4.3 Oil palm fruit processing in Togo

As in Mali' the Franc CFA is the accounting currency in Togo. A 10 % discounting rate and loan conditions of 18 % (6 years, I year grace period) were assumed.

Table 15 gives an overview on costs and results for the use of the hand-operated equipment developed by KIT, and as alternatives the process developed by TCC, Ghana, and the CALTECH expeller. The figures are based on field experience in Togo and can be interpreted in the following way:

Table 15: Assumption for Oil Palm Fruit Processing in Togo (per year in F CFA, unless stated otherwise)

As for the other case studies, land in rural areas in Togo is assumed to be available free of costs. The building in all three alternatives consists of a simple, large (60 m²) shed, which would have no residual value after 10 years.

The machinery, for the hand-operated process consists of a UNATA spindle press, cooking kettles, buckets and other equipment like oil containers and pounding sticks, which are to be renewed every year. For the TCC process, one TCC pounding machine, two TCC screw presses, one large cooking kettle and some buckets are required. The engine of the pounding machine is to be renewed after 5 years. The CALTECH process only includes as expenses for machinery the expeller and some drums. The expeller is driven by a petrol engine, which probably has to be renewed in the fourth and seventh year of production. A new screw for the expeller should be accounted for after 5 years.

Production costs at maximum capacity (250 working days per year) would involve loose oil palm fruits as the only raw- material in the above given quantities and for a price of F CFA 35 per kg. For the motor-driven alternatives, costs for utilities are for diesel/petrol and lubricants. The costs for fuel wood are again calculated on the basis of the wages for collecting. Wages for the hand-operated and the TCC process cover 8 women at F CFA 400 per day; with the CALTECH version, 2 women at F CFA 400 per day and 2 semi-skilled labour (i.e. usually men) at F CFA 800 per day get employed. Whereas maintenance is mainly for the engines and minor repairs of the equipment, spare parts include drums, kettles, oil filters, etc. In all three cases, costs for administration and marketing have been accounted as one working day once a fortnight.

The production programme and sales are, in all three standard cases' based on the assumption that the maximum capacity is only used to 10 % in the first year (= 25 working days) and to 20 % from the second year onwards (= 50 working days per year). The reason for this limitation is, in the local context, the availability of rawmaterial. Palm oil and palm kernels are sold at prices fixed by the Government. Palm kernels are not processed further because this involves either a very labour or very capital intensive procedure which is financially not attractive in comparison to the sales price of the kernels.

As working capital, spare parts and a reserve of petrol/diesel fuel is required for the motor-driven alternatives. Finished products are usually taken on stock for a month.

As source of finance, a loan from a local bank is probably required in addition to equity capital to cover the investments.

For the the financial evaluation of the three versions of equipment for oil palm fruit processing, again, the internal rate of return (IRR) has been chosen as the major indicator. The following figures were calculated:

- hand-operated equipment 38.35 % (30.0 % oil recovery),
- TCC process 14.91% (26.5 % oil recovery), - CALTECH expeller 22.00 % (28.4 % oil recovery).

Under the assumptions made for the standard cases in Togo (for oil recovery rates, see figures in brackets above), all three processes would give satisfactory returns on invested capital, the handoperated equipment even producing a very good rate of return. The sensitivity analysis which is illustrated in Figure 24, however, indicates that the financial returns for all three processes react rather sensitively to changing oil recovery rates and wages and very sensitively to changing capacity utilization.

Figure 24: Summary Sheet, Oil Palm Fruit Processing in Togo. Graphs are approximations.

Figure 24, A, indicates that for the handoperated equipment the expected IRR would still be very satisfactory (just below 30 %), if the the oil recovery rate were 2 % lower than the assumed standard case. The same reduction in oil recovery for the TCC equipment would, on the other side, produce an IRR of less than 6 %, which is less than the interest on a bank deposit and therefore not an attractive investment.

Figure 24, B, indicates that capacity utilization (i.e. rawmaterial supply) is a very critical factor for all three processes. For the standard cases, 50 working days per year (or 20 % utilization of maximum capacity) had been assumed. If this is reduced to 25 working days, the TCC process would already run into financial losses. At 75 working days per year, on the other side, the TCC and the CALTECH equipment would show very good results (IRR = 27 % and 35 % respectively.); the hand-operated equipment would even allow financial returns of more than 56%.

Figure 24, C, indicates that the handoperated process is, naturally, most sensitive to changing labour costs, but could financially still tolerate maximum wages (unskilled workers) of about F CFA 1,200 per day. A project using the TCC equipment, on the other side, would go bankrupt, if wages of more than F CFA 800 per day were paid. The CALTECH equipment is less sensitive in this respect.