GERALD  MUTINDA    REGIONAL  MANAGER  

 EAST  AFRICA  DAIRY  DEVELOPMENT  PROJECT  

HOW DAIRY BUSINESS HUBS HAVE UNLOCKED RURAL ECONOMIES IN EAST AFRICA

East Africa Dairy Development Project

¨  Implemented by a consortium of 5 partners led by Heifer International

¨  Funded by a grant from The Bill and Melinda Gates Foundation

¨  5.5 year (2008 – 2013) farm-to-table industry development project

¨  Primary objective of doubling incomes of 179,000 small holder dairy famers, transforming livelihoods of 1 million people

¨  Implemented in Kenya, Uganda and Rwanda

The Basis for the project

Why Dairy in East Africa (EA) EA is an agricultural economy ¨  With conducive ecology and enormous growth potential

¨  Over 100 million people, half subsisting on less than $2 per day

¨  Smallholders dominate with low yields/cow (1.5-3lts/cow) ¨  Women responsible for (70%) of food produced in Africa, but reap little benefits from it

Opportunities • Growing middle class and urbanization boosting demand for processed milk & products, •  Dairying=source of regular HH incomes, Nutrition & employment = a powerful antipoverty means •  Milk paradox- producers unable to access formal markets & processors unable to secure supplies •  Increased investments= Government-infrastructure, agribusiness players- processing capacity

Dairy Landscape in EA-a brief

¨  Over 10 billion liters of milk produced/year

¨  Over 70% by Small holder farmers; 02-15% of production is processed

¨  50-60% of dairy farmers subsist on less than 2 dollars per day

Challenges facing the small holder farmers

¨  Economics = poor efficiencies (e.g.1.5-3lts/cow/day)

¨  Fragmentation = majority of small holders not organized ¤  Limiting access to inputs and services

¤  limiting bargaining & influencing power

¤  Limiting attractiveness to agribusiness players (processors, input dealers)

¤  Over-reliance on informal markets

¨  Diluted government led extension/Farmer advisory

¨  Climate change & environmental sustainability

Why the dairy hub approach? Unlocks potential of rural economies

¨  Attracts investment to rural Africa

¨  One stop for collection of quality milk for processors

¨  Contract = assurance of market

¨  Access to services/input for farmers- check off/credit

¨  Stimulates employment opportunities

¨  More sustainable compared to government & donor support

‘dairy hub’ or cluster of services from which farmers are able to access inputs and services, including market for their milk. Inputs and services providers find it profitable to offer their services thanks to the economies of scale generated by the hub. The Producers Organisation

plays a central coordination role

The Solution – Transforming Chilling plants to Business Hubs

TRANSPORTERS

TESTING

FARMERS

FIELD DAYS

FEED SUPPLY AI & EXTENSION

VILLAGE BANKS

OTHER RELATED MEs

HARDWARE SUPPLIERS

CHILLING HUB

How to facilitate a dairy Hub: EADD’s experience

How it Gets Done 1.  Farmers are mobilized into associations to set up and run

producer companies/cooperatives. 2.  Companies/coops are assisted to set up infrastructure to

market milk and deliver inputs to members through the ‘Dairy Hub.’

3.  EADD staff provide technical assistance to producer Organizations to achieve farmer goals in sustainable manner

Examples of success:

11

• Over 200,000 farmers in collective action (in 81 POs) •  Over 77M Lts/Yr of milk aggregated in the last 3.5 years of the project support • An average of 23M USD paid out to farmers annually

• 54% average increase in milk yield per cow (exotic & cross breeds) •  Women constitute 31.5% of registered dairy farmers

• Thousands of disfranchised dairy farmers •  Less than 20M Lts/Yr of milk aggregated/marketed by POs • Less than 5M USD milk payments to farmers annually • Few women (13.8%) signing up in dairy POs

Before/baseline

Now

Examples of success:

$103 M (2009- June 2013)

Over 348 M Liters (2009-June 2013)

Over 40% PO farmers active in aggregating milk

Total volume of milk of aggregated (2013 is up to June)

Uganda/Kenya  • POs  establish  milk  supply  relaConships/contracts  with  major  processors  &  milk  traders  

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2009 2010 2011 2012 2013

POs net profit trend (USD)- 2013 covers up to June

POs net profit trend (USD)- 2013 covers up to June

Some lessons learnt

From a Hub model to a hub Approach

Embed extension services as an integral part of PO’s core business

EADD PHASE II (Tanzania, Uganda, Kenya) Looking for partners: Financiers Government agencies Input providers

www.eadairy.org

Thank you!