 2020.(11)

Damaged goods?
However, some critics oppose the application of Asia’s intensive model of production to Ivory Coast’s palm oil industry and West Africa in general, arguing that it has led to extensive deforestation, loss of biodiversity and greenhouse gas emissions in the region. Indeed, reliance on agriculture to secure Ivorian livelihoods means that around 65,000 hectares of tropical rainforest have been destroyed over the past four decades in Ivory Coast alone, so that primary rainforests now cover less than 2% of land.(12)

The rapid growth of Nauvu Investments can further be attributed to its acquisition of Unilever’s palm oil assets in Ivory Coast at the end of 2008. The Anglo-Dutch company had kick-started the Roundtable on Sustainable Palm Oil (RSPO), an international organisation comprised of producers, distributors and environmentalists in 2004.(13) With informed consumers placing increasing emphasis on sustainably sourced raw materials, the organisation was established in an effort to ensure that the food manufacturing giants (Nestlé, Kraft and Unilever, for example) obtain palm oil from environmentally friendly plantations only. To this effect, a certification scheme was implemented, with members of the RSPO pledging to use only certified sustainable palm oil by 2015.(14) However, of the first shipment of 1.3 million tonnes of sustainably produced palm oil, only 1% had been sold by mid-2009.(15)

In addition, Unilever dropped Asian suppliers of palm oil - such as Indonesian company Sinar Mas - which had been accused by environmentalists of illegal deforestation to expand palm plantations, while manufacturer Cadbury went as far as to remove palm oil from its products in the New Zealand market following pressure from consumer groups.(16) During the same time, however, Unilever was seeking new plantation sites in Western Africa and put forward a US$ 36 million investment plan, which would have seen the destruction of large parts of the Tanoé Swamps Forest located in southeast Ivory Coast.(17)

The project was abandoned in April 2009 following a massive environmental campaign by Ivorians, though by this time, Unilever had sold its stakes in Ivory Coast’s palm oil industry to the Wilmar and Olam joint venture.(18) Although ‘environmental concerns’ were cited as a partial reason for the selling of Unilever’s assets, it remains unclear whether the corporation was merely trying to distance itself from unsustainable business practices in Ivory Coast’s palm oil industry or whether the fact that their expansion project was thwarted by environmentalists weighed more heavily in the decision.(19) More importantly, how do the existing plantations intend to deal with sustainability issues now that these are in Singaporean hands?

Moving towards a more sustainable palm oil industry?
On the one hand, intensive production methods are being criticised as being responsible for environmental degradation and destruction of biodiversity. On the other hand, however, the now Singaporean Palm-CI did abandon the Tanoé Project, which may indicate that locals’ environmental concerns are being taken more seriously. Then again, Palm-CI admits to procuring a large percentage of its palm oil materials from the many smallholders situated in Ivory Coast - the sustainability of which is questionable as farmers may clear forests in an effort to increase output.(20)

A recently launched project that aims to reduce the Singaporean-owned plantations’ greenhouse gas emissions seems holds some promise of making palm oil production more environmentally friendly. Together with the Swedish firm Tricorona, Sifca will invest in a biomass plant which will utilise wood waste and palm shells to generate electricity to cover the company’s energy needs in its’ palm oil factories. The project is expected to reduce carbon dioxide emissions by 45,000 tonnes annually, as well as cut Sifca’s energy costs by half.(21)

The verdict on whether Ivorian palm oil products - be they edible or for use in bio-diesel - will generally become more sustainable, and will thus be bought by informed European and American consumers, is as yet out, however.