Why Busoga should embrace oil palm growing

By John Naku

Recent UBOS figures placed Busoga sub-region among the poorest areas in the country yet, save for the 1987 Alice Lakwena Holy Spirit insurgency that ravaged some parts of Busoga, the place has been peaceful to-date.

Oil palm production requires specific climatic conditions (well distributed, high rainfall of a minimum of 1,800 mm and high temperatures of 17-29⁰ C). These conditions are widely found in Busoga in the identified Districts of Mayuge, Namayingo and Bugiri in addition to land being available.

 It is also in Busoga where majority of the sugar factories are based to wit Kakira Sugar Limited in Jinja, Mayuge Sugar Industries Limited in Mayuge, Allied Sugar Industries in Kaliro, Kamuli Sugar in Kamuli, Bugiri Sugar in Bugiri District, Buyende Sugar in Buyende District, GM Sugar across the Nile among others.  One would anticipate that all these investments could be an economic game changer in the sub-region but the reverse is true.

Save for enriching their Chief Executive Officers as they economically impoverish our people as they rush to hire out their overused land to middlemen who turn out to grow the cane. Our struggling cane growers at the end of it all get peanuts from their land courtesy of quicker money from the go-betweens or call them middlemen. All combined, its only the CEOs and go-betweens ripping our farmers apart generally.

Busoga used to be independent with their serious involvement in perennial cash crops like coffee and cotton where ginneries in Bulumba, Luuka, Namulesa among others were visible and enabled her people to get to the money economy.  During the late Owek.Hon.Mathias Ngobi’s era, the people of Busoga benefited from coffee and cotton by taking their children to good schools and would hobnob with kids from the ‘A’ class which is no longer the case currently.  

Because of this economic boom, Busoga managed to extend a helping hand to foreign countries. Sugar cane growing was for Asians majorly who even went ahead to hire foreigners for labour.  

Busoga needs to rebrand to be able to compete economically. Its people must be flexible enough to realize this much needed transformation. Rigidity will not take them anywhere if there is any.  

There has been a lot of litmus testing in the sub-region as regards cash crops from Moringa, Vanilla to mention but a few but the end results have always been regrets.

The people of Busoga embraced sugar cane growing with a lot of heightened expectations and they went into it full throttle with majority taking loans from commercial banks, Microfinance Support Centre but the more farmers joined cane growing thereby caring less about growing food for home consumption the lesser demand for their cash crops. Sugar cane growing in Busoga is like a curse.  People had become so addicted to growing Sugar cane that they could not see any alternative crop to cane growing.  

First from encountering challenges in having an agronomist go to supervise one’s garden to finding challenges of acquiring permits that would enable one supply the cane to where he/she registered as an out-grower. Farmers thought this was due to the way lending was being executed. Farmers have since realised that the best way to invest right now at least with in Busoga for example is towards value addition mostly in Agriculture processing. This has a long term back and forward production linkages that can trigger production, processing and marketing hence improve on the social economic status of the communities. This grows the people's purchasing power and helps create reasonable incomes to enable loan repayments. 

With this grim scenario at play, President Museveni on Saturday, October 19, 2022 while presiding over the annual Bishop Hannington Celebrations got concerned and rallied the people of Busoga to embrace and support Oil Palm growing as an alternative to Sugar Cane. The President wondered how his ardent supporters could afford life that was punctuated by poverty. Prior to the President’s observation, no one had been brave enough to pose such a question.

In his wise counsel, the Fountain of Honour asserts that Busoga has what it takes to embrace Oil Palm given its strategic location being a peninsular-the area is surrounded by water like Source of the Nile, Lake Victoria, Lake Kyoga among others and that from expert information available before him, the people of Busoga ought to accept that economic development is the only way forward but also to ensure that they are flexible in terms of taking on new enterprises. According to the President, Oil Palm Growing is the most appropriate crop to register the much needed transformation economically for the people of Busoga.

According to Anthony Nkwasibwe, Operations Manager at the National Oil Palm Project, Busoga stands to benefit from this newly introduced crop in their area.

“Truth be told Oil Palm is the way to go. It has a serious return on investment just 3-4 years of proper management and a farmer can profiteer from this crop for over 20 years. I therefore encourage the people of Busoga with big chunks of land to journey with us in our auxiliary efforts to promote oil palm growing”, he revealed noting that the sub-region stands higher chances of changing its people given its favourable conditions and factors that it has.

On his part, Chit Pit Te, the Plantation Manager at Oil Palm Buvuma Limited asserts that Oil Palm is extremely important for the people of Uganda given the mere fact that the total requirement for the entire country is 550000 tons yet production is yet to realize the same.

“Uganda boosts of a favourable environment that is good for Oil Palm growing. Our goal is to help government realize it’s much desired wish of increased palm oil production and we are ready to do so because we are the largest oil producer in the world”, he revealed noting that their establishments wherever they are come with benefits attached to them in terms of corporate social responsibility addressing community concerns tops there to do list. Chin asserts that for the start even if only 10% of the area residents get involved in the project, this will be a good beginning generally as the rest shall join gradually.   

Background

Government through the Ministry of Agriculture, Animal Industry and Fisheries (MAAIF) is doing what it takes to scale up oil palm production in the country so as to domestically produce enough Crude Palm Oil (CPO) to meet the national demand of about 450,000 MT of the raw material for the manufacture of soap and cooking oil. This intervention will save the country about US Dollars 300 million annually in import substitution of crude palm oil and reduce imported shocks to Uganda’s economy that emanates from reliance on imported CPO.  Since early civilization, soap has been made from animal fat (i.e. beef fat commonly called tallow and pork fat commonly called lard). The world has, however, recently transited to using vegetable oil (from oil palm, sunflower, soya bean and rapeseed) due to religious reasons and avoidance of the repugnant meaty smell of products manufactured from animal fat. The emerging preference for vegetable oil for making soap (and cooking oil) as well as the new use of palm oil as a biofuel has created a new insatiably huge global demand for vegetable oils (especially palm oil). In Uganda, oil palm as a plant was first introduced at Entebbe Botanical Gardens as early as 1910. This was followed by rain-fed oil palm production trials in the 1960s. In 1972 pre-germinated seeds of eight improved hybrids of oil palm from Lome, Ivory Coast, were imported and planted at 04 trial sites of Kituuza Coffee Research Station in Mukono; Nakabango in Jinja; Bubukwanga in Bundibugyo; and Bugala Island in Kalangala. In the1990s, after guidance by H.E. the President, more rain-fed oil palm production trials were conducted. These studies revealed that on average, one Hectare of oil palm yielded up to 17 MT of Fresh Fruit Bunches (FFB) annually, 11 years after planting, without applying fertilizers or irrigation. Based on these findings Government took the decision to start growing oil palm in the country in Kalangala, Buvuma and Sango Bay by Bidco Uganda Limited. Others involved in this are Maruzi (Hillside Agriculture Ltd).

In the recent past, different commodities have escalated in the past months, making the daily life of most Ugandans harder. Soap and cooking oil are among the most affected products which are used by all Ugandans.  According to the Uganda Bureau of Statistics (UBOS), in February 2022, a laundry-soap bar cost 20 % more than in December 2021and almost 50 % more than one year earlier. Actually, as of July 2022 the price of a bar of laundry-soap had tripled compared to the price as of July 2021. Similarly, the price of cooking oil increased by 21 % between December 2021 and February 2022, and the annual rise was 77.6 %. These price increases are mainly due to imported shocks, namely; the Russia-Ukraine war; geopolitics of energy, driving oil and gas prices to their highest levels in nearly a decade; the supply-chain disruptions due to Covid-19; and the increased use of palm oil as a biofuel in Indonesia and Malaysia (as well as other countries).

Globally, palm oil production has exponentially increased within the last decade and it is estimated to continue rising due to unmatched increasing demand. The global palm oil industry is worth about US$ 60 billion, employing 6 million people directly plus an additional 11 million indirectly (Kadandale et al. 2019). According to Statisa, 2020 over 81.1 million MT of palm oil was produced globally in 2020, of which 72.3 million MT was CPO while 8.8 million MT was Palm Kernel Oil (PKO). Almost half (or 50%) of the world population (i.e. 04 billion people) rely directly on palm oil as a regular part of their diet, creating a world palm oil annual demand of about 60 million MT. Estimates from various industry sources predict that this demand will double by 2050 (Frost and Sullivan 2017). This means that the global demand for palm oil is expected to remain on a steady increase in the foreseeable future.

Malaysia and Indonesia are the leading producers of palm oil, presently together contributing over 88% of the global production (Statista 2020).  In the last decade, oil palm plantations in Malaysia and Indonesia have increased by 250% and 420% respectively (Statista, 2020). This increment in palm oil production has made Malaysia and Indonesia not only self-sufficient for domestic palm oil consumption but also the largest net exporters in the world. However, due to the extremely versatile nature of palm oil, it is now being widely used for many different purposes including biofuels or methyl/ethyl ester which has increased the domestic demand of palm oil in the two countries (as well as other countries).

Uganda’s current domestic demand for vegetable oils per year is estimated at 450,000MT. This demand continues to grow annually due to Uganda’s increasing population because consumption is calculated based on the World Health Organization (WHO) recommended rates per person per year. The current vegetable oils recommended consumption rate in Uganda is estimated at only 10 Kg per person per year which is conservative as compared to the WHO recommended rate of 15 Kg per person per year. Even with this conservative consumption rate, Uganda is still a net importer of vegetable oils. Equivalent vegetable producing crops like sunflower and soya beans currently contribute 40,000 MT towards the national demand, while oil palm production in Kalangala also contributes about 40,000 MT, leaving a consumption gap of 370,000 MT. As a result, Uganda’s current import bill on vegetable oils is estimated at $300 million (the equivalent of sh1.15 Tn).

To mitigate the country’s vegetable oils deficiency, Uganda requires 100,000 hectares of oil palm plantations. Besides, given the ever-growing population, Uganda will need at least 150,000 to 200,000 hectares of oil palm plantations in the next 10 years to meet the vegetable oils demand.  In view of the fact that all the neighbouring countries – Kenya, Tanzania, Rwanda, Burundi and South Sudan) are net importers of vegetable oil, they provide a potential market for the country’s anticipated surplus oil palm production. Uganda, therefore, needs to expand the current oil palm production to meet its domestic demand first and regional demand if any surplus is realized.

Government undertakes two responsibilities; first, it allocates land (minimum of 5,000 Ha) to a private investor to establish a nucleus plantation and a crude palm oil extraction mill. It then mobilizes and encourages members of the surrounding community to embrace oil palm growing based on its profitability. Smallholder farmers (owning 2 Ha or 5 Acres of land) who decide to grow oil palm are supported by Government with a loan of $6,000 (about sh23m) for establishing two (02) acres oil palm plantation at an interest rate of 10%. The Ministry of Agriculture Animal Industry and Fisheries has computed the cost of establishing one (01) Hectare of rain-fed oil palm plantation (including land preparation, planting materials, fertilizers, and field maintenance up to the first harvest after about 3 to 4 years) to be about $3,000 (an equivalent of sh11.5m).

Loan repayment by the smallholder farmers (Out-growers) commences after the first harvest (04 years after planting) and the recovery period is spread over ten years. During the loan recovery period each smallholder farmer takes home 67% of the sales value of the FFBs and the 33% goes towards the loan settlement.

Out-growers in oil palm growing zones are usually organized in a farmer organization which acquires 10% shares in the investor’s (nucleus farmer’s) company. These shares accrue from the land which Government allocates to the investor.

In the case of Kalangala, dividends from the 10% shares owned by the out-growers in the Palm Oil (U) Ltd owned by BIDCO (U) Ltd have accumulated to UGX 37 billion. This money is banked on the account of Kalangala Oil Palm Growers Trust (KOPGT), which is controlled by Government.

Oil palm is relatively a new crop in Uganda and capacity of the actors along the value chain need to be built especially in the areas of research, seedlings, and institutional support and extension services.

Government prioritizes the establishment of a functional seedling system to provide quality oil palm planting materials. To develop the envisaged 100,000 Ha, Uganda will require 16,000,000 high yielding oil palm seedlings. One hectare requires approximately 162.5 seedlings (65 seedlings per acre).

Oil Palm seedlings are currently imported by Oil Palm Uganda Limited (OPUL) – BIDCO in Kalangala and Oil Palm Buvuma Limited (OPBL) – BIDCO in Buvuma.  There are a few countries in the world that supply high quality, high yielding varieties which are a hybrid and resistant to diseases like fusarium wilt and ganoderma.

The implementation of the nucleus-out-grower model calls for strategic financing for land acquisition for nucleus establishment and credit financing for out-growers farm operations especially during the plantation development stage.

Financing of farmers in the hubs of Mayuge, Buvuma and Masaka, with 2 Ha plantations will be done using IFAD funds.

The Oil Palm policy will be linked to the oil palm expansion strategy in the country. The policy will guide on the selection criteria for areas suitable for oil palm growing considering the agro-climatic, agronomic, economic, social and environmental conditions; as well as clear processes and procedures that will be applied in assessing potential oil palm investments.

Mobilization of members of communities surrounding nucleus oil palm estates is based on the profitability of oil palm production for small holders.

In 2005, the NRM Government started rain-fed oil palm growing in Kalangala District in partnership with a private investor (BIDCO).  In the partnership, Government provided land for a nucleus plantation and an extraction mill. It also mobilized and financed out-growers with support from the International Fund for Agricultural Development (IFAD).

An oil palm plantation of 11,352 Ha (Nucleus– 6,500 Ha and Out-growers – 4,852 Ha) was established in Kalangala from which the country is getting 41,000 MT of Crude Palm Oil (CPO) annually. Two mills have been established in the area to crush FFB  into CPO. A refinery was also established in Jinja to process CPO into the main final products of soap, cooking oil and edible fat. Other products processed along the value chain are: palm kernel cake for animal feed, manure and fertilizer.

With the said achievements and lessons learnt from oil palm production in Kalangala, Government is supporting BIDCO Uganda Limited to expand rain-fed oil palm production to Buvuma (7,650 Ha plantation projected to produce 28,611 MT annually) and establish the Mayuge Hub covering the Districts of Namayingo, Bugiri and Mayuge. Planting is on-going and a mill is expected to be established soon in a preferred area.

Government is also availing land to BIDCO Uganda Limited and has planned an additional 3,000 Ha of land through mobilization of out-growers in Sango Bay in Kyotera District to further expand oil palm production. Two (02) CPO extraction mills will be established in Sango Bay. A total of 74,800 MT of CPO is projected to be produced from Sango Bay annually.

Why Oil Palm in Busoga?

Government in partnership with BIDCO has expanded the Buvuma oil palm plantation to Mayuge / Bugiri and Namayingo (6,200 Ha) projected to produce additional 23,188 MT of CPO annually. The Kalangala Plantation is being expanded to Masaka (3,000 Ha) projected to produced additional 11,220 MT annually.

The campaign to establish oil palm plantations across the country as enumerated above will result into a total acreage of 81,202 Ha compared to the desired acreage of 100,000 Ha which is enough to satisfy the domestic demand of CPO. The current campaign is projected to result into production of 303,695 MT of CPO compared to the country’s demand of 450,000 MT annually. This leaves a gap of 146,305. The strong demand for palm oil, cultivation of oil palm has expanded more in the past ten years than cultivation of any other crop. Oil palm requires a lot of land, which in most cases is not readily available in the areas that have been earmarked for its expansion.

The current financing of oil palm establishment under National Oil Palm Project covers only a maximum of two Hectares (smallholder farmers). The establishment and maintenance of one hectare of oil palm plantation from planting up to fourth year when the harvest is realized requires USD 3000 which is quite expensive for the majority farmers who intend to establish big plantations. Lack of capital to invest in oil palm plantation establishment by medium and large farmers has continued to slow down the country’s progress towards achieving oil palm self-sufficiency.

District level consultations have been conducted to create awareness on the importance and economic benefits associated with oil palm and to secure consent from the District Local Councils where oil palm is anticipated to be grown.

As already known, the agriculture sector is a key driver of Uganda’s economic growth and economic inclusion. The sector accounts for 70 percent of employment, provides more than half of the exports, about one-quarter of GDP, and food security for most of Uganda’s households.

Government in collaboration with private investors has further established production, bulking, processing and marketing zones around the nucleus plantations. The private investors act as link for the out-growers to access inputs, planting materials and agricultural extension services provided by Government and/or private sector. Other functions of the private investor include: training and registering farmers into membership groups, Area Cooperative Enterprises; ensuring quality of the inputs including certified/quality seedlings / planting materials, fertilizers, pesticides and other production chemicals/drugs supplied to the farmer groups; ensuring that the farmer groups receive adequate farm-based extension services either through private providers or public extension services; bulking and undertaking basic post-harvest handling to ensure high quality of the produce; and serving as a link with the domestic and regional market.

At the district level, project activities are implemented, at first, by the Hub start-up teams, and eventually by the Oil Palm Growers Trusts (OPGT) and overseen by the relevant District Local Governments. 

The writer is principle private secretary to the Kyabazinga/Final year graduate student at MUK Obwa Kyabazinga Bwa Busoga