Business case – Justification

Supportive government policy – Government policy has been very supportive of oil palm business as evidenced in the fact that its importation is restricted. It is on the list of non-valid for foreign exchange items and as such importers of the product are expected to source their forex requirements from the autonomous source

The import duty of 35% imposed on the commodity is quite high although producers of the commodity are asking for even a higher rate. It thus enjoys considerable government support and protection. In the quest for diversification of the economy, with all the structural rigidities, the support is going to be in place for a very long time

The product falls into the category of product some people described as products in the category of sellers’ market with okomu oil being the price leader. I will give an example for us to appreciate this. While working with a multinational, what the corporate head office normally does is to hand down your sku(store keeping units) projections to you. If you don’t catch up with strong reasons for the failure to catch up, the corporate head office will simply head hunt another ceo. Realising this, what the local office management of the company will do is to drop the products with the distributors and invoice them. When you send reports, the sales will be high and accounts receivables also high with increasing amount in delinquent receivables. The corporate office will naturally query this and that makes company introduce the key distributors’ scheme wherein the company guarantees the distributors. What this means now is that instead of the products to be seated as receivables in the company financials, it will now be standing as a liability to the distributors guaranteed by the company

Years later, I got an employment in an integrated oil palm company. I saw distributors depositing money - what Accountants call customers’ deposit/deferred income and loading was being scheduled for like 45 days later I was flabbergast. I‘ve never worked in such environment that you don’t need sales men. All the sales team does is to allocate products

Critical success factor. – If you produce products that has the market, you have the technology and can properly co-ordinate and control men and then the funding is available or can be packaged – you will certainly be rich if you are prudent. Oil palm operations have the entire ingredients of critical success factor. Facilities can easily be packaged if there is no funding, the market is ascertained and the technology is domiciled locally. The only thing that can be a challenge is the boiler in terms of technology and cost but there are ways around this.

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