Aug 16th 2014
The Economist. FOR half a century, Indonesia and Malaysia have accounted for the vast majority of the world’s exports of palm oil. But now investors are flocking to west Africa to secure land for rival plantations. Environmentalists say the forests of South-East Asia have been massively despoiled and are warning west African governments not to follow suit. A growth-versus-conservation battle is in the offing.
The oil palm is native to west Africa, but most of today’s production is small-scale; exports barely exist. Yet restrictions on logging and the acquisition of land in Malaysia and Indonesia are pushing investors into Africa, where concessions for new plantations are more freely available. In the past decade, politicians in west Africa and countries of the Congo basin have leased out around 1.8m hectares of land for palm-oil plantations, according to Hardman, a London-based research company. Another 1.4m hectares is being sought. Foreign companies sniffing around include groups such as Wilmar, Olam, Sime Darby, Golden Veroleum and Equatorial Palm Oil.
Demand for palm oil, whose annual global production is valued at around $50 billion, is soaring; consumption may triple between 2000 and 2050. The oil is taken from the oil palm’s red fruit and is used in roughly half of all packaged supermarket products, from margarine and ice cream to shampoo and cosmetics. It is increasingly used as a biodiesel, too.
But Africans are fast learning that it is a controversial business. Malaysia and Indonesia have been castigated for the environmental damage caused by palm oil. Deforestation has increased carbon emissions and destroyed the habitat of rare breeds of animals such as orangutans. Africa faces similar problems. A recent academic report noted that more than half of oil-palm concessions in Africa infringe on the habitat of great apes.
When a new concession is signed, civil-society organisations often complain that land has been “grabbed”. Weak land titles and hazy lines between customary and state ownership can result in local peasants being booted off their land and becoming impoverished, they say. Equatorial Palm Oil is just one company facing criticism. In Liberia, among other countries, the palm-oil industry is being hampered by such issues. “The country is producing very limited quantities of palm oil and indeed has very limited planted area, yet concessions were granted as early as 2006,” says Doug Hawkins of Hardman.
Some of the would-be investors in African palm oil do indeed have shoddy track records. Two years ago Newsweek’s “green ranking” of the world’s 500 biggest publicly traded companies judged Wilmar, a Singaporean group which owns plantations in Nigeria and Ghana, as the least environmentally sound. Potential investors in west Africa are becoming nervous. In 2012 Norway’s government pension fund pulled out of 23 palm-oil firms deemed “unsustainable”, including Wilmar and Golden Agri-Resources, though both are members of the Roundtable on Sustainable Palm Oil. This Swiss-based coalition of growers, processors, food firms, investors and green charities, with a secretariat in Malaysia, tries to persuade the palm-oil industry to cherish the environment.
Some commercial growers in west Africa have faced protests by locals. In certain cases, the police have been accused of using force to quash them. Last year Herakles Capital, an investment fund in New York, had to slim down its plans for a plantation in Cameroon that is said to be ten times the acreage of Manhattan.
Many investors say they have become more sensitive towards villagers’ worries and will clear forest only if it has already been “degraded”. In Gabon, for instance, Olam has returned much of the land allocated to it by the government because it was unsuitable for agriculture. It says it is developing less than half of the terrain it has retained, setting aside the remainder for community use or conservation purposes. The group says it is not developing any plantations in areas that are already permanently inhabited.
“If Liberia could get compensation for its forest being one of the last in sub-Saharan Africa, then we would take it,” says Liberia’s finance minister, Amara Konneh. “Of course we are worried about the ecological consequences. But we have to grow the economy. We have to create jobs for our own people. How we do it sustainably is where we are struggling.”