Potential for Malaysian Palm Oil in Sub-Saharan Africa Emerging Markets

Sub-Saharan Africa consists of 46 countries and more than 1 billion population. According to the MPOB data, there are 43 importing countries and territories of Malaysian palm oil from the region. Market conditions and requirements vary between countries in the region but the two major factors that drive the consumption and imports of palm oil are total populations and economic condition. Another important factor is port access. Fourteen countries in Sub-Saharan Africa that are landlocked and face specific constraints imposed by their geography they are usually dependent on their transit neighbours’ ports and other infrastructures.

If import volume by each country is taken into account, the palm oil market in Sub-Saharan Africa can be divided into three main categories as displayed in Figure 1 below. The first category is the traditional buyers of MPO that consists of the top six buyers from the region with an import volume of MPO exceeded 200,000 MT each. These countries are Kenya, Nigeria, Mozambique, Ghana, South Africa, and Tanzania. In 2020, Malaysian palm oil exports to Sub-Saharan Africa reached 2.7 million MT which was the highest ever export volume recorded by the region. The six countries mentioned above imported 1.85 million MT of MPO which represent 68% of total MPO imports by the Sub-Saharan Africa region

The second category is the re-exporting or transhipment market where these countries imported a large volume of Malaysian palm oil, with the main objective of re-routing to other destinations. These countries are Togo, Benin, and Ivory Coast which are located in the West Africa region. Last year, these three countries imported 339,000 MT of Malaysian palm oils but most of these products ended up in the neighbouring countries such as Nigeria, Niger, Mali, Chad, or Burkina Faso. Strategic location, favourable import duty policy, and an access port to cater for other countries in the hinterland give Togo and Benin especially an advantage as a re-exporting hub or as a gateway to the West African region.

Figure 1: MPO Export to SSA by Percentage of Total Export (2020)

The third group of importers can be categorized as emerging markets that consist of 9 countries with an import volume of Malaysian palm oil ranging from slightly below 20,000 MT up to 150,000 MT per annum. As shown in Table 1 below, total import volumes of MPO by these countries almost reached half a million MT last year, or about 18% of the total import volume of the SSA region. The highest ever amount imported by these group of countries were 594,000 MT recorded in 2017, buoyed by 90,000 MT imported by Guinea.

Table 1: MPO Exports to SSA Emerging Markets (MT)

2016 2017 2018 2019 2020
Angola 90,910 134,683 100,749 147,554 124,017
Madagascar 57,643 79,820 69,352 67,580 101,058
Mauritania 55,229 71,882 56,013 82,865 88,689
Congo Dem. Rep. 36,164 42,766 45,937 43,657 47,035
Senegal 31,062 58,085 95,627 30,113 39,137
Cameroon 28,476 79,214 16,109 17,731 32,117
Gambia 18,582 29,683 21,210 17,310 19,752
Guinea 50,173 90,411 52,936 57,563 19,577
Niger 3,870 7,399 7,780 16,863 18,688
Total 372,108 593,942 465,713 481,236 490,071

Products Breakdown

In terms of product breakdowns, RBD palm olein is the most preferred product with about 57% of total imports. Major buyers of RBD palm olein last year are Angola, Madagascar, and Mauritania. CPO/CPL imports represent about 25 percent of total MPO imports, mostly purchased by Madagascar and the Congo Democratic Republic. Out of 69,713 MT cooking oil imported by the region in 2020, Mauritania took in 40,000 MT while Angola purchased 10,265 MT.

Table 2: Breakdown by Products of MPO Exports (MT) to Emerging Markets in SSA

  2016 2017 2018 2019 2020
RBD Palm Olein 278,522 376,688 294,781 331,285 281,249
CPO/CPL 51,952 141,081 91,243 77,335 123,423
Cooking Oil 29,173 57,450 60,537 57,942 69,713
Others 12,461 18,724 19,152 14,674 15,686

Angola and Madagascar Palm Oil Import Potentials

Angola

The Angolan economy, the third-largest in sub-Saharan Africa, after Nigeria and South Africa, is dominated by the oil and gas industry, which accounts for about 50% of its GDP and is the primary source of revenue for the country. After a long civil war, the country posted one of the highest economic growth rates in the world, driven by its oil wealth. In the last few years, Angola was severely affected by the fall in oil prices. According to the updated World Bank forecast in June 2021, Angola’s economy is projected to expand by 0.5 percent in 2021 and 3.3 percent in 2022, on the back of stronger oil prices and government consumption.

Figure 2: Angola Palm Oil Import and Consumption (000 MT)

Angola is an important Malaysian palm oil importer in the Southern Africa region. The country has a population of 30 million and consumed about 350,000 MT of oils and fats in 2020. Palm oil consumption is about 64% of total oils and fats. In the past five years, the average annual Malaysian palm oil export to Angola was 129,000 MT.  In 2020, most Malaysian palm oil imports are in the form of RBD palm olein (108,00 MT or 87%) and the rest are cooking oil (10,265 MT) and RBD palm oil (1,730 MT).

The highest export MPO export figure recorded was 171,000 MT in 2015 when the country was experiencing 4.8% economic growth. With the end of the oil boom, from the end of 2015 to 2019 Angola plunged into a period of economic contraction but its economy is expected to recover next year. Presently, Angola is transitioning towards a gradual recovery from the COVID-19 pandemic, amid higher global oil prices, low levels of reported COVID-19 infection cases, and the start of a vaccination campaign. There is plenty of room for an increase in oils and fats usage as per capita consumption of about 12.0 kg in 2019 is still low compared to the world average of 30.0 kg. The potential is there for Angola to increase its Malaysian palm oil import up to 200,000 per year post-Covid-19 and higher crude oil price.

Madagascar Palm Oil Imports is Growing

Situated off the southeast coast of Africa, Madagascar is the fourth largest island in the world. Madagascar’s economic growth reached a decade-high of 5.1% in 2018 driven by robust activity in export-oriented sectors but slowed in the first half of 2019 due to a combination of weakening external demand from key trading partners.  According to IMF, due to the outbreak of the COVID-19, Madagascar’s GDP contracted by -4.2% in 2020 after growing by 4.4% in 2019 due to the outbreak of the COVID-19. However, the country’s economic growth is expected to recover to 3.2% in 2021 supported by government-led capital expenditure, continued donor aid, and a stable political outlook. The economy is forecasted to grow by 5% in 2022, subject to the post-pandemic global economic recovery.

Figure 3: Madagascar Palm Oil Import and Consumption (000 MT)

With a population of about 27 million, this island nation has steadily increased its total palm oil import from 72,000 MT in 2014 to 121,000 MT in 2020.  The import of Malaysian palm oil is also growing in tandem from 43,000 MT in 2014 to 101,000 MT in 2020.  Most of Malaysian palm oil imports last year are in the form of crude palm olein (64.3%) and RBD palm olein (30.6%).

From the trend observed above, it is evident that Madagascar is poised to be a substantial market destination of Malaysian palm oil in the near future. Malaysian palm oil exporters should not overlook Madagascar’s potential as the next growth market for Malaysian palm oil as there is plenty of room for a further increase due to better economic condition, and growing domestic demand driven by changing tastes and the growth in the food processing industry. 

Prepared by Iskahar Nordin

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