Two decades ago, the rest of the world saw Africa as a hopeless continent. Today Ghana is one of Africa’s success stories. Its economy, spurred by a thriving private sector, has grown on average by over 6 percent a year for the past five years. A significant part of this growth has been fueled by the success of the country’s palm oil industry, with over 300,000 hectares of land currently under cultivation.
Palm oil provides a major source of employment and revenue for Ghanaian smallholders, with 27,000 farmers engaged in the industry. The Ghanaian government recognizes the huge role palm oil plays in the economy, investing more than $3 million in the industry so far, and recently announcing a “master plan” to support expanded production.
Ghanaian ex-president John Kufuor left an important legacy for the country’s palm oil community. President Kufuor selected an additional 300,000 hectares of land for oil palm expansion which will be developed over the next few years. This will meet both domestic and international demand, as the Economic Community Of West African States (ECOWAS) has noted a shortfall in supply up to a million tons for the economic sub-region.
But Ghana’s efforts are now being undercut by the World Bank, which under its current president Robert Zoellick has suspended loans for palm oil and will impose new sustainability standards for lending. This development has serious consequences for the industry as well as poverty alleviation in Africa.
The World Bank has for decades supported the growth of palm oil in African countries. Since the 1970s it has invested more than $43 million in Ghana, including $12.5 million in 2007 alone. Recently however, the Bank’s International Finance Corporation (IFC) suspended its $132 million annual investment in palm oil, after sustained pressure from environmental groups in the West
This move will be extremely damaging not only to the palm oil sector in West Africa, but also to poverty alleviation in developing countries such as Ghana, where jobs are scarce in rural areas. In Nigeria alone, nearly two million people are employed in the palm oil business.
In addition, palm oil is a valuable food source for millions of Africans, at a time of increasing global food insecurity. Uganda has made recent strides to capitalize on local palm oil production to feed local families and boost job booth. The International Fund for Agricultural Development (IFAD) has announced a continuation of Ugandan palm oil investment of $52 million in partnership with the Vegetable Oil Development Project Phase 2. This loan provides direct benefits to more than 136,000 Ugandan families and local businesses such as BIDCO. The IFAD rightly sees palm oil investment as crucial for economic development and the World Bank would be well-served to follow this agency’s example.
Moreover, the World Bank’s unwise decision runs completely counter to the IFC’s stated aim, which is to reduce poverty and help people help themselves. As the Bank itself acknowledged in its Framework for Engagement, “the palm oil sector has played a significant role in advancing development and accelerating poverty reduction in the many tropical countries in which it grows.”
Instead of helping entrepreneurs in developing nations, the Bank is increasingly in thrall to environmental extremists whose anti-business agenda threatens the livelihoods of millions of people in the world’s poorest continent. Where is the logic in pandering to the demands of Western-based NGOs while undermining the very people you are supposed to be helping in the developing world?
While wealthy NGOs in the West pour vast sums into lobbying international institutions to advance their radical agendas, small farmers and landholders in Africa and Asia suffer. And the timing could not be worse, in the aftermath of a major global recession, and while the European Union erects further protectionist barriers to international trade through its Renewable Energy Directive, which will make it even harder for African farmers to export products such as palm oil to Europe.
President Zoellick and the Bank’s executive board should stand up to the powerful environmental lobby, and reject the mandated environmental certification standards which they demand. These so-called “standards” are in reality job killers in developing countries, and a hammer blow against African farmers.
A wealthier society with a clear stake in its economy is far more likely to protect the environment and natural wildlife than an impoverished one. It behooves on the World Bank to reinstate its backing for palm oil, and act decisively in favor of raising living standards and combating poverty in developing nations. The Bank should live up to its core mission, and free itself from the nefarious grip of environmental groups who are far-removed from the daily realities of the people in countries like Ghana.
Thompson Ayodele is the Director of the Initiative for Public Policy Analysis, a Nigeria-based public policy think tank and associate of African Liberty and IMANI Ghana.