Palm Oil Business Plan update

We have finished a first draft of the palm oil plantation business plan, and it was very interesting. Working through the budget in detail revealed that fuel will be the major expense in all areas – fuel for transport, fuel to run the machines, fuel for the generator. With the machines we priced, fuel for 200 hours (approximately one month) of operation is about eight times as expensive as the production manager, security / cleaning person, clerk, and production workers’ monthly salaries.
The relatively sterile world of Excel spreadsheets and business plans is so different from the reality here. Every day we see the National Organization for Welbody struggling to keep the mechanics and farmers it employs working hard and working honest. We see the tractor break down in fifteen different ways. We see the mechanics making gaskets out of bristol board, and holes in the tractor where tubes used to be that are filled with sticks. We went out to the farm and saw it when it was thick, eight foot high brush with bushes and wild palm trees, and afterwards, when the workers gathered round to quench their thirst, they drank from a plastic motor oil container. The water inside smelled like gasoline. They laughed when Katie, Allan and I were appalled.
We’ve seen the workers clearing brush with machetes and sticks, some of them amputees, some of them not. Last Thursday we returned to the farm, and now there are large piles of burnt sticks and sticks waiting to be burned all around the ploughed area. The tractor driver himself is a middle-aged man who wears a pink hat and few teeth. Planting and ploughing is going on, and I’m pretty sure that Katie, Allan, and I are the only ones who know that it costs almost 3 million Leones (1000 dollars) to use the tractor for a month. Just to give you an idea:

Tractor fuel, 6 gallons a day, 25 days a month, 15 000 Leones per gallon: 2 250 000 Le
Tractor driver, Leones/month: 250 000 Le
Tractor apprentice, Leones/month: 100 000Le
Tractor maintenance, Leones/month, inevitable: 500 000-1 500 000 Le

Altogether, in the best case, about 3.1 million Leones, or 950 USD, per month. That’s about 40 dollars a day (using 25 days in a month; Sierra Leoneans work most Saturdays).

1 Laborers for 1 day: 8000 Leones.

So we could employ 15 laborers for 25 days for 3 million Leones.

When we were visiting the palm oil plantation in Yele, and furiously jotting down notes about prices, quantities, logistics, and details, I thought of my grandparents. I call them Poppy and Buzz. When Poppy was younger, his first job was out in the middle of nowhere in Alberta, working for an oil company. I can hear a sound byte in my head of him telling me about being asked by the workers what to do – “Is this enough pipe?” He says that he looked at where the pipe needed to go; about thirty feet was needed. Then he looked at the pipe, three lengths of about ten feet. He didn’t know anything about oil pipelines. “Yep.” I think he’d do well in Katie and my advisory/number crunching/research/reality check role here in Kono. Buzz and him might not appreciate the bumpy roads as much anymore, though.

Here’s the first draft of the “Executive Summary” of the business plan. The business plan itself serves two purposes: operating statement for the farm, and convincing appeal for donors. It’s not a business plan in the sense that GAF is looking for investors; instead GAF is looking for donors.

The Kono Amputee Clinic Demonstration Farm is a project that will combine the long term profit potential of palm oil with an existing successful project that works to improve the quality of life of marginalized peoples in Kono District. It will be administered by the National Organization for Welbody (NOW) to provide income to fund the operating expenses of a primary health care clinic that provides modern medicine free of charge to amputees, war-wounded and their dependents.
The plan is to plant 100 acres with oil palms, purchase oil production equipment and then produce palm oil for the local and national market. Another non-governmental organization based has enacted a very similar plan with great success: the palm oil mill in Yele began producing oil in 2008 and continues with great success, funding the Magbenteh hospital in Makeni with the proceeds.
Through the planting, harvesting, production and sale of the palm oil the Kono Demonstration Farm will involve workers from the amputee and war-wounded communities to provide opportunities both for employment and development of business skills and entrepreneurial thinking.
Palm oil is a staple in both food and soap in West Africa, and so it is effectively a commodity. There are two types of oil, red and yellow. The red is more popular for cooking in West Africa, but if processed with a low moisture content, consumers will also use the yellow oil for cooking. Only yellow oil is used in soap-making. The Yele Palm Oil Mill is the only other mill in the country, so competition is mainly against traditional processing methods. The oil palm itself is native to the area, and resilient to pests, wind, rain, and dust after reaching maturity. They require little upkeep and have a long producing life (25-50 years). There are many different varieties, but we have determined that imported Tenera seedlings are the most profitable. Moreover, we will purchase these seedlings from the Yele Palm Oil Mill in order to further our relationship with them and enlist their educational capacities to improve our farming techniques.
We expect the farm to recoup profits equivalent to the initial donations by 2016, and to be able to fund the operating expenses of the clinic (~70,000 USD p.a.) by 2015. Future expansion is a possibility, because land is very cheap.
Production is a multi-step process, requiring approximately 30 – 50 thousand USD of equipment. Fruits are removed from their bunches, sterilized, digested, pressed for oil, and then the oil is clarified by passage over and under barriers and last heated to reduce the moisture content.
According to experience at the Yele Palm Oil Farm, sales are not difficult, because many middlemen come directly to the mill to buy oil. Otherwise, oil will be stored in a storage tank or in five-gallon jerry cans for sale in local markets. Some oil will be sold to the amputees and war-wounded and their dependents at a discounted price to encourage entrepreneurship on their part.
The Kono Demonstration Farm has access to and the leadership of many experienced individuals and institutions. Edward Ngegba, the farm manager, has local farming experience, scientific knowledge, and an appreciation for modern farming techniques. There are also other local farmers directly advising the farming, including Pastor Kanawa of Wardu. The Yele Palm Oil Mill runs educational programs to help farmers increase their fruit yields. Dr. Mohamed Bailor Barrie, director of NOW, possesses a remarkable ability to run a clean and transparent organization in the midst of a stagnant and often corrupt economy.
The production facilities will be registered with the Ministry of Trade and Industry in Freetown, as per regulations, and will not be one of the ten exporters of oil.
The future growth strategy encompasses different possibilities including further planting, agricultural education, crop diversification, expansion of processing capabilities to allow the processing of other local farmers’ palm fruits, manufacture of downstream products such as soap or biodiesel, and business leadership development for NOW and the local community.
In effect, NOW is funded by an American non-governmental organization known as the Global Action Foundation (GAF). The two organizations were funded by a Sierra Leonean and American doctor respectively to work in partnership to help the marginalized peoples of Sierra Leone. The director of NOW, Dr. Barrie, is passionate, hard-working, and well-educated. He has consistently passed up opportunities for higher paying, easier jobs; instead he works day and night for the amputees, war-wounded, and poor of Sierra Leone. Dr. Dan Kelly, the director of GAF, is his American counterpart, pursuing his residency at the Baylor School of Medicine in Houston. Dr. Kelly and GAF head up the fundraising that makes the projects of NOW possible.
NOW has an illustrious list of accomplishments and projects including the Kono Amputee Clinic, the UNICEF malnutrition project in Portloko District, and the recent awarding of the contract to create a similar malnutrition program in Kono District. Future projects include a peer education program focusing on teenage pregnancy.
The Kono Demonstration Farm boasts a number of primary success factors: a well known farming product, a resilient crop, local expertise and leadership, North American business acumen, cheap land, cheap labor, a product that is a staple food, low upkeep after initial capital investment, and last both the amputee community and NOW have emotional and financial stakes in the success of the venture.
There are many different ways in which you can help support this dynamic and powerful combination of business savvy and humanitarian goals. Through the palm oil farm, your donation will transform into a consistent source of income for the Kono Amputee Clinic, which will allow amputees, war-wounded, their dependents and the people of Koidu Town to be provided affordable care for many years to come.