US$ 52 million IFAD loan to boost vegetable oil development in Uganda

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US$ 52 million IFAD loan to boost vegetable oil development in Uganda

Rome, 21 October 2010 – A US$ 52 million loan from the International Fund for Agricultural Development (IFAD) to the Republic of Uganda will help to lay the basis for agricultural driven rural development. 

The loan agreement for the Vegetable Oil Development Project Phase 2 (VODP2) was signed today in Rome by Deo K. Rwabita, Ambassador of the Republic of Uganda, and Kanayo F. Nwanze, President of IFAD.

The VODP2 will raise the volume of oilseed crushing material produced by smallholders and consolidate direct linkages with the processors to ensure the supply of vegetable oil and its by-products to Ugandan consumers, to increase their per-capita consumption of oils and fats in the diet. The VODP2 will focus its activities on oilseed development around four hubs (Lira, Eastern Uganda, Gulu and West Nile) covering 43 districts. Oil palm activities will be carried out on Bugula Island in Kalangala District (Ssese islands), and new oil palm development will be carried out on Buvuma Island in Mukono District.

When the Vegetable Oil Development Project first phase started in 1998 to help the Government of Uganda increase its production of vegetable oil in order to decrease the country's dependence on imported oil, per-capita consumption of oils and fats in the average Ugandan diet was about 15% of the annual minimum requirement. While smallholder producers of oilseeds and oil palm will increase their incomes, the real beneficiaries of this project will be Ugandan consumers. Under the first phase of VODP, by 2009, per capita consumption of oil and fats in the rural Ugandan diet had almost doubled, to about 30% of the annual minimum requirement.  

Under the VODP2, it is estimated that by 2018, per capita consumption should double again to almost 60% of the annual minimum requirement, with Ugandans consuming vegetable oil from crops produced and processed in Uganda. 

VODP2 is co-financed by Oil Palm Uganda Limited (OPUL), Kalangala Oil Palm Growers Trust (KOPGT), the Government of Uganda, the beneficiaries and a grant from The Netherlands Development Organisation. VODP is the only large public-private partnership in IFAD's portfolio. "The process of identifying a private sector partner willing to commit to working with smallholder farmers has taken time, as have negotiations to ensure equity for smallholders, and plantation development in line with modern environmental standards" said Marian Bradley, IFAD Country Programme Manager for Uganda.

The project is expected to benefit directly some 3,000 smallholders from oil palm development and 136,000 households will benefit from oilseed development. Other value chain activities will include HIV/AIDS and gender awareness building, and social inclusion focussed on gender and youth.

To date, IFAD has financed 14 projects and programmes in Uganda for a total investment of US$ 295.5 million benefiting 4,281,150 households.

Notes to editors

  • Projections show that national production and processing of palm oil will save Uganda about US$60-80 million a year in crude oil imports.
  • Oil palm is a highly sustainable, energy-efficient crop and is eight to ten times more productive than any other annual oil crop.
  • Palm oil processing produces fewer carbon emissions than other sources of oilseeds that require annual planting. It is also energy efficient, because milling is powered by the waste from processing the fruit.
  • Before the Vegetable Oil Development Project Phase 1 began, there were few livelihood options and a limited range of government services. Today, project activities have improved local infrastructure on the island and services have greatly increased.

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Press release No.: IFAD/67/2010

The International Fund for Agricultural Development (IFAD) works with poor rural people to enable them to grow and sell more food, increase their incomes and determine the direction of their own lives. Since 1978, IFAD has invested over US$12 billion in grants and low-interest loans to developing countries, empowering more than 360 million people to break out of poverty. IFAD is an international financial institution and a specialized UN agency based in Rome – the UN's food and agricultural hub. It is a unique partnership of 165 members from the Organization of the Petroleum Exporting Countries (OPEC), other developing countries and the Organisation for Economic Co-operation and Development (OECD).