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Strengthening the Kenyan dairy sector and seeking regional markets

06 August 2012

According to press reports, Kenyan milk production grew by 150% between 2002 and 2011, with an almost fourfold increase in deliveries to milk processors. This growth was attributed to ‘sound policy and regulatory guidelines’. Nevertheless, a lack of proper storage facilities still leads to considerable milk production going to waste, while considerable seasonal price variations occur. In April 2012, at the 8th African Dairy Conference and Exhibition, calls were made by Dr Langat, chairperson of the Eastern and Southern African Dairy Association (ESADA), for ‘simple technologies that can boost milk conservation at farm levels during seasons of plenty and those that can convert excess milk to powder for use during dry seasons’.

Similarly, the executive director of ESADA, Peter Ngaruiya, called on the Kenyan dairy sector to ‘embrace new technologies and farming methods... to improve value and expand the market’. He hoped the conference would ‘empower local farmers to begin marketing and processing their own milk and use the bargaining power of clustering in cooperatives’. He also maintained that ‘value addition at the farm gate can give the farmer higher returns’ (e.g. through cheese and yoghurt production).

The conference was also addressed by Kenya’s President Mwai Kibaki, who called for governments to enhance ‘intra-regional trade in dairy products to promote and hasten the development of milk sub-sector on the continent’.

Kenyan dairy firms see the removal of non-tariff barriers to regional trade as a means of further boosting growth. According to Dr Langat, ‘deepening regional integration will address perennial supply fluctuations and raise our external competitiveness.’

There is seen to be considerable scope for increased regional cooperation in dairy sector development. Currently the East African region ‘produces about 12 million tonnes of milk per year against an annual demand of 14 million tonnes’, with demand expected to grow by 3.5% a year projected through to 2020.

Significantly, Tetra Pak sees this growth in demand being driven by low-income consumers in Kenya, with considerable scope for the introduction of affordable new dairy products. More broadly, according to Tetra Pak, ‘Africa will become the world’s second fastest growing market’ (after Asia) for dairy products. Product development and packaging innovations are likely to be critical to the full exploitation of potential African demand for dairy products, and ways need to be found of ‘boosting market access and creating efficient value chains’.

Most recently, proposals were tabled in July 2012 as part of the restructuring of the Kenya Dairy Board for the creation of ‘a strategic milk reserve to cushion against fluctuations in production’. Under the proposals, the New Kenya Co-operative Creameries would be the custodian of this strategic reserve of milk and milk products.

Editorial comment

In the EAC, Kenya’s milk producers are relatively advanced in their dairy husbandry practices as a result of efforts by government and private sector extension services to modernise farming practices and promote the use of modern technologies. Liberalisation, the formation of smallholder dairy cooperatives and the entry of private players, have led to significant advances in the sector in terms of production and value addition.

Currently there are many successful dairy cooperatives which have moved away from pooling, cooling and selling raw milk to larger private sector dairies, to processing their own milk and selling products in urban areas. As a consequence Kenya is the leading exporter of dairy products, with firms such as Brookside having set up operational branches in Uganda and Tanzania and planning to establish operations in South Sudan.

The establishment of processing plants in these countries is seen as a more viable strategy than simply exporting Kenyan products, since it creates opportunities for local farmers and dairy sector stakeholders.

However, there is growing concern in Kenya over moves towards protectionism within the EAC region, as it is feared that this could stifle dairy sector growth in Kenya.

Kenya’s dominant role does not extend much beyond the EAC, although it has aspirations to broaden its export markets. Attempts to penetrate the intra-COMESA market have been thwarted by SPS and quality standard issues. Mauritian importers, for example, prefer to source from Australasia and the EU largely on the basis of SPS and quality considerations, but also on the basis of stability of supplies and price. Further south in COMESA, South African companies tend to dominate imports.

It is against this background that the Kenyan government is placing emphasis on harmonising SPS and quality standards and promoting intra-regional trade in dairy products.

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