Nathaniel Makoni, ABSTCM LtdRaphael Mwai, PPD ConsultantsTsehay Redda, EDBD ServicesAkke van der Zijpp, Wageningen UniversityJan van der Lee, Centre for Development Innovation, Wageningen UR

White Gold: Opportunities for Dairy Sector Development Collaboration in Ethiopia & East

Africa

Inter Agency Donor Group Meeting, Masaka-Mbarara, Uganda

April 1 to 3, 2014

Study Countries

Outline1. Terms of Reference

2. Methods

3. Analysis & Findings

4. Key Issues & Recommendations• Regional level• Individual Country Level

5. Suggestions on Donor Contribution

6. Conclusion

Terms of Reference

  Country assessments:• Value chains • Enabling environment  (Policy dairy sector, organizations, training)

• Donor programs• General analysis• Recommendations for action. 

1. Desk Studies/Country Review

2. Country Studies & validation visit• Key informant meetings• Focus group discussions• Field observations

3. Countries visited: Burundi, Ethiopia, Kenya, Rwanda Tanzania & Uganda

4. Stakeholders reached: Input suppliers, Farmers,Transporters, Milk Traders, Processors, Public sector, Supermarkets & Kiosks

Methods

Conceptual Framework

Shared Value

Dairy InvestmentsDemanded Services

Scale production

Gender balance

Youth

= increased dairy incomeInclu

sive Appro

ach

Social Capital.

Environment

Shared value

Analysis and Findings

Commercial

(High)

Small-scale(Low)

ProcessorAggregator/Transport MCC Transport RetailInputs &

services

To market –raw warm milk Consumer

To Market - Unpasteurized

To Market

To Market – raw milk

Cottage industry

To market –value added

Dairy Value Chains Scenarios – Ethiopia & East African Countries

Ethiopia & East Africa Informal Dairy Sector

Tanzania

Burundi

Ethiopia

Kenya

Rwanda

Uganda

97%

95%

90%

80%

80%

80%

Formal13%

In-for-mal87%

Formal:Informal Sector

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

0 100 200 300 400 500 600 700 800 900 1000

GDP /Capita WB 2012/13

US $

Economics Data

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

2.4

7

8

6

1.53

3

Dairy Contribution to GDP (%)

?<3

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

0.010.19

3.50.2

0.680.65

Improved Dairy Breed Population (Million)

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

0.645

49.2

18

1.5

21

12.8

National Cattle Population (Million)

Dairy and National Cattle Data

Burundi Ethiopia Kenya Rwanda Tanzania Uganda

0.360.41 0.39

0.220.18

0.14

Milk Farm Gate Price US$/Litre

Uganda has least cost/ ltr.  for farm-gate and processed milkEthiopia risk to be uncompetitiveThe farm gate prices reflect breed, feed costs, warm chains 

Farm Gate Prices

Burundi Ethiopia Kenya Rwanda Tanzania Uganda

0.980.87

0.59

1.19

0.65

0.38

Processed milk price US$/litre

Highest cost of pasteurized milk is in Rwanda & Burundi (OH & packaging 50%)Uganda has lowest price of pasteurized milk 

Milk Processing & Packaging

Dairy Product Range (8)

Brookside, NKCC, Pearl & SALL

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

73

3300

4400

450

1650

1190

National Milk Production /Year (million litres)

Total = 11.06 BillionPotential Demand =48.5 BPotential Gap = 37.4 B

National Milk Production & Consumption

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

FAO Rec.

0 20 40 60 80 100 120 140 160 180 200

6

19

99

40

23

55

200

Milk Consumption/Capita (litres)

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

20000

210500

2900000

160000

410500

1018000

Milk processing Capacity (Litres/day)

Milk Processing & Utilized Capacity

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

Average

85

60

40

20

27

61

49

Utilized Capacity (%)

Key Issues & Recommendations

Overarc

hing c

hallen

ges

Low milk consumptionPoor

infrastructure & access to

markets

Low cow productivity:feed&breed

Lack of conducive policy & 

incentives

Limited research & extension

Inadequate farm

management National & Trans-boundary 

diseases

Limited official industry data

Low female & youth

involvement

Seasonal milk supply

Poor milk quality

Inadequate financial services

1

10

9

8 7

6

5

4

3

2

1112

1. Low Milk Consumption in Ethiopia & East Africa Countries

Private Sector

1. Awareness campaigns2. Product diversification3. Improve milk quality4. Reduce costs e.g. transport,     processing & packaging

Donors & Governments1. Policy incentives – encourage localized cottage industries  2. Increase education on importance of hygienic milk handling & 

Quality3. School milk feeding - parent co-fund4. Fund  programs for HIT, Girinka

- Suggested Solutions

Cezonyi MCC in Gishwati

               Kidaco, Huye District Rwanda

Hajji Dairy Nyanza, Rwanda

Increased Local Good Quality Milk Consumption

Inclusive approach – finance licensed trained milk traders for low overhead value addition

2. Low adoption of technology, poor infrastructure  and market access

1.Co-funding entrepreneur investments e.g. improve milk transportation

2.Promote innovative milk marketing models3.Improve road and power infrastructure4.Public cattle handling facilities

3.Low Cow Productivity: Feed & seasonal drop

• Commercialize production of fodder and feed conservation

• Research on appropriate fodder materials & pasture management

• Invest in irrigation of high biomass fodder crops & legumes

Low feed supply:

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr0

200

400

600

800

1000

1200

4. National Milk Production (Litres)

Volu

me

(Bill

ion

Litre

s)Seasonal drop =58%

• Improve AI delivery efficiency & cost

•  Support inclusive horizontal growth model  i.e. 1 grows to 5 cows

Inappropriate dairy breeds & herd size for smallholder business viability

Burundi

Ethiopia

Kenya

Rwanda

Tanzania

Uganda

0.2

0.3

18

12

5.8

4.6

Annual Artificial Inseminations As % National Herd

<20%

Burundi Ethiopia Kenya Rwanda Tanzania Uganda

13

26

12 13 15 12

35

63

30

57

83 86

AI Cost/Service (US$) & Farmgate milk equivalent/Service (liters)

RDCP-II AssistanceUS$28,875

Inyange Franchise Model

5. Blessed Dairy Consolidation & Quality Improvement Model

Now 2 trucks

RwF 400RwF 320

RwF 300

RwF 300

RwF 180

• Governments to address trans-boundary non-notifiable & notifiable diseases

• Enforce regulatory framework on drug quality and administration

• Reduce market distortions where veterinary services are privatized

6. Poor National and Transnational Disease Control

Donors: regional policy, capacity in vaccine production eg GALVMED Government: budget, surveillance, animal movement & quarantinePrivate sector: – insurance and vaccination schedules

Lumpy skin FMD

Improve national and transnational veterinary services through establishment of coordinating bodies and disease surveillance & control

7. Limited Research & Extension

• Increase funding to strengthen regional applied dairy research & farmer demonstration farms

• Match research programs with stakeholder needs

• Improve dairy extension experience & extension agent to farmer ratio

• Reconsider public extension role vs private

Alfalfa Research

Farmer demonstration

8. Inadequate Farm Management

Low farmer education and organization

• Improve skill base

• Establishment of training infrastructure

• Decentralized colleges - regional campuses

• Mandatory industry attachment for  all DVC players

• Organizational & business skills, dairy technology, financial literacy, & mentoring

9. Limited Official Industry Data

• Support development of data collection, collation systems and studies (e.g. on marketing & milk demand projections)

• Strengthen project MLE programs & share data with national data repositories

10. Inadequate Financial Services: Hub Integration

K KDFF EADD I    R Mukamira Dairy GoR   U UCCCU   aBi Trust

APEX Federation

Union

Scale

MCC dependent on milk buyers and have  no growth incentives. Finance MCC  to integrate : form apex bodies  & value add

JESA Integrated dairy model

JESA Commercial Farm Milk supply 50%

Smallholder Farms -Milk supply 50%

Price premium $0.4 vs $0.3AI, Extension, Finance & Veterinary services

Value Proposition

US$0.4/ litre 

1. Burundi   -   Bukkeye Dairy Farm 2. Ethiopia   -   Genesis 

3. Kenya       -   Githunguri Dairy 4. Tanzania -   Tanga Fresh

Other Regional Integrated models

11. Lack of Conducive Policies and Incentives

• Support EADRAC to develop appropriate milk quality standards

• Formation  & strengthening of dairy coordination and advocacy  bodies

12. Low Female and Youth Involvement

Empower women  through:1. Co-ownership of land and productive resources2. Gender equity land tenure 3. Reducing drudgery – adoption of equipment4. Equitable earning through inclusive business &5. Facilitate involvement of youth in the dairy sub-sector  

Abby Sugrue 2012 - LOL/USAID KDSCP

70% of dairy smallholder farmers are women

milk transportation

 milk testing 

fodder production 

starting dairy farms

There is High Unemployment for Youth

Country Specific Issues

Burundi

Issues• Power shortage – Rusizi III project• Lack of large volume milk buyers to serve the expanded 

formal supply base   • Competitiveness of local milk supply with imports• Challenge to expand & maintain cold chain • Credit & Finance –short term & unstable currency• Weak farmer advocacy bodies & lack of dairy coordinator

Ethiopia

Issues

• Low Consumption - Religious & cultural fasting days

• Rural warm milk chain –Ayib & butter line

• Weak private sector contribution

• Weak farmer advocacy bodies & lack of dairy coordinator

Issues• Milk quality & weak regulatory framework

• Oligopoly- 90% processing is under 3 companies

Kenya Dairy Board managing director Machira Gichohi said they banned milk hawking in urban areas because some "unscrupulous" businesspeople are adulterating .

Kenya

Rwanda

Issues• Large involvement of public sector – ownership?• Inadequate legislation and enforcement of milk quality 

standards• Gishwati milk basin  poor road infrastructure • High cost packaging as result of plastic ban

Tanzania

1.Infant dairy sector requires entire DVC support2.Low demand for processed milk

3.Limited institutional capacity and compartmentalization/silos (Line ministry knowledge experts not linked to local government)

Uganda

1. Weak dairy public sector institutes2. Limited participation by dairy farmers across the 

nation  e.g. Northern and Eastern  regions

3. Inadequate supply of good quality milk for value-added products e.g. milk powder

Suggestions on Donor Contribution

Development Projects Often Exclude Commercial Dairy Farms & Processors

 

Review Pro poor PolicyIntegrate them for•  Knowledge & 

technology transfer• Heifer and fodder 

supply• Economies of scale• market access

Promote innovation by entrepreneurs through pooled investment grants and challenge funds

Inadequate Support of Value Chain Entrepreneurs

AECF Kenya grant to entrepreneur for commercial production of quality dairy heifers

Stakeholder Concern Some Projects are Distorting Markets

Shared value

Harmonize

Align

Consult

Donors/Implementers  collaborate with lead milk buyers & private actors  to  allay concerns about market distortions     

Uganda Dairy Rehabilitation Model • United delivery approach & zero funding gaps-1986 to 2004• Coordinated donor effort = Dairy sector growth >4%/ yr.

1. GoU – Policy

2. UNDP/FAO – Coordinator, TA, DDC Secretariat

3. DANIDA – DCL, DMP study

4. ADB – DCL lab equipment, Bulk tankers ,MCCs, restocking

5. WFP – DDC, Powder/Butter oil, inputs, MCC, EDT Sch., vehicles

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 20080

200

400

600

800

1000

1200

1400

1600

Milk Production in Uganda 1991 -2008

Year

Litre

s (00

0)

Source DDA 2009

Some Programs Lack Shared Value, Synchrony & Duplicate

1. Consultation for priorities

2. Resource Mobilization

3. Capacity Building4. ParticipatoryImplementation

5. Dissemination & Adoption

• Shared vision, goals• Efficient operation• NRM• Regional Policy

ASARECA Model

Donor Funded Projects

Donor Collaboration: Production Level 

Issues Suggested EngagementLow cow productivity  Breeding, Extension & Finance

Poor veterinary national & trans-boundary diseases control

Regional veterinary labs, surveillance & vaccine production

Seasonal milk production Feed production

Issue Suggested EngagementTransformation of  informal to formal sector

Diversified approaches e.g. traders capacity & financing

Low milk consumption Milk consumption campaigns & school milk feeding programs

Milk quality Infrastructure, Training programs

Donor Collaboration: Market Level

Issue Suggested EngagementLow female & youth involvement

Beneficiary quotas,  skills development,& empowerment

Environment climate smart technologies & NRM

Weak policy Policy studies & advocacy  - land tenure, tax incentives

Inadequate financial services Design innovative  financial products e.g.RDCP II Inspired

Donor Collaboration: Cross Cutting Issues

Conclusion• Sustained impact will come from increased 

consumption, female & youth participation• Slow formal value chain growth calls for 

diversified approach to development of informal sector

• Opportunity for donor collaboration on improving production, market access & enabling environment

• Donor collaboration should promote private sector innovation, integration & investment

  

Murakoze cyane, Amesege'nallo’,  Asante Sana, Weebale Nyo  

Thank You

Characterization of East African vs South Africa Dairy Parameters

Item Description East Africa South AfricaAverage cows per farm 2 to 10 209

No. of Producers 20,000 to >600,000 2,686

Informal market channel (%) >80 3

Average milk production /cow/day <8 17.3

Seasonality drop (%) 58 25

Processing Capacity Utilization <60 >80

Processed dairy products <9 13

% Smallholder farms 80 < 5%

Dairy Breed composition (%) <20 >90

Commercial fodder (%) <10 >90