HAPPY: President Museveni receives an award from BIDCO’s D. Shah at the Jinja plant launch
MARKET INTELLIGENCE
By Jennifer Austin BIDCO’s recently launched edible oil plant in Jinja and the first phase of its palm oil plantation on Bugala Island will cost about $165m (sh303.6b) when completed, making it the largest private investment in Uganda.
When fully operational, the palm oil project is projected to make Uganda self-sustaining in edible oil production and replace more than $60m (sh110.4b) worth of crude palm oil, which is imported annually.
The refinery in Jinja is processing imported oils for sell in Uganda. When the palm plantation matures, crude palm oil from the island would be processed from the Jinja refinery.
At the opening of the Jinja plant recently, President Yoweri Museveni praised the fully-integrated processing chain, emphasising the need to add value to raw materials.
On Bugala Island, BIDCO has invested more than $40m (sh73.6b). The BIDCO compound boasts a modern conference centre, guest house, staff premises, a staff recreation centre and clinic. The company is also constructing a farmers’ training centre.
BIDCO has built 160kms of roads, developed two nurseries and imported more than a million seedlings.
Almost 2,000ha of land have been cleared and planted.
BIDCO’s investment partners, Archer Daniels Midlands of America, Wilmar Group of Malaysia and Josovina of Singapore are some of the leading international companies.
The investment is part of the Vegetable Oil Development Project (VODP), a joint effort between the Government, International Fund for Agricultural Development (IFAD), World Bank and the private sector aimed at increasing domestic vegetable oil production.
According to the Ministry of Finance, the VODP was approved by Parliament in April 1998.
IFAD and the World Bank have availed a $10m (sh18.4b) loan to support the outgrowers’ plantations and supporting infrastructure.
The Government will contribute $12m (sh22b) in the form of land, electricity and roads, while BIDCO will invest $120m (sh220b).
The palm oil plantation is planned to cover 26,500ha with projected incomes of sh2.5m per hectare annually.
Other fiscal incentives like a 25-year Corporate Tax concession and a 12-year deferral of Value Added Tax on the project’s products were extended to the private investor to make the investment more attractive.
These incentives will help compensate for the fact that the project is an agricultural project with a long gestation period and the company does not expect to have taxable revenues for the first 12 years.
It is also a pioneering project in an underdeveloped area and considered a high-risk commitment for investors.
Similar investment incentives were used in the initial stages of palm oil development in Malaysia and Indonesia where the majority of the world’s palm oil is produced.
The Ministry of Finance says these incentives are not limited to this project, but “The Government is prepared to consider extension of similar incentives to other investors in agriculture, on a case by case basis, for investment in a pioneer project of $100m (sh184b) with a long gestation period and ability to create employment for at least 5,000 people.”
