Gabon: Agriculture bouncing back

New ventures in cash crops, such as rubber and palm oil, should help to boost revenues from Gabon’s still-modest agricultural sector, with increased public and private sector investment schemes helping to jump-start the revitalisation of the sector.

The most prominent example of the country’s renewed focus on non-extractive commodities is the recently-announced partnership with Singapore-based multinational Olam – an agricultural product supply chain management firm with extensive holdings in Gabon – to create a large-scale rubber plantation for a total investment of $183m.

With a focus on both upstream cultivation and downstream transformation, the project fits firmly within the government strategy of not only boosting agricultural production but industrialising the sector through local value-added activity.

The joint venture, signed in March, includes the creation of a rubber tree (hévéa) plantation, as well as a processing plant in the Bitam area of the northern Woleu-Ntem province. The project’s location should provide several benefits: weather conditions in the province are ideal for the cultivation of rubber trees, and the proximity to the border with Cameroon and Equatorial Guinea may also foster intra-regional trade. Furthermore, it has a surprisingly ample labour force on-hand – the country’s massive rural exodus has been less dramatic in this traditionally agricultural area, where upwards of 40% of the population remains in rural areas.

The first phase of the project is set to begin in 2013. The plantation will cover an initial surface area of 28,000 ha and will be extended to 50,000 ha in the second phase. The first harvest is projected for 2020, and initial output estimates vary between 2 tonnes and 2.2 tonnes of natural latex per ha. At full capacity, the plantation is expected to generate 62,000 tonnes per year.

The joint venture also provides for the construction of a processing facility with a capacity of 225 tonnes per day. Olam will hold an 80% stake in the joint operation, and the Gabonese government will hold the remaining 20%.

Increased turnover from existing rubber cultivation in recent years bodes well for the new project. The local operator, SIAT Gabon, which was privatised in 2004, currently maintains approximately 10,000 ha of hévéa plantations in Bitam and the Kango area of the Estuaire province. In addition to industrial plantations, Gabon has roughly 3000 ha of smaller-scale village plantations, which help to stimulate the economic and social development of rural areas.

As global commodity prices have risen since the global economic downturn, the purchase price of natural latex has improved for rural farmers. In January 2011, SIAT Gabon announced an increase in its farmgate price from CFA450 (€0.68) per kilo of natural latex to CFA600 (€0.91) in an effort to encourage local producers.

In 2010, national production of natural latex increased 16.6% year-on-year (y-o-y) to reach 38,967 tonnes, and granulated rubber production increased by 9.6% y-o-y to reach 19,559 tonnes. Sector turnover increased by 64.7% over the same period, from CFA13.04m (€19,900) in 2009 to CFA21.47m (€32,600) in 2010. While there is a slow return on investment in rubber, with the first harvest coming years after the original plantation, global prices promise considerable medium- to long-term benefits. Rubber prices have risen rapidly since 2009, and growing demand from emerging economies, particularly in Asia, should continue to support high prices in the coming years.

Olam officials have indicated that prices may continue to increase by upwards of 3% per year over the next decade. World Bank data indicates the price of TSR20 (technically specified rubber) increased from $3380 per tonne in 2010 to a peak of $4510 in 2011. Prices have averaged slightly lower in the first quarter of 2012, at $3682 per tonne.

The success of new, large-scale agricultural projects is critical to the government’s goal of revitalising the sector. Agriculture, once an anchor of the economy, suffered from declining investment after the discovery of oil in the 1970s. As part of the nationwide economic diversification and development programme, Emerging Gabon, the government is working to ramp up sector activity to increase productivity, create rural employment and decrease overall reliance on costly food imports.

The new joint project should also have significant socioeconomic benefits in terms of rural development. The plantation and processing plant are expected to create 6000 direct and 5000 indirect jobs, and Olam has stated it will introduce training programmes for sector employees. The government confirmed that the project will also include the construction of 3366 housing units, as well as schools and a health centre for the neighbouring population.

Provided that the government and its private sector partners can overcome delayed return on investment in rubber and the currently insufficient levels of skilled local labour force, new agricultural investments, such as the Bitam rubber plantations, should help to diversify Gabon’s agriculture sector and boost the industry’s contribution to GDP.

Original Article Here