Youval Rasin, CEO, DekelOil: Interview

Interview: Youval Rasin

What can be done to increase palm oil processing?

YOUVAL RASIN: Traditionally, in the palm business five years are required before yielding starts, and then a mill can be built. It needs between six and seven years before you see the first revenue on a palm oil project. Yet, in Côte d’Ivoire, fruits can be collected from local producers, so investors do not necessarily need to plant before processing. A few years ago, there was a lack of processing capacity, but investors quickly understood that the country was sitting on huge potential, in terms of palm oil production. Compared to its neighbouring countries, Côte d’Ivoire offers many advantages to palm oil processing: 1 ha costs €1500, while in Liberia it can be as high as €3710. Additionally, Côte d’Ivoire has functioning infrastructure, such as its road network, and if machinery is needed, it can be rented locally.

Still, it is challenging to find large plots of land. It is possible to find a limited number of 300-3000-ha plots, but those larger than 10,000 ha are rare. In Côte d’Ivoire, there will not be the traditional huge estate, endless plantations one can find in Southeast Asian countries. This is a disadvantage; investors must work on a small-scale level. It would be very hard for large firms like Sime Darby or Felda to look for 100,000 ha in Côte d’Ivoire.

Agro-businesses have to be built on a smaller area here, but the market potential remains vast. ECOWAS experiences a shortage of 800,000 tonnes of palm oil per year and Côte d’Ivoire is the only West African nation exporting palm oil within the region, about 100,030 tonnes per year. Malaysian and Indonesian imports cover the market demand now, but there is great regional potential in palm oil production. In the long term, Africa should generate enough palm oil to cover its consumption and it should be exporting.

How can small-scale village plantations be better integrated into palm oil industrial activities?

RASIN: The organisational structure in Côte d’Ivoire is well-suited to support small farmers. There are cooperatives and research institutes, as well as subsidies that are provided. However, farmers’ yields still remain low – only 5 tonnes or 6 tonnes per ha.

The fastest approach to increase yields is to provide fertilisers to farmers, but the question is how. The massive small holders loan system requires government support. In absence of such support, industrials created a bonus system that is working but has limited resources. This will not support the massive needs of the small holders. In order for industrials to have a closer relationship with landowners, they should become partners in the plantation. Industrials would not pay for the land, but landowners would get an additional benefits coming from the plantation. This can even provide jobs to villagers and it basically reduces the risks that agribusinesses will have land issues to zero. The biggest challenges facing our industry are issues related to land ownership – especially in places like Côte d’Ivoire where land titles are unclear.

Is sustainable palm oil investment a priority?

RASIN: Standards which were set in Asia are not necessarily the right ones for Africa. These are two different continents with their own market specificities. For instance, in Malaysia, plantations of less than 5000 ha do not need certification, but in Côte d’Ivoire most of plantations are smaller than that. Hence, standards are now being established to accommodate Africa’s needs. Côte d’Ivoire is in the process of creating a national interpretation of the Roundtable on Sustainable Palm Oil (RSPO) – setting the principles that companies should follow. The RSPO is about making practical the principles of sustainability. This is a challenge, though deforestation is not a concern in Côte d’Ivoire. Instead, the country is mostly concerned with the fallow land palm oil plantations occupy. In Malaysia, deforestation is a massive problem. Thus, large-scale Asian firms are now looking to Africa. They do not suddenly like Africa, but are adapting to land reserve issues in Asia. For instance, KLK recently bought Equatorial Palm Oil in Liberia and four years ago Wilmar bought a sizable stake in SIFCA.