Rao explains BIDCO development project

Oct 03, 2005

<b>By Rao Kodey</b><br><br>The whole idea of the palm oil development project is to demonstrate a success story so that in future, commercial banks will come in and support oil growers in Uganda. All my life, I have seen success stories stimulate growth. If this project fails I can assure you no p

By Rao Kodey

The whole idea of the palm oil development project is to demonstrate a success story so that in future, commercial banks will come in and support oil growers in Uganda. All my life, I have seen success stories stimulate growth. If this project fails I can assure you no palm oil will be grown in Uganda for the next one hundred years because people will quote this failure.

This region imports one million tonnes of palm oil a year, you just see the opportunity. There is great potential here and we will harness that. I am not ashamed to say that we will make money in doing that and in the process we will make others rich as well.

This will be the first time there is commercial scale palm oil production in Uganda. Palm oil is a long-term investment because of the long gestation period of the trees. We will have seven years of no product and just cost and will only start seeing profits in 15 years. The International Fund for Agricultural Development (IFAD) is providing funding to support the out-growers involved in the project.

They proposed the project for the sake of poverty alleviation and their focus is on the out growers.

They also wanted a private investor to get involved to process the palm oil, to provide a market for the out growers.

In 1997, BIDCO submitted a bid for the palm oil project but indicated that the 4,500 ha that government originally proposed was not a viable size. In order to make it a worthwhile investment, given the risk, we told government we wanted to expand the project and that we also needed some additional fiscal incentives.

The government promise to provide infrastructure for the project was in the original bid tender document. This is not something we asked for, IFAD and the World Bank insisted on those provisions.

Our core competency is oil and Africa. We want to do business in Africa and provide products for people’s daily needs. The core competency of Africa is agriculture and it is ironic to import anything into the country. Currently, 90% of oils in Africa are imported. This leaves ample opportunity for backward integration.

We believe that we can be instrumental in changing people’s lives here. For me, the more out growers I have, the better.

What I do is make products for consumers. The out growers are also given a 10% shareholding in the company, Oil Palm Uganda Limited. The fiscal incentives and land grants from government thus benefit the small holder out-growers as well.

In July 2004, government handed over land titles for 6,500ha. A year and a half has passed since we began our work and they still need to give us the additional 20,000ha.

There is no directive to degazette the forestland, just a directive to get 20,000 ha because the president does not want the investor to run away. One provision of the agreement is that if the government did not give us the 26,500 ha within one year, we can walk away, and government has to refund our investment.

We have already invested over $40m in the development of the island. The 6,500ha is prepared and ready for planting. 1,500ha has been planted and our goal is to have another 100ha planted by the end of this year. We need the rest of the land to begin preparing it. The machinery we have is now standing idle.

The Prime Minister has appointed a committee to look into getting the rest of the land.

The government has three options for getting land. They can buy private land on the island, it can buy land elsewhere or it can buy land on the smaller islands and swap it with the NFA for land on Bugala island. We will take whichever land they give us as long as it is suitable for planting. Right now it is more convenient to develop on the island because our machinery is there.

I am aghast at how much time is being wasted in doing things over and over again. There have now been four EIAs (Environmental Impact Assessments) done to evaluate the project. Donor countries with the PMA (Plan for the Modernisation of Agriculture) that are blocking the project are raising questions that have already been answered. I have been working on this project since the 1990’s and all these concerns have been addressed.

The main environmental complaint is that the palm oil forest is a mono-crop. Yet NEMA has said there is nothing unique on this island that is not on the other islands.

There is overwhelming support for the project from the people of Kalangala who say they get nothing from the forest now.

I see no environmental difference. This is an agricultural project; I am replacing one forest with another forest. The tree canopy is one hundred percent. They plant the ground at first with cover vegetation to protect against soil erosion, we don’t use herbicides and use minimal fertilisers. There is more dry matter in this type of dense palm oil forest than in the forest there now.

I don’t see that 30,000ha can cause that much damage, it is an insignificant amount of land. In Malaysia there are plantations that are five million ha.

We are not telling government what lands to give us. All we want is that they give us 20,000 ha of land. As long as the land is suitable for growing palm oil, that is all we ask.

Kodey Rao is the Managing Director BIDCO Uganda Limited. He spoke to Jennifer Austin

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