The Zambian government through the Industrial Development Corporation (IDC) has acquired a 90 percent stake in the Zampalm palm oil plantation in Mpika at a cost of US$18 million, with Zambeef Products retaining a 10 percent stake in the project.
Zambeef set up Zampalm Ltd in 2009 to produce palm oil and invested more than $20 million. The IDC is an investment company wholly-owned by the Zambian government.
Under the agreement, IDC will inject funds to develop the project, plant an additional 900 hectares of palm and expand production with a modern 10 tonnes-per-hour self-powering palm oil mill to process fruit from the plantation.
The deal reportedly aims to develop the full potential of the 20,000 hectare plantation, of which 2,911 hectares is already planted, and build an outgrower scheme for local farmers.
As part of the investment IDC will invest US$16 million in equity capital, with a further US$2 million dependent on production milestones over the next five years.
“IDC invests in projects for the long-term benefit of the country, and so this partnership with Zambeef on the expansion of the Zampalm project in Mpika makes sense for both parties,” said Zambeef chairman Dr Jacob Mwanza. “We look forward to working with the IDC team to build on Zampalm’s strengths to further develop the nation’s home-grown edible oils industry, create employment and develop the area around the plantation.”
IDC’s shareholding in Zampalm complements the investment in Zambeef by the National Pension Scheme Authority (NAPSA), which is the largest Zambian shareholder in the company, giving every Zambian citizen a stake in the food processing and retailing giant.
Zambeef will retain a 10 percent shareholding in Zampalm following the investment and will continue to supervise and develop the Palm project under a management contract overseen by a join board comprising IDC and Zambeef representatives, along with Senior Chief Kopa, in whose chiefdom the plantation is situated.
Zampalm was incorporated in 2009 to provide a source of crude palm oil following Zambeef’s acquisition of edible oil processing company Zamanita as a continuation of its strategy of vertical integration. The company sold Zamanita to Cargill in 2015 in the light of the increasingly competitive, technologically complex and capitally intensive oil seed crushing industry.
“Following the disposal of Zamanita, the Zambeef board reviewed its strategy for Zampalm and concluded that given the long timescales required to create value from a greenfield project, it was in the best interests of Zampalm stakeholders to seek a new majority shareholder. IDC represent the ideal partner given its mandate of working with the private sector to deliver long-term economic transformation,” said Dr Mwanza.
The transaction also ensures continuation of the social responsibility contribution agreement entered into in October 2009 between Zampalm and the Kopa Community Development Trust.
Zampalm owns 20,238 hectares of land on title in the Northern Province of Zambia, on the Eastern side of Lake Bangweulu, to the North-West of Mpika town. Zampalm currently has approximately 413,362 palms planted over an area of 2,911 hectares in the main plantation, with another 172,000 seedlings in the main and pre-nursery. The first crushing mill, with a capacity of 2 tonnes per hour, was established in 2016.
The production and processing of crude palm oil is expected to drastically reduce the country’s dependence on crude palm oil and edible oil imports. Current imports stand at over US$70 million every year, a costly exercise for the country which consumes around 120,000 tonnes of cooking oil but only produces 30-50 percent of the total supply. More than half of Zambia’s edible oil consumption is imported from the Far East, East Africa and South Africa.
Once at full capacity, the plantation will contribute to substituting 70,000 tonnes of cooking oil imported into Zambia, saving the country around US$70 million (K511 million) in foreign exchange outflows every year. There is also potential for Zampalm to branch out into the Southern African Development Community (SADC) market, targeting countries such as the Democratic Republic of Congo (DRC) and Angola, which are also massive importers of the crude palm oil.
Palm oil is the world’s most used and versatile vegetable oil. In addition to cooking oil, its derivatives are found in foods such as margarines and ice cream and is also used as a thickener, preservative and antioxidant; in personal care products such as shampoo, and cosmetics; industrial products such as lubricants paints and inks; and as a renewable fuel. The palm plant is the most efficient oil producing plant and can be harvested for 25 years and as long as the tree continues to yield a harvest.