The final audit of 2019 brought me to Gabon, in Central Africa, on the Atlantic Coast. The country is slighter smaller than Colorado in terms of area, but it only has 2 million inhabitants. Outside of the capital and two or three other cities, there really is not much in Gabon. Some towns dot the highways and there are villages inland. Due to the small population and the low income and wealth of most of the population, there are not many services, amenities, or commerce in the country. The second-largest city, Port Gentíl, was isolated from the rest of the country until recently because there was no highway connection. A ferry was the best option. The highways that do exist are in poor condition. Electric service is not widespread or reliable. There is very little domestic production, so the country must mostly rely on imports.
Despite the small nature of the country, richness is abundant in Gabon. It has petroleum, which is the main source of revenue in the country. It also has minerals mining and some logging. Logging needs to be controlled because Gabon has some of the best-preserved tracts of tropical rainforest in Central Africa. It also has large populations of African mammals such as elephants and hippos that are famous for surfing on the waves off the coast.
The Company I Work For (hereafter TCIWF) has made some sizable investments in Gabon in partnership with the government. Gabon’s relative stability and geographic placement in a growing Africa make it an attractive country for investments. TCIWF hopes to help manage services and export goods from the country. These investments brought me to the country over the last two weeks. I was headed there to audit our oil palm plantations – among the largest in all of Africa. I departed Chicago on Saturday and arrived in the Gabonese capital, Libreville, on Sunday evening.
Day 1 – The Refinery
The oil palm is a species native to Africa. It produces bunches of golf ball-sized orange fruits. Crush the fruits and you get crude palm oil (CPO), a versatile saturated fat that is semi-solid due to a mix of different amino acids in its composition. After crushing the fruits, a mill can extract the palm kernels at the heart of the fruits. When pressed, these yield palm kernel oil (PKO), which is a different fat with a different use profile.
CPO and PKO can be further refined to yield various fat products and derivatives, such as liquid cooking oil, solid fat like shortening, margarine, fats for baking and confectionaries, as well as soaps and even bio-diesel. Due to the versatility of CPO and PKO, they appear in a variety of forms in a growing number of edible and household products around the world. Certain estimates claim that 50% of average grocery store products contain palm oil in some form or another.
It didn’t make to me long to find a product with palm oil. Breadsticks in the airport lounge.
TCIWF has oil palm plantations, crushing mills, and a refinery. After breakfast on Monday, we loaded our suitcases into the back of an SUV and hunkered down for the four-hour drive to our CPO refinery on the shores of the Ogooué River. The Ogooue is Gabon’s largest. It originates in The Congo and it discharges an impressive amount of water.
The road is very bad in certain areas, so it was slow and bumpy going, but we reached the refinery by lunchtime. After lunch, we met with the refinery management team to get an introduction to palm oil and the products they make at the refinery. After the introduction and some questions and answers, we put on hard hats and headed out of the office and into the plant for a tour of the production areas. By the end of the tour I had to bow out and go back to the office. I was exhausted after nearly three days of travel and I could barely keep my eyes open.
Day 2 – Fractionation
We produce three products at the mill, all primarily for domestic consumption in Gabon:
- Refined palm cooking oil
- Unrefined palm oil
- Laundry soap
Unrefined palm oil is for traditional African cooking. It’s orange, semi-viscous, and does not have a neutral odor. I bought a small bottle to bring back to my research chef co-worker in Chicago. She may find it unappealing, but I want to dare her to make something cool out of it. My Nigerian co-worker may also get a kick out of it, as may my newest cubicle neighbor, who used to work in palm oil and coconut oil sales.
To get clear cooking oil, similar to soybean oil or canola oil, the CPO goes through a process called fractionation. It separates the solid from the liquid fractions of the oil. The liquid fraction, olein, becomes cooking oil, and the solid fraction, stearin, can conveniently be used in soap.
Day 3 – A Day in the Life
A typical day in audit will have us pre-scheduled to meet with between two and four departments between the morning and the afternoon. We sit down with them and ask them several questions to understand their work. Then we usually dig in and review documents and procedures with them to see if there are measures they can take to improve the control they have over their processes. Today was a “typical” day. We met with human resources, health & safety, finance, and IT.
Day 4 – The Plantation
Palm oil has a bad reputation. See Exhibit 1, above. It has been blamed for deforestation, toxic smog, greenhouse gas emissions, destruction of wildlife habitats (particularly for orangutans), social inequity, and deleterious health effects for consumers. Although the oil palm is native to Africa, it is most prevalent in Indonesia and Malaysia, where it has earned its reputation. A year ago The New York Times ran a great article explaining the origins of the oil palm industry and why this has provoked so many environmental concerns (I’ll ruin the punchline: Blame Bush).
TCIWF is striving to not emulate the Asian model of oil palm cultivation. All our palm plantations in Gabon are Roundtable for Sustainable Palm Oil (RSPO) certified or in the process of obtaining the certification. We are not killing any orangutans, and we adhere to a zero-burn policy. We do not burn land for any agronomical purposes. Alright, you got me. There are no orangutans in Africa to kill. Still, we respect all the mammals that approach or cross our plantations. The most common is elephants. Some of our lots border national parks, and there are large populations of migratory wild elephants. We’ve even had to install elephant deterrent devices that try to scare them off. The elephants can damage our oil palm trees if we are not careful.
I do not think oil palm is a perfect crop. Unless you can find perfect savannah-land, you will probably have to fell some trees to plant a commercially viable plantation. However, on a yield per land area basis, oil palm is up to four times more productive than soybeans and other common oils, like sunflower and canola. Some people claim that the soybean lobby is behind the smear campaign against palm oil. Palm oil is a saturated fat, which has been found to have a higher correlation to heart disease than unsaturated fat. However, to achieve certain desirable properties, palm oil does not need to be partially hydrogenated like soybean oil. If I’m not mistaken, partial hydrogenation is the source of the infamous trans fats.
Day 5 – The Mill
We run a few mills for our different plantation lots. The mills take fresh fruit bunches (FFB’s), recently cut from the oil palm trees, heat them to soften them up, and then massage/force the CPO out of them. We also take the nut at the center of the fruits, remove the shell to reveal the kerne,l and force milky white PKO out of the kernel. These are our main products and exports. Our mills also have their own boilers and electric generation turbines. We take the excess fiber from the oil extraction process and burn it as biomass, avoiding the need for a diesel generator.
Day 6 – Saturday
Today was a typical day, but at the plantation, not at the refinery. We met with the warehousing teams, maintenance, HR, and corporate responsibility & sustainability manager. Speaking with all the departments is very important. Warehousing and maintenance may seem minor compared to operations and finance, but getting everyone’s perspective on issues and challenges helps us as auditors paint a complete picture. For instance, operations may highlight a particular labor issue, but if we do not speak with HR, CR&S, and health & safety about the same issue, we may miss out on points that operations overlook or it prefers not to take complete responsibility for.
Day 7 – Sunday
Saturday is a half-day of work at the plantation, but Sunday is off for everyone. The TV in our guesthouse has one English language television channel: CNBC Africa. Sunday is not exactly primetime for African or worldwide financial news, so I spent about three hours watching French-language music videos. I jotted down a few songs to add to my Spotify rotation. We also got invited to lunch at a restaurant in the nearby town of Mouila. I had gazelle. It was good. It’s like a tender, leaner little beef with a higher proportion of bone-to-meat.
Day 8 – Monday
More of the typical. We hit up health & safety, quality, and IT. Gotta’ make sure those free fatty acids aren’t accumulating in the CPO! (It’s actually very important – FFA’s can decrease the shelf life of the oil and promote the development of cholesterol in humans).
Day 9 – Finance
Being in the field > Being in the office
All-day, a conference room, no windows, air conditioning, and a lot of junk food wrappers on the conference table. Oh, what a joy. We must do it though. Going through the accounting books, line-by-line, reveals a lot about the business and many of our suggestions for improvement stem directly from our finance review. I’m also of the opinion that if finance cannot explain to the auditors what is going on in the books that means that finance does not understand the finances enough to control them. Luckily, that was not the case today.
Day 10 – The Drive
Over the week we were at the refinery and plantations it rained a lot. Today was no different. It rained so hard overnight I couldn’t sleep past four or five in the morning. This continued intermittently into the day and posed a problem. The highway was becoming increasingly flooded and scarred. Our vehicle could get seriously damaged, or a washout could leave the highway completely impassable. In the end, we did make it to Libreville, but it took eight hours and some intense concentration from our driver to weave safely around potholes and puddles-cum-inland seas. Many heavy trucks were likely stranded for at least the night because a wide washout meant they could not pass without repairs.
In Libreville, we reunited with the second half of our team, the Londoners, who had been auditing other plantations and corporate functions at the Libreville office. They treated us to a pleasant dinner, seeing as we had harrowed the rain-tossed highway and did not enjoy the fare at the plantation very much.
Day 11 – Libreville Office
On the final day of the audit, we met with various folks to clarify loose ends. We also compared notes with the Londoners and began consolidating them into one report. Given the large scale of the investment here and the breadth of activities, we want to present a clear report to our superiors. I think we will accomplish that, but in the coming weeks there will still be analysis to do, followed by clear report writing.
As the day concluded, we went out for a final dinner before heading to the airport for our flights to Europe and onwards to the US for some of us.
