Making policies work

GREAT insights Magazine

Partners for good: what two African dairy companies can teach us about partnership with NGOs

28-02-2019

Poorva Karkare, ECDPM Great Insights magazine, Winter 2018/2019 (volume 8, issue 1).

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CSO-business partnerships are vital to achieve sustainable development. But policymakers and development practitioners still struggle to pinpoint what it takes to make these collaborations work. While there is no magic formula for success, the context of a partnership can tell us a great deal about its chances of achieving its aims. ECDPM’s Poorva Karkare interviewed Nancy Jones Abeiderrahmane of Tiviski (Mauritania) and Nathaniel Makoni of African Breeders Service Total Cattle Management Ltd (Kenya), two private dairy companies that have partnered with international NGOs to further their business. Their stories provide interesting contrasts and valuable lessons for the future.


Huge potential in African dairy


There is huge potential in upgrading the dairy value chain in Africa, not least, by bulking the output of small producers. This is complicated, however, by industry-specific factors, like the difficulty of organising smallholders to supply milk, the need for consistent quality of the raw milk and the greater effort required to deliver production-boosting services to dispersed populations of producers. There are also broader constraints, such as the lack of infrastructure, finance, access to markets, and policy environments that are not always conducive to small businesses.

Private businesses interested in sourcing milk from smallholders have sought to collaborate with non-profits, such as NGOs, to overcome the obstacles. In some cases, funding from development partners has helped make such ventures successful. The resulting collaborations provide valuable insights into CSO-business partnerships overall. Here we compare ventures involving two companies: African Breeders Services Total Cattle Management (ABS TCM) in Kenya and Tiviski, a dairy company in Mauritania.


Similar products, different contexts


The two companies operate in very different contexts. In Kenya, smallholders have a sedentary lifestyle with livestock based in one place. In Mauritania, herders depend on sparse pastures in arid zones. This obliges them to travel long distances in search of feed and grazing. Kenyan smallholders, moreover, have had previous – albeit disappointing – experiences with the cooperative model, and are somewhat exposed to the business model of milk production. The herders in Mauritania are based in remote locations and have little earlier exposure to commercial business, besides being culturally reluctant to sell milk.

However, similarities can also be found. In both cases, the private company proved pivotal in making the ventures work. They adopted different business models, but each made an informal pact with small producers to bulk the raw milk before trucking it to a central processing unit.

ABS TCM used a hub model the company had been developing for several years. It established locations where milk could be collected, chilled and then sent on to processors. At the hubs, the farmers supplying to ABS TCM could also obtain inputs and services on credit to help boost their production.

Nouakchott-based Tiviski set up delivery centres close to producers, near the grazing lands, hundreds of kilometres from its processing plant. It also provided inputs like feed, again through a credit system for participating herders. Milk is then transported to the processing plant to make products like pasteurised milk, cheese and butter.

In both cases, bulking made it possible to collect milk in the quantities required for processing, paired with strict quality control. These market development projects were profitable for ABS TCM and Tiviski, while also increasing the incomes of the producers involved, as their production now reached the formal market. Higher incomes had knock-on effects, stimulating the rural economy and helping establish a supply chain.


Different models of partnership


Both companies partnered with international NGOs, though these partnerships arose somewhat differently. ABS TCM already had several years of experience with its hub model and was convinced of the model’s benefits. To replicate it elsewhere, the company entered into a partnership consortium with Heifer International (see reference). The consortium applied for development funding to scale up the business model together.

Tiviski collaborated with Vétérinaires Sans Frontières (Belgium), an international NGO, to support a producers’ association the company had set up, called Association des Producteurs Laitiers de Tiviski. While the association provided services to enhance milk quality – particularly feed, veterinary care and training (e.g., milking hygiene films), it proved too costly for the company, despite contributions from the herders involved. Thus, it sought financial and technical assistance from the NGO.

The NGOs’ roles were also different. In Kenya, the development partners complemented the company’s activities. Among other things, they mobilised smallholders to bring their milk to the hub and assisted in enterprise development, best dairy practices and performance documentation. These were no easy tasks, given farmers’ initial distrust and hesitation to provide milk to a larger entity, due to their previous disappointing experiences with a cooperative model. The private company provided participating farmers services like artificial insemination, veterinary and udder care, as well as inputs like feed, on credit, debited against the milk supplied. This resulted in a significant boost in production.

The Kenyan consortium partners brought out each other’s strengths. The development partners absorbed some of the risk, helping to mobilise farmers and providing financial backing to scale up operations. The business model (setting up hubs for collecting and cooling milk in bulk and providing cattle services) remained firmly in the hands of the private company with no subsidy from the partners. By 2018, when the project ended, the model had become self-sustaining.

In Mauritania, however, the partnership was short-lived, as it ran up against conflicts between the principles and needs of the NGO and the private company. Whereas Tiviski viewed the milk-backed credit system as key to ensure the sustainability of the support and quality in the system, the NGO – strongly opposed to the private component – demanded that services also be provided to herders who did not supply to the company. Eventually this resulted in separation of the association from the company. It became an independent herders’ organisation and the feed supply component was discontinued, as the NGO prioritised the veterinary care element. Demand from herders prompted Tiviski to resume supply of affordable feed on credit. The NGO reportedly eventually discontinued its support due to cooperation issues and personnel challenges.


What lessons does this teach?


Smallholder farmers and herders are fragmented and operate on a small scale, resulting in both high transaction costs and poor access to credit. Similarly, inputs and services are costly to provide to dispersed populations of small producers, even if all those involved contribute. In each of our cases, partnership with an international NGO provided a way to overcome market and policy constraints through technical and financial support and relationship-building assistance.

Donor funding proved important to reduce the cost burden for the companies. This underlines the key role that development partners can play, at least in certain cases, in facilitating successful partnerships. In our cases, development financing – from the Bill and Melinda Gates Foundation in Kenya and from the European Union in Mauritania – was released for the projects through the NGOs, which in turn worked with the private businesses.

Before such funds are provided, project proposals need to be rigorously scrutinised to determine if a partnership is warranted in the first place. Where partnership is considered worthwhile, project evaluation criteria can be carefully designed to include collaboration components. This is a departure from the typical project performance indicators, which relate mainly to outputs, like numbers of families supported or outcomes like increases in incomes.

Partnerships involving businesses and CSOs can take different forms. When the objective of collaboration is to contribute to sustainable value chain development, it seems particularly important for the domestic private sector partner to have a central part. While CSOs can help in this endeavour, they seem best placed in a supporting role. The primary position needs to remain with the industry partner that creates the added value and stimulates the local economy, through employment generation and scaling up.

Modes of collaboration that acknowledge the different roles and strengths of the private business and CSO can obtain better results than project-driven exercises led by an NGO and treating the private company as an accessory. These latter may never become independent from assistance. The former, however, are increasingly recognised as vital instruments for sustainable development, though much remains to be learned about their effectiveness and efficiency.

For development partners, it is perhaps most important to go beyond the evaluation of the results of a particular project, to assess partnership experiences and the way the collaboration affects the results. A qualitative assessment of the partnership dimension can go a long way in drawing lessons to inform future partnership approaches.


Reference


Other partners in the consortium included Technoserve, International Livestock Research Institute (ILRI), World Agroforestry Centre (ICRAF), and CGIAR


About the author

Poorva Karkare, is a Policy Officer at ECDPM in the Economic and Agricultural Transformation team.


Photo: Milk transport in the desert. Credit: Tiviski


This article was published in Great Insights Volume 8, Issue 1. Winter 2018/2019

Economic Transformation and TradeFood SecurityAgricultureDairyValue chainsAfrica