What dairy opportunities are in East Africa?

This became clear during the webinar 'Dairy in East Africa' that was organized by the Dutch Dairy Center on February 18. Because when you think of East Africa, you do not immediately think of a very advanced dairy sector, but rather of small companies with 1 or 2 cows. However, that picture is not entirely correct. "The dairy sector in East Africa is extensive and variable," says Jan van der Lee, Senior Advisor Sustainable Livestock Systems at Wageningen Economy & Research. "This is partly due to the climate. There are very dry areas, but also regions with mountains up to 4.000 meters high. In short: a lot of tropical savannah, but also subtropical areas. It is a region where dairy farming can perform exceptionally well."

Big steps taken
East African dairy farming mainly consists of a combination of small mixed farms, specialized mixed farms and commercial dairy farms. This concerns a total of 9,2 million dairy farms, of which 100.000 farms are medium to large. "Although production in the above-mentioned 5 countries is almost equal to production in the Netherlands, the big difference with our little country is that in Africa it is all needed for own consumption."

In Ethiopia, Kenya, Tanzania, Uganda and Rwanda together, milk consumption amounts to 14,5 million tons, while in the Netherlands it is only 7,7 million tons. Milk consumption is particularly high in Kenya, at no less than 5,16 million tons. "It is more than production, so the country has to import 4%. This is mainly done from Uganda, where there is a small surplus." In that country, milk consumption is just over 2 million tons, while milk production is more than 2,5 million tons.

If we look at the number of cows on a dairy farm, this is not surprising. Uganda has more cows than Kenya. In Uganda, the livestock herd is just over 6 million animals, while the dairy herd in Kenya is 5,5 million animals. However, the largest dairy herd is in Ethiopia, where there are almost 12 million cows. In total, production in that country amounts to 3 million tons, which in short means that efficiency can be a lot better. What is striking in all countries is that the growth of the sector has more than doubled in the past decade.

Low milk prices
In percentage terms, very little of all that milk goes to processors. In Kenya and Tanzania this amounts to a few percent of all milk produced. This percentage is the highest in Rwanda, around 35%. A few years ago this was only 15%. "What is a slight point of concern is that the milk price is therefore far below the global average. In Rwanda and Ugunda it is even more than 40% below that average," says Van der Lee. Only in Ethiopia is the milk price far above the average: +70%.

Milk prices in these countries are of course also related to consumer prices. In 4 out of 5 countries the milk price is a quarter of the retail price. "That is comparable to the Netherlands, but is and remains too low," says Van der Lee. In Ethiopia the price is higher and the price for the consumer is therefore also higher, at approximately 50% of the milk price. "Why is this? Little value is created for milk and export is difficult. Creating a higher milk price remains a major challenge," says Van der Lee.

A positive point is that the middle class in the above-mentioned countries is growing rapidly. "In 10 years, this group should have grown to 10 million consumers. That is good news for the dairy sector," says Van der Lee. "The question is whether the sector can handle that extra demand. Consider matters such as availability of land, purchasing (rough) feed and government regulations. The chain must improve. There are opportunities for Dutch companies, for example in the field of education, training and advice."

Opportunities and challenges for the Netherlands
The fact that there are plenty of opportunities and challenges in East Africa is endorsed by De Heus Koudijs, CRV and Kanter, all of whom are already active in the region. "We mainly see the challenge of technical guidance in the region and that also means that you have to be permanently present. A challenge for us is that dairy farmers in Africa do not always receive a fair price for their product and therefore have difficulty making the necessary investments. When value is created, the farmer receives a fair price and these investments can be made," says Johan Verhoek, export manager at De Heus Koudijs.

At CRV they also experience the above. Hielke Sportel, Area Manager International Business Development at the company: "With varying milk prices, such as in East Africa, it is difficult to continue investing. When milk prices are high, they throw a lot of money over the counter and then have to low milk price. That does not work in dairy farming. Continuous investment must be possible. The changing regulations are also a challenge for us, especially in the field of the import of frozen semen. What one country allows, the other country does not allow "That's not allowed. That's sometimes quite a puzzle for us."

"Hard currency is also a known problem in Africa," said Van der Lee. Tijn Kanters, co-owner and sales manager at Kanters, endorses this. "We do experience problems with payments. Just before you want to conclude a transaction, you often receive a message that something is not going well with the bank. That is frustrating, but in the end we will work it out."

Knowledge transfer is the most important task
East Africa shows that there is particular interest in knowledge transfer, says Jos Creemers, Senior Dairy Expert at Prodairy EA. "The technologies that are introduced must also be guided. Over time, otherwise they will not be used efficiently enough." There is also a lot of interest in the field of roughage. "Good roughage must be brought to the market in African dairy farming. There is potential here for Dutch companies. This way we can reduce the cost price of milk slightly. The market is now too dependent on a small quantity, poor quality feed and high imports of concentrate. This ensures that production costs remain high."

Creemers continues: "It is difficult to develop a good ration here. Advisors often stuck to the products that were already present on the company: a lot of concentrates and little roughage. We at Prodairy have now set up a library with ingredients of roughage and concentrates in order to achieve better formulation of the ration. In this way we have hopefully given the advisory sector a better tool. More roughage should ultimately lead to a lower cost price and therefore a higher margin for the farmer."

Meeuwes Brouwer, who is in East Africa for Nedap, states that the government is very interested in aid from more developed countries. "Practical training is important to the government and they would like to collaborate with the Netherlands for this. It is also considered important that the quality of the milk increases and that supply and demand are better matched." Finally, Van der Lee states that there are opportunities for the Dutch business community in the field of mechanization, quality control and assurance systems and the marketing of dairy products.

In short: there are plenty of opportunities in East Africa. Consider Dutch assistance in the field of (feed) advice, modern technology and education and training. But, that sometimes requires some form of creativity. After all, the resources available in East Africa are not as extensive as here in the Netherlands.