Chapter 11. Oil palm industry growth in Africa: a value chain and smallholders’ study for Ghana 369
There are divisions of labor by gender in the processing chain of activities. Men perform mostly
stripping of fruit, extraction and digestion. Women undertake boiling the fruit, putting the boiled fruit
into the machine and carrying firewood for processing.
The group faces multiple challenges in processing, which include the following:
(a) Frequent mechanical breakdowns occur as a result of inferior materials. The thread (a component of
the extractor) often gives out because the metal used in the manufacture is not strong enough to
withstand long periods of use. The appropriate metal is quite expensive and when processors give
artisans money to buy it, they are not sure if the genuine metal is used by the artisans.
(b) The competition level is high. There are many processors around so the farmers are able to sell
the palm fruits at high prices. This increases processing costs.
(c) Land for cultivation of oil palm is gradually becoming quite scarce. This will have an impact on
potential volumes of fruits that can be supplied.
Table 11 summarizes the estimated oil palm processing costs and revenue per tonne FFB/week, as described in
the FGDs. In general, it appears that the larger the volume of FFB processed per week, the higher the margin
on processing, conferring economies of scale to the processors.
Anticipating future challenges to small scale processing, the group members indicated that their
business is at risk of collapsing because the large scale mills, which benefit from economies of scale
and can process efficiently, are able to offer lucrative prices to farmers for their fruits. For instance,
the larger mills offer farmers GHC 195/tonne of fruits (covering both sale and transport) whereas the
medium sized mills don’t pay the transportation costs for the farmers. Another challenge is that prices
of palm oil are not stable. Buyers of palm oil from the group set the prices and the major reason they
give for offering low prices is that “the market is not good”. The large mills are able to process fresh
fruits and therefore produce better quality palm oil. For all these reasons, the small mills see the larger
ones as a threat to their survival. The group has appealed to the government both to help them acquire
more machines and to help them market their outputs.