Briefing on the Kenya Dairy Board and the Kenyan dairy industry

BRIEFING ON KDB & THE KENYAN DAIRY INDUSTRY National Dairy Forum, Addis Ababa, Ethiopia, 23-24 November 2010 Presentation by; Martha Mulwa Chairlady, KENYA DAIRY BOARD 23 th November, 2009

Background information on Kenya’s Dairy Industry 1900: Colonial settlers introduce commercial dairy farming 1928: Formation of Kenya Co-operative Creameries (K.C.C) 1950: Farmers started lobbying for a regulatory body. 1954: SWYNNERTON plan allowed indigenous Kenyans to practice commercial dairying 1955: Mr. L.G. Troupe commission formed for the establishment of a regulatory body

Background information cont’ 1958: The enactment of the dairy industry Act Cap 336 laws of Kenya established the Kenya Dairy Board 1964: The Kibaki Commission abolished contracted milk quotas and opened up KCC to all farmers. KCC became a guaranteed market for milk producers with the monopoly to market and distribute milk and milk products

1960’s: A strong smallholder dairy sector grew rapidly with the support of the govt. 1980’s: Smallholder farmer support by the Government became unsustainable . 1992: The Dairy industry was liberalized resulting to price decontrols, private milk marketers, and privatization of dairy support services. K.C.C. was opened up to competition from private players, a situation which brought it to a near collapse. Background information cont’

Kenya Dairy Board - Mandate Mandate To Regulate , Develop and Promote the Dairy industry in Kenya Vision To be a world class Dairy Developmental and Regulatory Authority Mission To facilitate the stakeholders’ activities towards a sustainable dairy industry that provides quality and affordable milk and milk products.

Kenya Dairy Board - functions Advice the Government on Policy issues related to the industry Promote extension, research and other related technology transfers in the dairy and related industries Establish and maintain data on the dairy industry within and out of the country and make it available to industry stakeholders Facilitate provision of technical advice and training on processing technologies, milk testing equipment, milk collecting centers Promote Local consumption as well as exportation of milk and milk products

In partnerships with relevant institutions formulate rules and regulations , setting national quality standards for milk and dairy products, packaging materials Promote quality assurance programs and regulatory mechanisms for the purpose of protecting consumers against health hazards Advise the government on the management of national strategic reserves for dairy products Facilitate the development of efficient production, marketing, distribution and supply of dairy products that are consumer specific Regulation of imports and monitoring of exports Kenya Dairy Board - functions cont’

Kenya Dairy Board Management Structure Board of Directors Managing Director Technical Services Department Finance Department Administration Department The Board of Directors consists of 14 members appointed by the Minister of Livestock Development and representing various actors in the Dairy value chain Representation MoLD MoF

Kenya Dairy Board – Revenue base Milk cess - @ 20 cts/LTR Processors Levy-@ 20cts/Ltr Marketed Annual License fees Application Fees- Kshs 600 Primary Producer Licence Fee-Kshs 1,200 Cottage Industry-Kshs 4,000 Mini Dairy-Kshs 6,000 Milk Bar-Kshs 2,500 Cooling Plant(Below 5,000)-Kshs 1,000 Cooling plant (over 5,000)-Kshs 2,000 Processor –Kshs 25,000 Import levy - @ 7% C.I.F Government grants – about 20% of the Board’s annual budget

Kenya Dairy Board - Branch network KDB has presence in the major milk production and consumption zones of our country

Production approx. at 4.2 billion litres of milk per annum (2009) Total Marketed milk per annum is approx. 2.4 billion litres (formal &informal) Dairy herd population (2007) – 3.846 million Contributes 4% of Kenya’s GDP (official figure ) but recent estimate puts it at 8.3% Over 1 million small holder dairy households engaged in dairy production Current status of the Dairy industry

Generates 365,000 waged jobs and over 500,000 jobs in support services Milk production in Kenya relies on rain fed agriculture leading to seasonal fluctuations in production Milk surplus is normally experienced in April to September and a scarcity in January to March There are 27 active milk processing companies (2008) The industry has a capacity to process 3.5 million litres per day (however, current utilization is about 45%) Current status of the Dairy industry cont’

Other categories of licensees (2009) include; 64 mini dairies, 78 cottage industries 1138 milk bars. 757 producers Long life milk installed capacities: Milk powder: 190,000 LTRS/ day UHT Milk: 400,000 LTRS/day Cheese: 31,500 LTRS/day Butter: 50,000 LTRS/cream/day Ghee: 4,000 KGS/batch Current status of the Dairy industry cont’

Current status of the industry cont ’ Potential to offload excess production through exports

Current status of the industry cont’ Drop in 2008 was attributed to the effects of the post election violence The formal sector accounts for about 20% of the marketed milk

Current status of the Dairy industry cont’ Exports and Imports Exports have grown while imports have generally gone down- Import &Export regulations 2004 The major export destinations are Tanzania, Uganda, DRC, Rwanda, Burundi, Sudan, among others Major export products are – (UHT, milk powder, butter, cheese, Ice cream, Yogurt ) Formation of the East African Dairy Regulatory Authorities (EADRAC) has facilitated intra-regional trade

Challenges facing the Dairy industry 1 . Farm level Issues Poor livestock sheds/milking parlours Personnel hygiene/clothing/medical checks Milk handling equipment Time taken to reach collection/cooling centre Non attainment of raw milk standards- TPC, density, butterfat Insufficient extension/advisory services to dairy farmers and training for dairy farm-hands and management, Inadequate supply/poor access to clean water Low productivity/efficiency Poor milk handling equipment Non adherence to recommended drug withdrawal periods – drug residues in milk

Challenges facing the industry cont’ 2. Animal Feeds Feeds -nutrient imbalance Contaminants in milk- (Antibiotics, Aflatoxins, Herbicides, Pesticides) Inadequate use of concentrates or leguminous plants to bridge the protein gap Inadequate mineral supplementation- lowered production and fertility Inadequate conservation of feeds for dry season feeding Inadequate monitoring of feed quality standards.

Challenges facing the industry cont’ 3. Animal Breeding Limited access to A.I. services leading to poor quality dairy cows, especially by small scale farmers; Use of unselected bulls for breeding purposes in the face of poor accessibility to A.I. Services; Low cow productivity Limited registration of stock and tracking of breeding programme– risk of in-breeding

Challenges facing the industry cont’ 4. Animal Diseases Management Poor/limited adoption of appropriate disease control practices by dairy farmers. High incidence of sub-clinical mastitis- poor milk quality/spoilage High cost of drugs, vaccines and sera in the face of poor practices in disease control; Uncontrolled livestock movement; High prevalence of breeding diseases causing sterility and prolonged calving intervals and; Misuse of drugs, vaccines and sera leading to poor efficacy and resistance to regularly used products

Challenges facing the industry cont’ 5. Milk Quality, Collection and Cooling Limited adoption of the code of hygienic practice Poor road network in milk producing areas- long time to reach cooling centre High degree of contamination- Adulteration and poor handling Insufficient/poor utilization and inappropriate distribution and location of cooling facilities Poor state/distribution of milk collection centres Limited access electricity, water & waste disposal systems Lack of a residue management protocol

Challenges facing the industry cont’ 6. Milk processing and packaging Poor rural infrastructure, such as roads, electricity and water to facilitate rural investments Inadequate information to guide investments. Narrow product range/limited value addition Limited access to affordable credit facilities for setting up processing facilities; Limited technologies for small scale processing; Competition from raw/milk itinerant traders Under utilised processing capacities High cost of fossil fuel and packaging materials Limited access to markets – failure to meet international standards and lack of a milk traceability system

Priority Intervention areas in the Dairy Industry Improve productivity per cow Enhance capacity/adoption of feed conservation technologies by farmers Improve quality, safety and traceability of milk and milk products Enhance accessibility to dairy information Address the quality of animal feeds Enhance Dairy research and development Promote low cost technologies Strategize on restocking measures Develop workable strategies to control animal diseases

Priority intervention areas cont ’ Speed up review/enactment of pending policies and bills Strengthen institutional capacity of organizations serving the industry such as CAIS, DTI, KDB, among others Create harmony amongst stakeholder organizations Enhance stakeholders collaboration Enhance efficiency in the dairy value chain Establish a sustainable financing of dairy Regulatory, Developmental and Promotional programs (as in other developed dairy industries

Ongoing Stakeholder collaborations The Dairy Taskforce (DTF) -was appointed by the PS, MOLD, in May 2007 The DTF comprises of 23 key institutions/departments in the Dairy industry Represented are Breeders, Processors, Development partners, stakeholder associations, Animal health providers and Government Mandate is t0; Continuously review the performance of the industry and recommend interventions Promote coordination of stakeholders activities in Dairy Development Come up with actionable plans to address constraints in the dairy industry

Areas of collaboration between MOLD and KDB Department Areas of collaborations Department of Veterinary Services SPS issues Traceability issues Implementation/enforcement of Dairy regulations Sharing of information Farmer registration Accreditation of BDS providers Department of Livestock Development Extension Farmer registration Animal nutrition Information sharing Planning Department Review of Dairy policies and regulations C.A.I.S Promoting breeding services Registration of livestock Sharing of information D.T.I Short-term training of stakeholders

On going programs in the industry Program Financier Implementor Main objective Kenya Dairy Sector Competitiveness Project (KDSCP) USAID Land O’ Lakes Increase incomes to smallholder dairy farmers East African Dairy Development Project (EADDP) Bill & Melinda Gates Foundation Heifer Project, World Agro-forestry center, ABS, Promote marketing of milk and strengthening of SBO’s Improving Quality Assurance in Milk Markets (IQAM) MESPT SITE Enterprise Promotion Improve quality along the dairy value chain by building capacity in SME’s Small-Holder Dairy Commercialization Project IFAD MOLD Commercialize dairy production

Key stakeholder associations in the industry East Africa Dairy Regulatory Authorities Council (EADRAC) Association of Kenya Feeds Manufacturers (AKFEMA) Kenya National Dairy Producers Organization (KENDAPO) Kenya Livestock Breeders Organization (KLBO) Dairy Traders Association (DTA) East and Southern Dairy Association (ESADA) East Africa Dairy Stakeholders Association (EADAS)

Challenges facing the Kenya Dairy Board Constraint Proposed interventions Limited resources to fully and effectively undertake its mandate Improve income base e.g. introduction of Dairy Development levy Slow formulation and enactment of Dairy policies/regulations Speed up review/enactment of relevant policies and bills e.g. Dairy policy and bill Inadequate human resource capacity Recruit more personnel/build capacity of existing staff Inadequate working tools Construct a head office, acquire enough vehicles, establish a laboratory facility etc

Proposed Dairy Development Levy Cess was introduced in 1959 – 2cts By the year 2000, the cess received was KSh 4 million/annum This made the Board heavily reliant on the exchequer and compromised on service delivery In 2000, the cess was increased through a gazette notice to 20cts/LTR. This significantly increased the revenue and service delivery capacity of the Board Despite the growth in revenue as more milk is marketed formally, the Board still faces financial constraints.

Proposed Dairy Development levy cont’ The Board’s expenditure is expected to increase with increased activities and services in line with stakeholders demands Formal milk marketing is expected to saturate leading to stagnation of Board’s income Government is cutting down support on parastatals Import levy expected to remain low as the Board regulates on Imports Current cess is charged on producers. Processors, who benefit significantly from the industry, make no direct contribution to the development of the industry unlike in other countries

Proposed uses of the Dairy Development levy 1. Establish a Dairy Development levy The idea had been initiated in the 1980’s through the support of the WFP WFP donated dairy produce (approx. KSh 300 million) to be sold by KCC. Revenue generated was to establish the fund Aim was to establish a revolving fund that could be accessed by stakeholders for development Collapse of KCC killed the initiative There is still need to establish a revolving fund for the industry

Proposed uses of the Dairy Development levy cont’ 2 . Strengthening KDB Dairy Information/ ICT base Stakeholders have identified dairy information as the most critical input in the Dairy value chain KDB has established a Dairy Information center to respond to this demand and rolled out e-dairy system for implementation of a Dairy Information Management System The system will address generation and dissemination of Dairy information, among others Support is required to extend the system countrywide The ICT infrastructure of the Board requires to be strengthened

Proposed uses of the Dairy Development levy cont’ 3. Promotion of Kenyan Dairy produce Promote local market especially value added products Promote exports to the regional and export markets The future of the industry depends significantly on exports

Proposed uses of the Dairy Development levy cont’ 4. Improving Quality of Kenyan Dairy produce Recent studies have shown worrying trends in the quality of raw milk and finished dairy products The standards for dairy produce have been harmonized in the EAC and will soon be extended to COMESA. The industry has to conform to these standards to sustain and grow dairy exports Strategies required to adopt and implement GAP’s in milk production and GMP’s in milk handling processing Traceability of Dairy produce also requires urgent attention

Proposed uses of the Dairy Development levy cont’ 5. Advising, Organizing and Facilitating stakeholders Enforcement of the Dairy Industry Act, Cap 336 Capacity Building of stakeholders Strengthening BDS provision 6. Strengthening stakeholder organizations Breeding organizations Dairy Training centers Genetic Improvement centers Farmers Training centers Producer groups etc

Proposed uses of the Dairy Development levy cont’ 7. Strengthening KDB’s Capacity Human Resource Development Working tools 8. Support Research and Development Product Development Studies and surveys Low cost technologies Dissemination of research findings/technologies

Comparison of KDB levies with other Parastatals Organization Mandate Levies charged Budget 2008/2009 (Ksh millions) Catering and Tourism Development levy Trustees Promotion of training, marketing, and the development of tourism industry in Kenya 2% of sales 855 Kenya Sugar Board Regulating, developing and promoting sugar production and marketing 4% of the ex-factory price at the mills and 4% C.I.F on imported sugar 1,500 Electricity Regulatory Board To regulate production and distribution of electricity 3cts/Kwh 134

Comparison of KDB levies with other Parastatals Organization Mandate Levies charged Budget 2008/2009 (KSh. millions) Tea Board of Kenya Develop. Promote and marketing of tea 1% of sale price of Kenyan tea 384 Kenya Plant Health Inspectorate Services Coordinate all matters relating to crop pests and diseases 1% of value of imports/exports 887 (inclusive of a G.O.K grant of 400 million) Kenya Dairy Board Regulate, develop and promote the dairy industry in Kenya 20 cts/LTR of traded milk and 7% C.I.F on imported milk 146

Dairy Development levies in other countries Administrator Payments Uses Danish Dairy Board Milk Levy fund paid by milk producers and processors At rate of Kshs 5.60 per KG of milk Support to a number of activities including provision of dairy information, research and development, market promotion etc Dutch Dairy Board Dairy levy paid by milk producers and processors Dairy research, information, animal health and quality issues Canadian Dairy Commission Dairy levy on milk paid by producers, processors and distributors Enforcement of regulations, market promotion, support to dairy information

Dairy Development levies in other countries Administrator Payments Uses United States of America Food and Drug Administration Various charges as follows; Farms – Grade A milk 200 US dollars/annum - Grade B 125 UD dollars/annum Processors – Procurement fee 0.02 US Dollars per litre processing 0.07 US Dollars -Licence fee 500 US Dollars/annum Regulation of the industry, conducting inspections/sur-veillance Australian Dairy Commission Dairy Service Levy/Dairy structural adjustment fund paid by milk producers and consumers as follows; -liquid milk-kshs 0.16 per LT -milk fat kshs- 1.30 per KG -protein- kshs 3.20 per KG -Consumers kshs 5.60 per LT Research, extension, support to dairy information etc

End of presentation ------------------------------ Thank you

Briefing on the Kenya Dairy Board and the Kenyan dairy industry

More Related Content

What's hot (20)

Similar to Briefing on the Kenya Dairy Board and the Kenyan dairy industry (20)

More from ILRI (20)

Recently uploaded (20)

Briefing on the Kenya Dairy Board and the Kenyan dairy industry