With 50% low yield and high cost of infrastructure, maintenance and electricity, it will be very difficult for local farmers to compete with Crude Palm Oil (CPO) imported from the Far East without the duty protection, smallholder oil palm growers have said.
Average yield of CPO per hectare of plantations in the Far East is 5.5 metric tonnes in comparison to 2.5 to 3.00 metric tonnes in nucleus estates of the country, even after practicing best plantation procedures.
This yield disparity is due to the rainfall pattern and soil structure. In Malaysia, rain is evenly distributed throughout the year whereas in Ghana for four months plants will not see a drop of rain, Mr. Charles Lawrence Twumasi-Ankrah, a farmer and an executive member of Oil Palm Smallholder/Outgrowers Association told a media conference in Accra.
Government is expected to impose a 10 percent Import Adjustment Tax (IAT) in addition to the 10 percent ECOWAS Common External Tariff (CET) on imports of crude palm oil.
This is in line with a global movement toward Customs unions, wherein ECOWAS is introducing a CET to allow the same Customs duty to apply for all goods entering ECOWAS members, regardless of which country within the area they are entering. ECOWAS is due to implement the CET this year.
Meanwhile, members of the Oil Palm Development Association of Ghana (OPDAG), a non-governmental association, have asked government to suspend implementation of the IAT on imported crude palm oil until the gap between local production and demand is closed. They argued that the implementation of IAT will effect a rise in production costs on CPO — which could result in the increase of the fast-moving consumer goods prices.
But Mr. Twumasi-Ankrah disagreed that with implementation of IAT, the price of CPO in the country will increase — and this will have a direct and proportionate increase in the price of Fresh Fruit Bunches (FFB), which accrues to the benefit of farmers who are the largest stakeholder group in the oil palm industry.
He stated that many oil palm entrepreneurs are calling on authorities to introduce fiscal measures to protect the industry so as to attract genuine investors and rural dwellers into the sector.
“If authorities do not implement the fiscal measures, actors in the industry will pay lip-service to the industry to the detriment of the economy. The much talked about more import and less export cannot be over-emphasised. Factors such as strong import or US$ demand to meet import bills and large fiscal and current accounts deficits all continue to undermine the economy.
“Imports create employment for the exporting country and take away the employment of the importing country. Import of a metric tonne of Crude Palm Oil into Ghana displaces one farmer of their income. There must be strong fiscal discipline to protect the palm oil sector.
“It is very obvious that every country tries to protect the local agricultural industries by imposing additional duty which can drive positive economic and social impact for people and communities.”
He explained that Ghana has a deficit of CPO, hence policy needs to be framed to increase the production of CPO and not other way around by suspending the duty protection; and that oil palm plantations raise the living standards of the rural people by providing employment to thousands of inhabitants and alleviating poverty.
Palm plantations, schemed smallholders, independent farms, out-growers and individual farmers create employment in the palm segment for more than 290,000 people.
Companies operating in Nigeria are liable to pay IAT -25%, while Ghana palm sector actors are demanding for 10% IAT is very valid.
“Many oil palm entrepreneurs are totally convinced that IAT on CPO will have a positive impact on the palm sector, farmers, out-growers, smallholders, and additional revenue to government.
“Any decision to not protect the palm sector will eventually affect the local farmers and indigenous companies. Protection of duty is needed to bring up the production and close the gap between production and demand.
“There are some companies with open commitment to source 300,000 tonnes of palm products from Africa; this will be possible only by framing polices to favor growth of the palm sector and not favor the importers,” he remarked.