WITH prices of food and other edibles like cooking oil soaring, the war in Ukraine has created a great potential for Zambia to flood the market and make money from selling palm oil.
The country can rake in a fortune from exporting the product to other countries.
Just like the price of fertilizer, which in some countries has increased by 300 per cent, Zambia can take advantage of the ongoing geopolitical tension involving Russia and Ukraine to make a fortune from palm oil.
For many years, Zambia has depended on imports from other countries to flood the local markets with palm oil.
However, more than a decade ago, the country had its first palm oil plantation in Mpika district in Muchinga Province through the Zambian Palm Oil (Zampalm).
Nonetheless, the potential from the product is yet to be fully exploited.
The Zampalm project was launched in 2009 and currently has around 400,000 palms planted over an area of almost 3,000 hectares in the main plantation.
Situated in the sparsely populated area of Chief Kopa’s area in Mpika, Zampalm has been a catalyst for economic growth and development in the area that looks set to prove a role model for sustainable agribusiness projects across the Southern Arica region.
Zampalm owns 20,238 hectares of titled land, and the intention is to plant thousands of seedlings and similar areas in subsequent years as the business grows.
A two-tonne-per-hour crushing mill was built in recent years, with plans for a second two-tonne plant and a further 10-tonne plant later on, taking crude palm oil production up to 17,000 tonnes a year.
The total investment cost was estimated to be around US$41.5 million.
At current prices, the average production of crude oil of 3 to 3.5 tonnes per hectare could generate more than US$200 million in revenue over the next decade.
The market for edible oils in Zambia, of which palm oil is one component, is estimated at 120,000 tonnes per year, and this is expected to continuing growing as the country develops further.
More than half of Zambia’s edible oil consumption is imported from the Far East, East Africa and South Africa.
Palm oil is the world’s most used vegetable oil and has many different uses in addition to cooking oil.
Palm oil and its derivatives are found in foods such as margarines and
ice cream, used as a thickener, preservative and antioxidant; as well as in personal care products such as shampoo, and cosmetics; industrial products such as lubricants paints and inks; and as a renewable fuel.
Once fully operational, the plantation will help to substitute 70,000 tonnes of cooking oil imports into Zambia, saving the country around US$70 million of foreign exchange outflows every year.
While Zambia is not a traditional growing region for palm oil, lower yields are expected to be outweighed by the competitive advantage of being closer to consumers in the region given that the cost of importing edible oil from the Far East can account for around a third of its retail price.
It is worth mentioning that despite palm oil being a money spinner, Africa has performed woefully on the global market.
For instance, despite palm oil being of strategic importance to Nigeria, the country is not longer the world’s leading supplier of the commodity.
In the early 1960s, Nigeria was the world’s largest palm oil producer with global market share of 43 per cent.
In 1966, Malaysia and Indonesia surpassed Nigeria as the world’s largest palm oil producers.
Since then, both countries combined produce approximately 80 per cent of total global output, with Indonesia alone responsible for over half, that is 53.3 per cent, of global output.
According to the Central Bank of Nigeria (CBN), if Nigeria had maintained its market dominance in the palm oil industry, the country would have been earning approximately $20 billion annually from cultivation and processing of palm oil as at today.
Nigeria is the largest consumer of palm oil in Africa with a population of 197 million people (World Bank, 2018).
The nation consumed approximately 3 million metric tonnes of fats and oils in 2018, with palm oil accounting for 44.7 per cent or 1.34 million metric tonnes.
In the same period, production stood at 1.02 million metric tonnes resulting to supply shortfall of 0.32 million metric tonnes (excluding possible impact of palm oil exports).
Today, Nigeria has been overtaken by Indonesia and the country is now the fifth largest producer, with less than two per cent of total global market production of 74.08 million metric tonnes.
Therefore, the war in Ukraine is a blessing in disguise for African countries, such as Zambia, to seize the opportunity to make a fortune from palm oil sales.