Making policies work

Talking Points

A glass half full: East African dairy farmers see potential in regional cooperation

15-07-2016

Tondel, F., Bizzotto Molina, P. 2016. A glass half full: East African dairy farmers see potential in regional cooperation. ECDPM Talking Points blog, 15 July 2016.

Share Button

Lucy Njiru runs a small dairy farm in Kirinyaga County, in central Kenya’s highlands, where coffee and milk are among the main agricultural products. With two cows and one bull, she produces only 20 litres of milk a day. Ms Njiru is also the Manager of Kirinyaga Dairy Farmers Cooperative Society (KDFCS), a small producers association, which is her main job. She joined KDFCS eight years ago, as a bookkeeper, after having obtained a university degree in cooperative banking.


Inadequate organisation of milk marketing systems prevents smallholder farmers from producing and investing more


She says that smallholder farmers have difficulty in developing their dairy operations and generating more value added due to the inadequate organisation of the milk marketing system and the adverse spillover effects of “informal” marketing channels. ‘During the dry season [when the milk supply is low], informal traders offer farmers higher prices than the cooperative can afford’, which disrupts its business. ‘On top of that, the cooperative has to pay taxes to the local government and a levy to the Kenya Dairy Board [the public agency regulating the Kenyan dairy industry]’. ‘Then, she continues, during the rainy season [when the milk supply is high], informal traders run away from farmers and they [the farmers] come back to the cooperative’.

Dairy-East-Africa-Photo-by-Lucy-Njiru-550x413

Photo courtesy of Lucy Njiru

Without a secure supply of milk, Ms Njiru’s organisation cannot take the risk of investing in a modern cooling tank and other equipment required to run milk collection more efficiently, reduce post-harvest losses, and process raw milk into value-added products. ‘Selling raw milk is not a long-term strategy for us’, she says. But, for now, this cooperative society depends on raw milk sales to one of Kenya’s major dairy processors, which fetches low prices and prevents it from generating higher incomes for its members.

In Eastern Africa, the dairy sector has considerable development potential, given the already large share of dairy farming in agricultural production and farm employment, and the growing demand for dairy products in urban centres. But this potential has remained underexploited due to multiple constraints.


Disparities in regulations among countries create unnecessary barriers to trade


Regulation is also a central concern for Clayton Arinanye, General Manager of the Uganda Crane Creameries Cooperative Union (UCCCU). UCCCU is the fast-growing commercial branch of a large, western Uganda-based dairy farmers organisation. Exporting to the regional market is already a reality for UCCCU, although it faces barriers to doing business across borders, notably between Uganda and Kenya.

Mr Arinanye deplores the lack of harmonisation of product regulations and standards and the complexity of trading procedures creating unnecessary trade barriers among East African countries. Despite the establishment of the East African Community Customs Union several years ago, the regional market remains fragmented due to various non-tariff barriers to trade. This prevents dairy companies like UCCCU from smoothly selling products or sourcing feed in neighbouring countries.

Due to inefficient milk marketing systems and also inadequate access to inputs and supporting services, too many dairy farmers cannot reap the full returns from their labour nor invest in their production capabilities. At the regional level, dairy production has not kept up with the rapidly growing demand for quality, differentiated dairy products from the emerging urban middle class (a sizeable part of this demand is satisfied by overseas imports). Moreover, dairy value chain actors have been unable to fully take advantage of intra-regional trade complementarities.

Dairy-East-Africa-Photo-by-UCCCU-550x413

Reception of milk at a collection centre, photo courtesy of UCCCU


To improve their livelihoods, small dairy producers need a more level playing field


Mr Arinanye and Ms Njiru insist that their organisations need a more level playing field to thrive and further improve the livelihoods of their members. Their economic model is under pressure from a widespread unregulated sector as well as powerful processors that can more easily accommodate to the lack of commonly applied rules and to unstable market conditions.

‘For our small cooperative to gain access to the market and grow its business, some basic rules and norms must be set and actually enforced for everyone’, Ms Njiru says, citing regulations for antibiotic residues in milk that ‘do not reach the informal sector’, among other regulatory issues in the formal or informal sector. Milk sold to consumers through poorly regulated channels is commonly substandard, putting public health at risk.

Mr Arinanye admits that in Uganda, despite UCCCU’s own efforts, milk is still essentially priced in terms of quantity, not quality. While Kenya has made progress in this area, Uganda has yet to follow that path. Ms Njiru adds that ‘milk pricing must be transparent’, echoing a common sense of unfairness among dairy farmers about prices paid by large processors.

Mr Arinanye and Ms Njiru shared these stories at recent discussions facilitated by ECDPM and the Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA), which involved a broad range of public and private stakeholders from Kenya, Rwanda and Uganda. This meeting was convened by the Secretariat of the Common Market for Eastern and Southern Africa (COMESA) to inform the planning of the COMESA Comprehensive Africa Agriculture Development Programme (CAADP) investment programme for regional trade and market access. It gave those stakeholders the opportunity to share their perspectives on critical policy issues in the dairy sector and discuss a joint approach to addressing these issues.

Both Mr Arinanye and Ms Njiru think that this regional programme will yield benefits for farmers if it leads to the harmonisation, or mutual recognition, among East African countries of regulations and standards, supports their effective enforcement, and thus facilitates market access and trade. COMESA’s programme could also encourage a shift towards transparent, quality-based marketing systems, which would benefit all value chain actors, not least low-income consumers, they say.


COMESA’s programme should also boost the capabilities of dairy entrepreneurs with potential


At the same time, Mr Arinanye and Ms Njiru recognise that regulatory harmonisation and the lifting of barriers to cross-border trade will not be enough to ensure that smallholder dairy farmers get a fair share of the market. Even in Kenya, with its century-old dairy industry, the informal sector still plays an important role in organising the collection of milk from scattered small-scale producers and bringing it to households at a relatively low cost. In a more competitive market, these producers could well end up more vulnerable. In a not so different context, in West Africa, rapid development of a commercially oriented dairy sector has in some cases disrupted traditional livelihoods systems whereby women used to rely on dairying for their households’ own consumption and on small-scale trading for income generation.

Other stakeholders who took part in the COMESA-led discussions said that, while COMESA’s programme should help rationalise and integrate domestic markets, it should also work in tandem with local actors so as to deliver inclusive outcomes. In particular, it should support and dovetail with programmes enhancing the capabilities of small dairy entrepreneurs and private cooperatives with potential (for example, the training and certification scheme implemented in Kenya in the 2000s); with initiatives such as local institutional procurement programmes; and with existing national multi-stakeholder platforms.

Mr Arinanye also emphasises the urgent needs of achieving productivity gains, to make up for the lack of competitiveness of East African dairy producers vis-à-vis the international market, and of strengthening resilience to droughts, as climate change is already affecting milk-producing areas throughout the region.


Dairy producers see opportunities in this COMESA initiative, and ECDPM will continue to support this emerging platform for the East African dairy sector


Mr Arinanye, Ms Njiru and other stakeholders see opportunities in this regional programme. Establishing a regional multi-stakeholder platform will assure that their voices are better heard in the policy dialogue. This platform will facilitate the sharing of national experiences; generate data and analysis helping to better understand policy issues and plan policy and regulatory reforms; and ensure that reforms and investments are monitored and evaluated. It could pool public and private resources to jointly improve regulatory systems, infrastructure, and supporting services. This platform could also bring about synergies with regional trade facilitation initiatives such as TradeMark East Africa.

In collaboration with local and regional actors, ECDPM will continue to support regional cooperation in the East African dairy sector. The Centre will further assist public and private stakeholders in analysing critical policy issues, finding politically feasible and sustainable solutions, and bridging the gap between policies and practices. In this process, ECDPM will liaise with and build on the contributions of Dutch development partners and other European actors.


Main photo: courtesy of UCCCU.

The views expressed here are those of the authors and not necessarily those of ECDPM.

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments

Food SecurityThe Role of the Private Sector in Agriculture and Food SecurityDairyEast Africa