The Technical Centre for Agricultural and Rural Cooperation (CTA) shut down its activities in December 2020 at the end of its mandate. The administrative closure of the Centre was completed in November 2021.
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Oil palm: A profitable business for Ugandan farmers

Dossier: Cooperatives

Field report Uganda

Fishing was once the most important social and economic activity on Bugala island in Lake Victoria. The island used to be one of the poorest places in Uganda, facing increasing depopulation, especially by youth, however the introduction of commercial oil palms and business development services over the last 10 years have been transforming the island’s economy.

Commercial oil palm production was introduced to Bugala island, in the Kalangala district of Uganda in 2007 with support from the government-funded Vegetable Oil Development Project (VODP) and the International Fund for Agri-culture (IFAD). “Oil palm is a good source of income as ripe fruits are harvested every 10 days and farmers are paid monthly for their produce. Regularity of income-flow enables farmers to borrow from banks,” reveals the VODP national coordinator, Connie Magomu Masaba. She adds that banks con-sider oil palm gardens as stable collateral and less risky than other agribusinesses. 

From fishing, the islanders have gone to oil palm cultivation and the situation has changed dramatically. According to Masaba, “Mature oil palms (3-4 years old) can be harvested for 20-25 years, providing farmers with a steady monthly income of about €300 per ha.” The average size for an oil palm garden is around 2.3 ha per farmer and new gardens may be soon established on other neighbouring islands and suitable areas on the mainland. 

Oil palm cultivation has been so lucrative that teachers, policemen and local politicians are also now getting involved and public-private investments in roads, electricity and ferries have been multiplying. Not only have the pristine forests of the islands remained intact, but tree coverage on the island has actually increased because oil palms replaced mostly what was grass and agricultural land in disuse. Additionally, buffer zones have been built to prevent fertiliser leakages from the oil palm gardens into Lake Victoria.

A supportive business 

To provide smallholders with the necessary support to grow oil palms (i.e. access to seedlings, fertiliser, know-how and credit), the government and IFAD established the Kalangala Oil Palm Growers’ Trust in 2006-07. Oil palm growers are part of the Board of Directors of the Trust. Over time, the Trust has emerged as the key provider of business development services for oil palm growers. It also provided loans to help farmers bear the risk and cost of planting oil palm seedlings and waiting for the trees to mature and be productive, extension services, as well as services for collecting, transporting and selling the growers’ fruits to Oil Palm Uganda Ltd. (OPUL). This multinational corporation then mills the fruits and processes them into edible oil, biofuel, detergents, and other products. 

In 2006, the farmers established the Kalangala Oil Palm Growers Association. It works to improve farmer’s bargaining power. Nelson Basaalidde, general manager of the Kalangala Oil Palm Growers’ Trust explains that, “The Kalangala Oil Palm Growers Association is a production cooperative made up of 1,800 smallholders, including 600 women, who have graduated to commercial farming.” Basaalidde further reports that individual farmers currently own around 4,500 ha of oil palm gardens, while OPUL owns a plantation (also located on the island) of about 6,500 ha. Given that the demand for palm oil is currently unlimited, healthy competition between smallholders and OPUL is demonstrating who is the most efficient producer. However, in order to convince the government to include more farmers in this lucrative business as oil palm gardens are developed in other areas of the country, it is crucial that smallholders stay competitive. 

Cooperation for competition

External donor and government support to the Kalangala Oil Palm Growers’ Trust will end by December 2018. By this time, the 2,000 growers involved will have generated up to €37.5 million in income (€19,000 per grower on average). Such considerable revenues will allow growers to finance the Trust themselves. However, this will only be possible if the Kalangala Oil Palm Growers’ Trust succeed in organising growers and mobilising their resources for the common good. Collective action is thus the answer for ensuring the sustainability of the Kalangala Oil Palm Growers Association-Kalangala Oil Palm Growers’ Trust-OPUL value chain. 

By the end of 2018, Kalangala Oil Palm Growers Association will be expected to take over the owner-ship and control of the Kalangala Oil Palm Growers’ Trust, in order to develop a new generation cooperative, or a hybrid organisation integrating both the management and services of the Kalangala Oil Palm Growers’ Trust, with the membership of the Kalangala Oil Palm Growers Association. 

Time will tell whether the transition to a new cooperative enterprise, without government and donor support, will succeed. If not the government will still continue expanding oil palm production, but mostly through large commercial plantations, rather than through smallholders’ gardens. 


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