Clerks at a processing plant in Kenya pour milk through a cloth strainer © Russell Powell/Heifer International
“The dairy sector is one of the fastest growing agricultural sub-sectors in Eastern African countries, which has generated significant economic returns and employment opportunities along dairy value chains,” states a Briefing Note of the European Centre for Development Policy Management (ECDPM). In addition to providing a regular source of income and nutrients to most rural households in Eastern Africa – where 68% of all milk produced on the continent comes from – milk is the focus of growing demand due, in part, to the emergence of an urban middle class that is very fond of dairy products.
Between 2002-2005 and 2010-2013, the volume of average annual intra-regional trade in dairy products increased by 1,106% from 1,530 t to 18,449 t, according to an International Growth Center (IGC) report. Meanwhile, over the same period, exports to other African regions increased by 597%, from 1,576 t to 10,988 t. This significant growth was made possible by the greater economic integration of the East African Community (EAC), which simplified customs procedures by setting up the Single Customs Territory in 2013. The situation, nevertheless, varies between countries, as reflected by the annual consumption of dairy products, with Kenya in the lead at 93 l per person, followed by Uganda (42 l), Rwanda (26 l), Tanzania (24 l) and Ethiopia (19 l).
In Kenya and Uganda, dairy value chains are more advanced, with a high number of stakeholders, milk processing plants and distributors. Feed suppliers, as well as veterinary and artificial insemination services, are also found in both countries. Tailored policies and significant investment by the government and development partners has also boosted milk production in Rwanda, from 51.5 million l in 2000 to 445 million l in 2012. Conversely, in Burundi, the dairy sector remains informal, unstructured and mainly geared towards meeting the consumption needs of local farmers.
Overall, more than 80% of the milk produced in Eastern Africa (up to 95% in Tanzania and 98% in Ethiopia) is still generated by the informal sector, thus eluding quality control measures and limiting the scope for value chain investment and structuring. Furthermore, less than 1% of EAC dairy products are exported to member countries or outside the region. However, Uganda – the leader in this field – exports long-life UHT milk, powdered milk, butter and ghee mainly to Kenya, where national supply does not meet demand, but also to the Democratic Republic of Congo, Egypt, India, South Sudan, Sudan and the United Arab Emirates.
What is at stake in formalising the sector? “Food safety,” says Jan van der Lee of Wageningen Livestock Research. “Quality cannot be guaranteed in the informal system that supplies urban centres. This works well in very short supply chains, but the shelf-life of stocks must be guaranteed for remote production and consumption centres.” Structuring and formalising the dairy sector could also help build a trusting relationship between milk producers and processors, which is often lacking. This could in turn promote development of the dairy product market.
Transforming the dairy value chain
According to a WUR report, which refers to milk as ‘white gold,’ “the largest opportunity in the region is the huge potential to produce large quantities of milk through simple improvements.” These include: improved cow productivity, establishment of a cold chain for milk collection, and reduction in milk losses. In Ethiopia, for example, WUR’s Dairy Business Information Service and Support project showed that improved cows (local cows crossed with European dairy breeds) produced almost four times more milk, with a subsequent three-fold increase in dairy farmers’ income – ETB108 (€3.90) per day, compared to ETB31 (€1.12) for farmers rearing local cattle breeds. The different steps in the value chain must also be improved via the adoption of new technologies, increased traceability and better market access, for example.
Such transformations in the Eastern African dairy sector could be facilitated by further investment by major international groups. For example, in 2013, the Danone group acquired 40% of Brookside Dairy’s capital, which enabled this Kenyan company to expand its operations to Tanzania and Uganda, while the Indian enterprise Amos Dairy invested €17.8 million in Uganda in 2014.