Africa: NGOs asked to disclose info?

Thank you to a Khor Reports' international reader for alerting some news, in response to our recent posting on remote sensing and transparency. Interestingly, the Liberia government asks NGOs for some information disclosure (see news clipping image below). Might other Africa governments do the same?

 

Khor Reports comment: As Africa is in development mode, they will probably be more sensitive to interventions that affect their economic development policies. The asymmetry of information flows generated by plantation sustainability is notable. Plantations have released a lot of information and have also brought NGOs in-house to assist them in various technical and market access fields. They will be giving out more data such as the geovectors of their boundaries, land bank maps and land type details for usage by the public and NGOs via new RSPO and TFT-Wilmar's policies. In contrast other stakeholders have not needed to release much information.

Liberia palm oil project shareholder in default?

On 8 July 2013, Equatorial Palm Oil (EPO) issued a default notice to Biopalm Energy Limited, part of the Siva Group. The company said: “EPO has, however, advised Biopalm that any dilution of shareholding that results from raising equity in EPO, due to Biopalm's failure to honour its Commitment, should, in EPO's view, result in a corresponding increase in EPO's share in LPD, which is, at present, held 50/50 by EPO and Biopalm as well as an award for damages for loss due to Biopalm's failure to honour its commitments under the Investment Agreement.”

Biopalm was earlier reported to have effective 63.3% stake in the Liberia palm plantation assets via a 50% JV and 13.5% stake in EPO. However, a report in Feb 2012 indicates it has a 26.71% stake in EPO, indicating an increase.

The Liberia plantation concession area is some 170,000 ha. Liberia is the centre of the largest scale oil palm FDI projects in Africa so far. Projects have been held up by land disputes. The other key players are Sime Darby and Golden Veroleum / Golden Agri.


*Please contact Khor Reports if you would like to get a copy of our info briefing on this matter, including profile of Siva Group, and various info collated on Equatorial Palm Oil.


News source:

Equatorial Palm Oil issues default notice to partner
8 July 2013 | 11:23am StockMarketWire.com
The board of Equatorial Palm Oil (PAL:AIM) has issued a written notice to its joint venture partner, Biopalm Energy Limited (a wholly owned subsidiary of Indian conglomerate, the Siva Group) setting out that Biopalm is in material breach of its obligations under the investment agreement signed between the parties on 10 December 2010. Biopalm is required under the Investment Agreement to arrange and/or contribute, either directly or through any member of its group, any external funding required by the joint venture company, Liberian Palm Developments Limited (up to a maximum of US$30,000,000). Notwithstanding Biopalm's obligations to fund LPD up to the Commitment amount, EPO intends to continue to fund LPD and its assets in the Republic of Liberia. EPO has, however, advised Biopalm that any dilution of shareholding that results from raising equity in EPO, due to Biopalm's failure to honour its Commitment, should, in EPO's view, result in a corresponding increase in EPO's share in LPD, which is, at present, held 50/50 by EPO and Biopalm as well as an award for damages for loss due to Biopalm's failure to honour its commitments under the Investment Agreement. EPO continues to negotiate and work with Biopalm regarding the Commitment with a view to an amicable solution being reached, but has reserved all rights to take action against Biopalm under the Investment Agreement. EPO shall make further announcements regarding the above, and its continued discussions with Biopalm, in due course. Story provided by StockMarketWire.com - See more at: http://www.stockmarketwire.com/article/4628151/Equatorial-Palm-Oil-issues-default-notice-to-partner.html#sthash.cjyWmQnf.dpuf

Behemoths' land banking efforts stutter?

"Sime Darby’s expansion into Liberia may have hit some road blocks. It was reported that citizens from more than 15 towns and villages near Sime Darby Plantation in Grand Cape Mount County have threatened that the company would face stiff resistance if it intends any further extension of its concession. Not yet known at this point is the size of the area affected as portion to Sime’s 200,000ha concession land." (ECMLibra research report, 18 July 2011)

Khor Reports comments:

a) SE Asian plantations have taken a great interest in West Africa, Papua and other 'tougher' regions, to extend their land banks. Various problems have been reported with these major expansion efforts.

b) Sime Darby is reported facing some resistance from locals in Liberia (article above). The plantation behemoth had also sought to extend its interests in Sarawak, Malaysia, by offering larger stakes to local landholders - but we hear that some of these efforts may have gone 'on hold' for various reasons.

c) Golden Agri is also looking to develop 220,000 ha in Liberia via the USD1.6 billion deal with Golden Veroleum (the land area was initially reported as a 500,000‐acre palm oil plantation in the southeast of the country).3 September 2010: Golden Agri said its “subsidiary Golden VerOleum would form a partnership with the Government of Liberia in a palm oil project… for the cultivation of sustainable palm oil by the company and by Liberian smallholders and farmers, mill processing and value‐added manufacturing…The investment is expected to total USD1.6 billion” (source: http://www.reuters.com/article/2010/09/03/goldenagri‐liberia‐idUSSGC00373720100903). In October 2010. Golden Agri reported it disposed of its entire shareholding comprising one share of HK$1 in Golden Veroleum Limited. A clear status update is needed.

d) Sometime in 2009‐2010, Golden Agri’s “in progress” acquisition of 1 million ha in Papua falls through. Now, players like Wilmar are looking to Papua for major cane sugar projects. Will they have a happier outcome in the low-lying and seawater-flood prone region?

Sime explores 300,000ha landbank in Cameroon, France processing plant

Sime Darby lately announced a few proposed ventures overseas, including exploring a potential 300,000ha plantation landbank in Cameroon.

In its 18th March 2011 research note entitled "Sime Darby – Malaysia, Too early to add more overseas ventures," UOB Kay Hian research notes that, "Notwithstanding the risks associated with investments in Africa, this venture could divert the new management’s focus from re-examining and streamlining its current business divisions........ Sime is planning to build a processing plant in France which would receive palm oil feedstock from its Liberia estates. This move faces the challenges of meeting Europe’s high oil quality requirements as well as strong resistance from the environmental movement in Europe against palm oil...." (On left, UOBKH graphic with data from Sime Darby, showing the earnings by division of the Malaysian conglomerate)


Khor Reports comment:

a) Sime currently operates in Liberia with under 10,000ha, but has potential to increase this to 220,000 ha. With perhaps another 300,000 ha from Cameroon, this could ramp up Sime's already large landbank reserves substantially.

b) Old-style plantation expansion in Malaysia did not require corporate growers to set-aside land for smallholder development (Felda was the land agency that focussed on smallholder efforts). Indonesia requires corporate land concession holders to set aside some 20% for smallholder development. Sime's planned new project in Sarawak will give substantially more allocation to indigenous land owners and a state land agency under an improved 'native customary rights' program. Thus, there is an increasing trend toward higher allocations for smallholders. Oil palm growing in Africa is characterized by significant smallholder interests and it is likely that corporates will be required to give larger allocations for these.

c) The proposed processing plant in France is a move toward creating a segregated supply chain (perhaps of sustainable smallholder palm oil??) direct to the end market in Europe. Such a supply chain is the goal of global giants Cargill and Wilmar, and large Malaysian planters such as KL Kepong and IOI Corp. Mid-sized, Europe-oriented players, United Plantations (affiliated with Aarhus) and New Britain Palm Oil have also made a similar moves, with the latter even building a dedicated supply for confectionary maker, Ferrero Rocher.