PAN AFRICAN INSTITUTE FOR DEVELOPMENT – WEST AFRICA

P.O. BOX 133, BUEA, CAMEROON

DEPARTMENT OF BUSINESS STUDIES

Examining the factors that affect the growth of Micro
and Small Palm oil Mills in Ekondo Titi. SW Region
Cameroon
Chapter 1

MBA Thesis, to the Department of Business Studies.

By Azah Anold

Comments……

CHAPTER 1
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 INTRODUCTION

1.1 Background of the study

The oil palm tree (Elaeis guineensis) is a perennial plant with fossil and linguistic
evidence for an African origin (Hartley, 1992). Fridel (2001) suggested on
evidence of an analysis that fat found in a jar in a tomb at Abydos (c. 300 B.C.)
may have been palm oil. Propagated in the humid tropics of West and Central
Africa, South East Asia and South America, the crop grows normal between
latitude 10 degrees North and 10 degrees South of the equator. In these regions it is
very common to find palm trees growing spontaneously in the wild, in isolated
stands or as natural oil palm tree groves. However, palm oil (its main product) led
to its worldwide increase cultivation as far back as the first half of the 19th
century. When the slave trade was suppressed by the British, however, a substitute
had to be found. Thus palm oil acquired the unique distinction of being the
commodity which replaced the traffic in slaves (Pavinho, 1996). Also, increased
demand for crude palm oil generated by the industrial revolution in Europe
(notably to lubricate railway truck axles) and, to a lesser degree, for palm kernel oil
as the margarine industry developed in Germany and the Netherlands (Jannot et al
2003). Though palm oil has to compete in a market containing some thirteen
principal vegetable oils and oil seeds, two types of marine oil and thirteen
categories of animal fats, palm oil and its products still occupy number one
position of edible oils and fats in world trade followed by groundnut oil, olive oil
and soya bean oil and cottonseed respectively (FAO 2015). Palm oil has been an
important ingredient in the diet of many people worldwide for it the world’s largest
source of edible oil, accounting for 38.5 million tonnes or 25% of the global edible
oil and fat production (Boclare 2007). The world’s leading producers of palm oil
today is Malaysia, Indonesia, Columbia and Thailand, Nigeria and Cameroon
respectively accounting for about 47% of the global palm oil production. (Evenye,
2012). Palm oil as a major food and non-food ingredient consumed by virtually
everyone especially here in West Africa used in cooking of African meals or used
in the manufacturing of palm oil related products like soap, lubricant, biodiesel,
mayonnaise, base for lipstick and Pharmaceuticals (Hellen et al, 1994). In Africa,
Nigeria is the leading producer of palm oil followed by Cameroon and Ivory Coast
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respectively but has since 1974, Nigeria has ceased to contribute to the export trade
in the commodity, largely due to increased domestic demand/consumption that
have not kept pace with the production (Omoti,2004).
The development of the oil palm sector in Cameroon began with the
harvesting of spontaneous oil palm groves and the incorporation of sprouted
seedlings into farmlands inside agroforestry systems. The annexation of Cameroon
by the Germans induced the development of large scale plantations by private
German firms before WWI. After the defeat of the Germans by the British and the
French in 1916, the industrialization of these plantations began in 1928 at Lobe
(Ekondo-Titi) with the introduction of Uniliver Palms (Present day Pamol
plantations Plc) with major farms and Headquarters in Calabar, then the Cameroon
Development Corporation (CDC) in 1947/48. During this period, very little was
done to develop the smallholders’ oil palm sector. Although Pamol began with the
development of village plantations for the local population in the 1960s and 1970s,
CDC on its part did very little to develop oil palm plantations for the local
population (Nkongho et al, 2012). After the creation of “la Société camerounaise
de palmeraies” (SOCAPALM) in 1968 under a Nucleus Estate Smallholder (NES)
model, it is only in the late 1970s that the government of Cameroon – as part of its
poverty reduction strategy decided to develop oil palm smallholdings for the
locals. A partnership between major agro-industries and oil palm smallholders was
created with funding assistance from the World Bank and it was placed under the
supervision of the “fonds national du développement rural” (FONADER) (Ndjogui
et al, 2014). According to Assouh (2010), about 35 000 ha of smallholdings were
developed within 12 years during the FONADER-sponsored scheme. Agrarians in
2010 at the World Oil Palm Show in Geneva awarded lobe oil as best palm oil in
de world due to its low cholesterol levels. This is a result of the climatic conditions
and soils under which the palm trees grow. Cameroonians have always been using
oil palm tree products through the crude red oil extracted from the mesocarp of the
fruit, the oil contained in the kernel sometimes called white oil (‘mayanga’), the
maggots and mushroom that comes out of dead palm tree tissue and the sap which
ferments to generate palm wine Seku (1992).

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 Cocoa, rubber and raw crude palm oil are the three major cash crops that
Cameroon exports, but palm oil alone contributes to 1.7% of Cameroons GDP
(Julio et al 2016), and provides employment to more than 2.5 million
Cameroonians especially in the coastal rural communities. In Ekondo Titi, more
than 20 000 households are engaged in the activity as each family already owns a
farm (Philip 1992). Palm oil production is the main source of income to the local
population followed by cocoa and rubber sales. Ranked 1st in the production of
palm oil in Cameroon both in large agro companies and in Micro palm oil mills,
the Ekondo titi region contributes to about 34% of palm oil produced in Cameroon
and has contributed greatly in the socio economic development of the region (C.
Okon, 2011). The palm tree planting industry is attracting other agro-based Small
Enterprises involved in transportation, processing and marketing of small holder’s
Fresh Fruit Bunches (FFB). The mill industry in Ekondo Titi has attracted
especially young people who provide most of the un-skilled and semi-skilled
labour in the plants hence increasing rural income (Rose et al, 2005).

A palm oil mill is an agro factory processing FFB from farms into crude palm
oil and palm oil spinoffs like kernel oil and sludge oil. This production process
begins with intense boiling (sterilization) of raw stripped fruits, or fruit bunches in
the (case of pioneer mills), to the grinding of hot palm fruits in digesters, then the
crushed pulp is taken to presses and separation centers where oil is separated from
the fiber and sludge oil is then separated from natural palm oil through filtration.
Whether large scale or micro, palm oil mills burn palm nut fiber as their main
source of energy in boiling incoming FFB. (Bismarck 2000).

Small and medium sized palm oil production is done by small palm oil mills,
unlike the direct process of boiling fruit bunches, these mills lack the sophisticates
bunch sterilizers. The harvested bunches are broken sections and kept in heaps to
loosen up for 4 to 5 days. The next step in the production chain usually and locally
called ‘nacking’, this is where a team of young men with axes machetes and large
mill rail-like shifters come and hit the bunches to separate the loose nuts from the
bunch stalks then filtering on the rail like shifters the loose nuts to separate clean
nuts with nut caps. Clean nuts are then loaded to the large cooking pots with the
use of wheel barrows for sterelization to commence (Misori et al 2004).

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 Micro, Small and Medium sized Enterprises (SMES) generally can be defined as
businesses which are independently owned and operated and not dominated in its
industry. The European Union categorises SMEs by head count as follows;
Recommendation 2003/361/EC regarding the SME definition.
1) Micro businesses have a head count of less than 10 employees
2) Small businesses have a headcount of less than 50 employees and Medium sized
businesses have a head count of less than 250 workers. The mill business as a
SMES can be categorized under Agro-Processing and creates employment in the
following fields:
Logistics; Drivers own their own trucks especially Toyota Hilux, Tractors and
Toyota Dina. They are in charge of transporting workers to the farms, FFB from
the farms to the mill, and edible palm oil and Kernel to Customers usually in
Kumba, Bafoussam and Douala. Processors are the general mill labour(axe boys,
cookers, millers and loaders). Wholesalers provide the working capital used in
financing harvesting and purchase of FFB and all costs related to Mill charges,
Retailers sell palm oil to consumers at local markets and in stores in and out of the
region.

Description of study area

This research project investigates the feasibility and factors leading to the growth
of micro palm oil processing plants owned and managed by small holding farmers
in the Ekondo Titi council area South West Region Cameroon.
Ekondo Titi Sub Division and the entire Ndian Division is reported to be one of
the fastest growing areas in the world being covered with oil palm seeds with half
of the regions surface area already under cultivation of FFB. Though much of the
production of Palm oil in the region comes from Pamol plantations Plc an agro-
industrial company with processing plants and farms cultivating about 10,374
hectares with average annual production of 14,000 tones, independently owned
small holding farms and processing mills are evolving and are on the rise for the
last decade occupying about 6,890 hectares of palms. These privately owned farms
have a production potential of 35 000 tons of FFB/ year and belonging to 1,224
identified small holders (Pamol Plantations Plc Magazine, June 2016)

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Some entrepreneurs like the researcher have identified and invested in this new
Agro-processing Small and Medium Sized Enterprise which process the FFB of
farmers into edible palm oil. Some of the mills now crack palm kernels which is
usually exported through the Ekondo Titi Creek to Cross Rivers (Calabar). More
than 90 percent of farmers rely on micro mills for the transporting, processing and
even marketing of their produce and pay high mill charges. The rapid growth of
small holding palm farms has been one of the major factors leading to the
expansion and changes in the Palm oil mill industry.
Ekondo Titi is located in the Ndian basin in The South West Region
Cameroon one meter above sea level. Its maritime and main low land areas give
the region two major distinct soil types. Lowland villages like Lobe Town and
Kumbe Balondo are rich in the red seasonal flooding lateritic soils, while the
upland towns like and Bekora and Lobe are enriched with dark brown alluvial soils
which are the best soils for palm plantation farming. The town is one of the
Cameroons 21st Marine battalion military bases also a customs stop between
Kumba and Calabar in Cross river state Nigeria. There are too many palm oil mills
in the town now so much so that when entering the town, it is usual to scent the
aroma of fresh palm oil from a distance.
Small and medium sized agro-processing enterprises (SMAEs) are
responsible for generating a large share of products and services in the agricultural
sector and play a critical role in increasing demand for raw materials. They create
income and employment in rural areas where the opportunities for employment are
frequently sparse. SMAEs can play a critical role in creating rural income and
employment opportunities, through the demand they create for raw material
supplies from smaller and medium scale farmers. SMAEs that are appropriately
managed can produce high quality products, which can increase export revenues
and reduce dependency on imported products.
However, there are major constraints that must be addressed in order to realize the
full developmental potential of SMAEs.
Looking at the growth rate of the Mill business, one will begin to ask themselves
questions like; does the future of oil Palm processing in the region belong to Small
holders or to Pamol?

1.2 Statement of the Problem

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Amongst the small-scale producers in Ekondo-Titi spread over an area of about
7000 acres, traditional methods of stripping of fruit from bunches is the hard way
and the only way. Here, harvested FFB is heaped in the mills for 4-5 days,
sprinkled with water each day and covered to facilitate natural loosening. It has
been recognized that the rapid extraction of fruit from the bunch on the same day
of harvest will increase oil yield and quality, and that provision of bunch sterilizers
will arrest the deterioration of palm oil quality and quantity even before
processing. Fruits which have been kept for several days before processing or over-
ripped fruits on palm trees will be invaded by moulds causing lipolysis which
decreases palm oil bleachibility. (Martin et al, 1999).
In addition, during processing, outdated equipment like the hand press and the
railing filtering shifters is mostly used. This method of oil palm processing is
arduous, time consuming and oil yield is usually low with high free fatty acid (ffa)
content that can be up to 30% (Orewa et a, 2009). This dangerous routine exposes
uninsured workers to direct fire while trying to off load large tanks of boiling
fruits. Inside the digester room, sharp large iron forks will be seen passing around
ones unprotected feet moving fibre from cages into wheel barrows.
Often, about 35%-75% of potential palm oil is lost during processing since most
of the slower hydraulic press systems are not effective to squeeze out all the palm
oil from the fiber. Potential palm oil is also lost during processing because palm oil
comes out much and easily when the cooked fruits are still hot. Using this separate
pot and processing units systems, fruits from the pots cool off in wheel barrows
during transporting from fire section to machine rooms. (FAO, 2015). According
to Duchscher (2011), a recovery of 37.2% of palm oil contained in the fiber was
obtained in an experiment after double pressing.
High cost of procuring mill equipment is a serious problem in Cameroon this is
a result of high custom duties. The complete cost of buying mill equipment ranging
from a land by a river, to the machinery and structures cost about 25 000 000 frs
and more. Often, lister engines will be imported from nearby Nigeria. High
equipment costs have discouraged intending investors from establishing and
investing in oil palm venture. Consequently, significant proportion of farmers
resort to hiring of processing equipment and manual labour this is resulting to high
cost of mill charges, delay processing and rotting of FFB. (Ekine and Onu, 2008).
Fruit theft is another major problem facing the industry, this is because mill
workers have developed a new habit of stealing fruits and processing them in
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nearby mills since the councils have now decided to create industrial areas in
towns where mill can be constructed along rivers.
In the last two years, there has been the introduction of the new semi
mechanized 2.5 tonne per hour capacity production hydraulic jack system, but
most mill workers find this machines difficult to operate and usually revolt against
the system with the claim that it has led to the loss of the positions of manual chest
men, and a reduction in their mill charges from 500frs per drum to 350 frs per
drum (Abacha 2011)
Despite the state’s New ACEFA project under the ministry of Agriculture to
supply complete mill equipment which costs about 5 million francs each to
registered family owned mills, the initiative is slow as it may take up to 3 years
with over refinement of paper work to and from Buea for a farmer to finally
receive those machines.
After examining growth factors of Oil palm mills, this research will also
look at the movement occurring in the mills in the last decade. These changes have
been from localizations as industries, to the rapid changing technological
advancements in production of edible palm oil. Manual processing and screw hand
press methods used to be adopted for palm oil extraction from FFB (fresh fruit
bunch), but the system is changing with lister engines and hydraulic press systems
not only producing palm oil, but making use of cracker engines to snap-off palm
kernels a spin- off with high demand these days.

1.3 Objectives of the Study

1.3.1 Main research objective
To examine the factors affecting the growth of micro and small palm oil mills in
Ekondo Titi.
1.3.2 Specific Objectives
To identify the specific factors affecting the growth of micro and small palm oil
mills in Ekondo Titi.
To analyse the operations of micro and small palm oil enterprises in Ekondo titi
alongside world’s best practices.
To evaluate the role of the government in promoting the growth of micro and small
palm oil mills in ekondo titi.
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1.4 Research Questions
1.4.1 Main research Questions
What are the factors affecting the growth of micro and small palm oil processing
enterprises in Ekondo Titi?
1.4.2 Specific research Questions
What specific factors are responsible for the low growth in micro and small palm
oil mills in the study area?
To what extend are the operations of micro and small enterprises in Ekondo Titi in
line with best practices for the operations of palm oil producing SMES in the
World?
What contributions have been made by the state of Cameroon in promoting the
growth of micro and small enterprises in Ekondo Titi?

1.5 Significance of the Study

This research work will act like a guide to some entrepreneurs in the Mill
business to understand the level of competition and strategies for best practices in
the industry.
Pamol managers need to take a look at the study because it covers an important
part of their main problem today which is fruit theft.
Also, the Ekondo Titi Council and the local community after reading this work,
will understand the level of employment the business creates and its impact in the
food supply chain.
Since this project looks at the cost of investing in a mill business, future
investors like the Panel will benefit from being part of an ongoing lucrative
business with high capital turn over.
The government of Cameroon through the ministry of Agriculture and its new
ACEFA projects will benefit from this project because it covers one of the most
important value creating agricultural activity in one of the most remote regions of
the country.
To the body of knowledge and the academic world, this project is one of the first
in the study area and will act as a reference book to future researchers on the issue
of palm oil production by SMS agro processing industries

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 Lastly, because the author is a mill manager, this work will not only help me
acquire a masters in Palm oil Business Management, but will act as a guide in
making Rose Farms become the most enlightened mill in Ekondo Titi processing
and marketing palm oil its by-products both in Cameroon and Nigeria.

1.6 Organisation of the study

The study is organized into five chapters. Chapter one is the introduction of the
study and it includes a historical and current background of palm oil processing
both in Cameroon and in the Ndian basin, the problem statement, some main and
specific research objectives, main and specific research questions, significance of
the work, organization and scope of the study. The chapter closes with the
definition of some new terms in the work. Chapter two is the literature review of
the study, this part will appraise critically some palm oil processing related
theories, and gaps identified in the literature, including some novel ways the
researcher tries to fill the gaps. Chapter three deals with the research methodology
which looks at methods adopted in carrying out the study and the validity of
results. Chapter four focuses on data presentation and analysis whiles chapter five
presents a summary of the study, findings and conclusions drawn from the findings
and recommendations of the study. There will also be a section for references and
appendix.

1.7 Scope of the Study

1.7.1 Field visit/survey
A preliminary survey was conducted randomly some years back to ascertain the
communities that process oil palm in large quantity using manual/rudimentary
equipment. The survey result shows that Ekondo titi and surrounding villages has
several smallholder palm oil mills with numerous customers. Almost every family
in Ekondo Titi own a palm farm, and will need to process their FFB. Observations
indicates that the palm oil mills are located in all part of the community and aroma
of oil palm can be perceived even at increased distance when approaching the
industrial areas of the town. Though palm processing mills have different
capacities and different management and marketing systems, located in different
villages, 10 randomly selected mills including Rose farms will be visited and data
would elicited through interviews from 100 mill workers mill owners and

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customers plus some observations. The mill owners (10 respondents) will provided
the information such as cost of setting up small-scale palm oil processing business
due to their knowledge on the equipment procurement and overall management of
the palm oil mills. While the socioeconomics characteristics will be provided by
the mill workers and owners and customers (100 respondents). The information
from the respondents will serve as a basis for comparison, for the purpose of
triangulation.

1.8 Definition of Terms

Palm oil.
Palm oil or red oil is a natural vegetable oil of high free fatty acid and glycerol
content produced from the Elaeis guineensis plant and used as a food ingredient
and a non-food ingredient in the manufacture of soap, margarine, ointments and
many other industrial products (FAO, 2015).
Palm oil is the red fluid extracted from the fibrous mesocarp of ripe palm fruit. It
is solid at ambient temperatures and at tropical temperatures, it is fluid with certain
fractions held in crystalline form. On settling, there is a clear liquid section at the
top and a crystalline fluid base.

Palm oil mills

A palm oil mill is an agro factory processing FFB from farms into crude palm
oil and palm oil spinoffs like kernel oil and sludge oil. This production process
begins with intense boiling (sterilization) of raw stripped fruits, or fruit bunches in
the (case of pioneer mills), to the grinding of hot palm fruits in digesters, then the
crushed pulp is taken to presses and separation centers where oil is separated from
the fiber and sludge oil is then separated from natural palm oil through filtration
and boiling. (Bismack et al, 2000).
These are plants either large or small which engaged in the transporting
processing, storing, marketing and distribution of palm oil, and bi-products like
palm kernel. The major differences between a pioneer mill and a small holder mill
is that pioneer machinery use pulleys and gravity feeds with much reduced labour
cost and provision of standard milling control systems like weighbridges and
enclosed automatic sterilizers.

FFB
Fresh Fruit Bunches. These are the ripe thornily fruits of the Palm tree carrying the
palm nuts held by the bunch stalk Babatunde (1975). FFB is harvested with a
hooked knife (Milesian knife) attached to a pole.

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Micro and Small scale Enterprises
SMES - Micro, Small and Medium sized Enterprises can be defined as
businesses which are independently owned and operated and not dominated in its
industry.
According to Ngong Cloudin (2015), Micro Enterprises are small business that
employs a small number of employees or have less capital assets.

Small holder scheme - Pamol’s new initiative to buy at high prices every FFB from
farmers.

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