Entrepreneurship Zone: 24 February 2022 :: Building a palm oil business in Ghana: Entrepreneur shares his journey

Thu Feb 24 06:09:36 CAT 2022

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Entrepreneurship Zone: 24 February 2022 ::  Building a palm oil business in Ghana: Entrepreneur shares his journey

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Palm oil is the most widely used vegetable oil in the world. In Twifo Praso in Ghana, west of the capital city of Accra, Benjamin Agyare has built his company Mampoma Oil. He started buying the oil palm fruit from farmers in 2016, selling it on to processors. Over time, Agyare expanded this business. It now provides oil palm seedlings to farmers and processes the fruit as well. 

Finding the right focus

If Agyare had to start over, he would invest in processing the oil palm fruit at the same time as developing the supply side.

In 2016, when the company was founded, his research showed there were a lot of artisanal and industrial mills vying for palm fruit in the region. With such intense competition and not enough fruit to go around, the company focused on increasing supply by supporting farmers, providing them with technical inputs, and then buying the fruit to sell on to the various mills.

Agyare admits the growth of the company would have been more pronounced had he ventured into processing earlier.

It was only in 2021 that Mampoma acquired an artisanal palm oil mill, locally called a Kramer after the European engineer who originally installed one of these in the country. With this, Mampoma could produce around 500 litres of oil per day.

Demand-driven production

“The demand for the oil keeps growing because 70% to 80% of all our food items contain palm oil or a component of it. The cosmetics industry is also driving up demand for palm kernel oil,” says Agyare.

Palm oil is extracted from the outer part of the fruit while palm kernel oil comes from the soft part of the seed.

In addition to the robust market for the two oils, there are various co-products (Agyare’s preferred word for by-products obtained in the production process) that enjoy a healthy and growing client base. Mampoma hopes to, in time, produce all of the possible products it can from the palm fruit and its kernels. This is why Mampoma Oil established a separate company – Mampoma Farms Limited in 2020 – to increase the oil palm farming base. Agyare invited three directors to invest and join him and his father on the board. The funds brought in by these directors were used to grow 120,000 seedlings, which were distributed to outgrowers and smallholder farmers in 2021.

Mampoma procures from the farmers, then processes as much of the palm fruit as its mill can handle and directs the rest to the nearby industrial mills. Its own product goes largely to two clients that take all the available oil. “In peak season, our little machine and staff work 24 hours a day just to meet the demand,” he says.

The challenge of finance

“Sadly, our financial system does not favour young and upcoming entrepreneurs. Instead, they look for well-established businesses,” he explains. “Even though there are programmes for start-ups and you join a mentorship programme, obtaining funding at the end of it all remains a challenge.”

To overcome the lack of capital, Agyare has brought in partners and ploughs most of the company’s profits back into operations and expansion.

The potential for higher profits is locked up in increased oil-processing capacity, he says. The company is currently in talks with Absa Bank in Ghana – through its Young Africa Works Programme – to fund a motorised, upgraded version of the Kramer or even to install a mini-plant with a one-tonne per hour processing capacity.

“With an upgraded Kramer, our oil extraction rate will be between 12% and 15%; and with the international-standard mini-plant between 20% and 22%.”

Putting the paperwork in place

Unmet demand means increased competition for the oil palm fruit in the region, even from the farmers within Mampoma’s network of suppliers. “A few farmers did some side-selling last year. This was before we had formalised the agreements. In February this year, 80% of the farmers were registered as part of our outgrower and smallholder farmer scheme. We provide input support such as fertiliser, and they are contractually obliged to sell us their fruit. Mampoma will also appoint technical support officers to guide them on best-practice for pre- and post-harvest operations.”

Further expansion along the value chain

Mampoma sells every co-product it can from the production process: the whole kernels (as it is not yet extracting oil from the kernels), the fruit fibre and the empty fruit bunches.

He hopes the mini-plant will soon become a reality as it will mean increased output. An improved mill could double the company’s revenue from its current US$53,000. With a mini-mill, it jumps exponentially to $700,000.

For Agyare, the long-term plan is to move into refining the oil once the processing capacity has improved. “Refining both oils means there will be more products to sell, including input ingredients for the cosmetics, pastry and baking industries. The opportunities are endless.”—Howwemadeitinafrica

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