As the most widely used vegetable oil in the world, palm oil or a component of it is used in 70-80% of food items. Its usage is also high in the cosmetic industry.
Despite the high demand, most smallholder palm oil farmers in West Africa are a dejected lot. West Africa, the epicenter of palm oil production in the 1960, has long lost its allure in favor of Malaysia and Indonesia. The two Asian countries now account for 85% of the world’s palm oil supply, with clients including some of the world’s biggest brands.
In Ghana, hundreds of smallholder farmers have given up on palm oil farming and instead opted to give up their lands to artisanal and small-scale illegal gold mining activities.
It is estimated that in Africa, the palm oil market is worth about $30 billion, while in Ghana, the third biggest producer in West Africa after Nigeria and Côte d’Ivoire, it is worth about $600 million.
Why palm oil farmers switched to illegal mining
As a young mining engineer in 2015, Ababio Kwame had a first-hand experience with farmers giving up palm oil farming for illegal mining.
The impacts were destruction of otherwise productive lands, food insecurity, destruction of water bodies particularly rivers and streams that sustain rural households, deforestation, health risks and entrenching poverty.
“Giving up farms for illegal mining has had devastating impacts on communities,” says Kwame, the founder of Green Afro-Palms, an agritech startup that is spearheading positive transformation of the palm oil value chain in Ghana.
Lack of processing technology
Instead of ignoring the problem, Kwame decided to understand why farmers were giving up on the crop, coming to the realization that for the smallholder farmers who account for 80% of palm oil production, the main problem was lack of processing technology.
For the majority of the farmers, dependence on menial methods, particularly the use of hands to crush the palm oil fruits to extract the oil was not only cumbersome, it also led to substantial losses. Farmers were only able to extract 10% to 13% of the oil compared to a maximum rate of 23%.
To a large extent, this explains why Ghana has failed to unleash the full potential of its palm oil industry. The government reckons the crop has the ability to rake in $134 million annually from exports. Yet, it only managed to generate a paltry $6.4 million in 2021.
Data show that palm oil production in Ghana for the 2022/23 marketing year is forecast at only 300,000 metric tons compared to 600,000 metric tons in Côte d’Ivoire.
Though Ghana has over 1 million hectares zoned for oil palm cultivation, the harvested area in 2022/23 is forecast at 360,000 hectares compared to 300,000 in Côte d’Ivoire, while yields in Ghana are forecast at 0.83 tons per hectare compared to 2 tons per hectare in Côte d’Ivoire.
Notably, the availability of processing mills in Côte d’Ivoire is the main factor behind the high yields.
“At Green Afro-Palms, we came in to provide processing technology solutions to enable farmers to process up to 20% of the palm oil inside the fruit,” explains Kwame, adding that the solution is encouraging more farmers to revert to palm oil farming as a profitable enterprise.
Green Afro-Palms: Higher yields, higher returns for farmers
Green Afro-Palms has built a simple processing technology that is able to run on solar energy and which is planted closer to smallholder farmers.
Using the technology, the startup partners with farmers by purchasing their produce, undertaking the processing to extract the oil and supplying to the consumer market.
Over the past eight years, Green Afro-Palms has worked with over 1,000 farmers and processed over 1.8 million liters of palm oil that has been supplied to the consumer market in Ghana and across west Africa.
By purchasing the raw crop and processing it for farmers, Green Afro-Palms enables farmers across 35 farming towns in Ghana to earn three times more compared to what they made selling processed palm oil to middlemen after undertaking the burdensome task of manual processing themselves.
“Our model enables farmers to get income, access to markets and prevents them from giving their lands for use in illegal mining,” states Kwame.
Green Afro-Palms’ sustainable agribusiness model driven by entrepreneurship, innovation and a desire for social change has saved 1.2 million trees, with the ripple impacts being saving water bodies, containing deforestation and ultimately helping in climate change mitigation and adaptation, claims the startup.
Owing to its sustainable model, Green Afro-Palms emerged as the overall winner of the inaugural Sankalp West Africa Summit Awards.
The event brought together over 300 change-makers, investors and entrepreneurs to discuss sustainable development in West Africa cutting across agriculture, climate change, circular economy, financial inclusion, energy, gender and livelihood among others.
“The Sankalp West Africa Awards 2023 has truly been an enriching experience when it comes to meeting hundreds of impact enterprises whose business promise and potential is crucial to solving economic and development challenges in the region,” said Arielle Molino, Sankalp Lead and AVP Intellecap Africa.
Nigerian startup Kitovu Technology, which is focused on building climate-smart farming and post-harvest infrastructure, was the runner up, while ShaQ Express, a Ghanaian tech firm addressing the evolving needs and challenges in the e-commerce and logistics industry, was the second runner up.
Pad-Up Creations from Nigeria, a circular economy startup that manufactures and produces washable and reusable sanitary pads as a sustainable solution for women and girls in Africa, scooped the fourth winner dubbed the ‘Sankalp Ecosystem Award’.
Scaling up operations
“Winning the award was an endorsement for the work that we do,” says Kwame. He adds that considering there are about 30,000 smallholder farmers across west Africa who are into oil palm cultivation, the award was an endorsement for the firm to reach many more farmers, ultimately helping ensure that Africa regains its important role in the global palm oil trade economy.
Statistics show that Asia imported 58.4% of all internationally traded palm oil in 2022 with Europe taking 20.9% and Africa importing 13.3%. Other continents account for the remaining 7.4%. India and China are the largest importers at 19% and 15% of global total respectively.
The rising demand for palm oil means significant opportunities abound for Ghana to increase production, exports and earnings. For this reason, Green Afro-Palm is determined to scale up operations. Over the next three years, the startup that has mainly been financing its operations through equity from the co-founders and grants, is looking to raise $500,000.
The funds will enable it to invest in more processing technologies, a development that will enable it to reach an additional 1,000 farmers and process 9.2 million liters.
During the period, the startup aims to have a presence in at least 50 towns in Ghana besides expanding into the Nigerian market. “This will mean having a bigger impact in three years compared to the eight years it has taken us to be where we are today,” says Kwame.
He adds that financing has been the key challenge for the startup, something that is curtailing its plans to continue offering a direct and guaranteed market to more smallholder farmers.