Reality Check for Malaysian Palm Oil

Production and demand growth

Olam International’s Supramaniam highlighted the positives of venturing into Africa’s palm oil industry, citing his company’s experience with this.

In Africa, palm oil production stands at about 2.2 million tonnes, while demand hovers at about 5 million tonnes. The deficit of 3.5-3.8 million tonnes is only going to widen, he said.

One reason is the growing population, now at 1.2 billion and projected to double by 2050. Of this number, 48% will be below 18 years old. In addition, the GDP of the middle-income group is rising rapidly alongside purchasing power.

Supramaniam said that for every increase of one billion people, demand for edible oil will rise by 24 million tonnes. This points to huge demand growth.

“Today, there are about 30 democratically elected governments [in Africa] and they understand the need for agriculture to feed the people. We should take advantage of this to invest in these countries,” he said.

However, he noted that consumption of oils and fats in Africa is still low and that it will take a long time for this to reach the global average.

There is good public private partnership and equity participation of the government in African countries. However, infrastructural development remains a challenge as some countries are still developing, and this will raise the cost of doing business. There is also a need to institute sustainability measures from the start.

MPOC