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http://www.ft.com/cm…l#ixzz2VRnoVe3v By William Wallis Olam, the Singapore-registered commodities trading house, owes its origins to cashew nuts and the dark days of military rule in Nigeria. This was when currency controls made getting foreign exchange a permanent headache. In 1989, the Indian group Kewalram Chanrai hired Sunny George Verghese, now Olam’s chief executive, to find a forex solution for its textile and chemical business in Nigeria. He did this initially by selling cashews on international markets. So began a long journey across dozens of countries and numerous commodities, which, in its latest iteration, has seen Olam launch an expansion from trading into large-scale commercial farming in Gabon. Olam’s plans to transform tens of thousands of hectares of forest into rubber and palm oil plantations are among the most visible signs of returns from the recent government drive to spur investment – long neglected – in agriculture. “In 2010, we started looking at Gabon differently, with a new government with clear priorities and looking for investment,” says Gagan Gupta, the 36-year-old manager of Olam’s expanding operations. “We wanted to do palm and rubber. The government wanted a special economic zone.” This included running a purpose-built industrial zone outside Libreville, where timber companies have begun processing wood to conform to regulations banning the export of unprocessed logs. Gabon is blessed with fertile soils and a favourable climate, which deliver some of the highest yields in the world for, particularly, rubber. Gabon’s big landmass – most of which is still forested – and low population density make it easier for commercial farmers to gain land titles and manage community relations than in many other African countries. This is at a time when global demand, lack of available land elsewhere and soaring food prices are driving the most significant push into farming on the continent by external forces since colonial times. As in other oil-rich African states, the focus on oil production in Gabon, to the near exclusion of other economic activity, has greatly reduced the role of agriculture over the years. For now, much of the country’s food requirements are imported from elsewhere in Africa and from Europe. The most visible evidence of the produce of local farmers can be found at market stalls along the country’s main highways. About 100km from the capital, Libreville, and beyond the bridge at Kango, the scale of things is now apparently changing. A short drive through secondary rainforest and you emerge into what must count as one of the fastest-growing oil palm plantations on the continent. Tens of thousands of four-foot-high plants stretch across undulating hills towards the horizon and on either side of numerous forested zones, where protected flora and fauna and sensitive local sites have been left alone (along with buffer zones to the surrounding rainforest). Mr Gupta says the cost of leasing land in Gabon is average for the continent. Labour costs are higher than average at a prescribed minimum wage equivalent to $300 a month. But he hopes that higher yields and the chance to operate the plantations using environmental and social best practice will compensate for that. “There is limited land available for certified palm oil. We can do socially responsible green certified oil here that will fetch a premium. You can’t get certified in Malaysia – here it is possible,” he says. The company is treading in the footsteps of Siat, a Belgian agro-industrial group that is part Chinese-owned, which took a more traditional route in acquiring state palm and rubber plantations about 10 years ago, and which has $600m expansion plans. Gert Vandersmissen, Siat Gabon’s general manager, says one of the biggest constraints to growth is the shortage of labour and the time it takes to get authorisation for visas for immigrants. Most of Gabon’s inhabitants live in Libreville, Franceville and Port Gentil and not everyone is keen on the hard labour associated with plantation work. Rubber prices tend to be sensitive to global financial conditions and, following the 2008 recession, they dipped to below the cost of production, according to Mr Vandersmissen. He maintains that yields in Gabon are among the best in the world and long-term prospects are good. Like Olam with palm oil, Siat is making a strategic calculation for the future. This takes into account rising demand for palm oil in Africa, the shortage of available land in other parts of the continent and the link that is emerging between palm oil prices and those of crude, because of palm’s potential to be converted into biofuels. Oil palms take at least three years to begin producing, and 12 years to peak over a lifespan of 25 years, so it is a long term bet. “We are riding structural changes,” says Mr Gupta. Continue reading →