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3. Dairy development and internal dairy marketing structure: Policies, performance and options


Introduction and background
Some experiences of dairy development and marketing policies in sub-Saharan Africa
A review of some experiences of dairy development and marketing in some selected countries in sub-Saharan Africa
Dairy development and marketing policies in Kenya
Experiences on dairy development and marketing in some other countries of sub-Saharan Africa


Introduction and background

3.01 When evaluating internal dairy marketing systems, a marketing system may be described in terms of the major types of enterprises that are involved in marketing and the types of functions that these enterprises undertake. Such a description thus focuses on the marketing structure, i.e. an analysis of the network of the various competitive and complementary marketing channels between the producers and the consumers, and should include an account of the direction of product flows as well as the amounts of the product that flow in different marketing channels. The extent of government involvement in the marketing system very much determines the kinds of marketing structures that prevail in different countries. The available literature suggests that most countries in sub-Saharan Africa have dairy marketing systems that comprise both a government-controlled channel, which will be referred to as the formal marketing subsystem, and a non-government (i.e. private) marketing channel, which will be referred to as the informal marketing subsystem.

3.02 Few countries in sub-Saharan Africa appear to have well documented national dairy development and marketing policies, let alone an account of the national food policy. However, an indication of what these policies are can often be derived from the broad statements which one often finds in the national development plans and/or government sessional papers on development prospects and problems.

3.03 The term "policy" in general can mean almost anything, depending on the context. For analytical purposes, however, the term "policy" will be defined simply as a set of government decisions, often embodied in legislation, taken at a national level and which usually apply to a country as a whole rather than to one part of it10 Marketing policies will refer to any government decisions that affect one or more of the main marketing functions, where a marketing function is defined as any specialized activity that is undertaken to ensure that a particular product flows in an orderly manner from the initial point of production to the ultimate consumers. The main marketing functions are normally classified into three categories:

10 ILCA Livestock Policy Unit Programme Review and Protocols for 1984 (Addis Ababa, 1983).

(i) exchange functions, which are further subdivided into buying and selling functions. The buying function also includes product assembly, i.e. collection from producing sites;

(ii) physical functions, which comprise transportation, processing and storage functions; and

(iii) facilitating functions, comprising standardisation, financing, risk-bearing, market intelligence (information-gathering), and management (entrepreneurial) functions.

Clearly, governments have a lot of scope to intervene in marketing, given the wide range of functions that are undertaken in marketing. Marketing policies do not only influence the functions carried out but also the performance of the marketing system for a given product. The performance of a marketing system may be evaluated in terms of the extent to which the particular marketing system succeeds in achieving the goals set for it over a specified time period. In discussing marketing policies, it is helpful to distinguish between objectives and instruments in policies. The objectives are the "ends" or overall purposes which policy-makers seek, while the instruments are the particular "means" by which policy-makers try to achieve their objectives.

3.04 Given the problem of getting well documented national accounts of dairy development and marketing policies, this paper draws quite heavily on mission reports made by the ISCDD11 of the FAO for a number of sub-Saharan African countries and on an interim report on FAO Expert Consultation on Agricultural Price Policies.12 The review of such documents indicates that most governments of the countries in sub-Saharan Africa aim to promote local dairy production, even in those countries where the potential for local dairy development would appear to be relatively low, especially for market production (e.g., Mali and Botswana, where local conditions would tend to favour beef production under extensive grazing systems). In many countries, dairy development is geared toward achieving higher levels of self-sufficiency in dairy products in order to reduce or curb imports of dairy products. Imports of dairy products in many of sub-Saharan African countries constitute a large proportion of total food imports, Hence the dairy development policies in these countries would appear to be geared toward an eventual substitution of dairy imports. Sometimes, the instruments used to implement dairy development and marketing policies also aim to improve rural standards of living, since dairy production is also seen as a means to generate some income to smallholders, creating some employment in the rural sector, and provide highly nutritive diet ingredients.

11 International Scheme for Coordination of Dairy Development (ISCDD) Country Mission Reports (FAO, Rome, Various Countries and Years).

12 Held in Rome, Italy, between November 29 and December 2,1983, but final report not yet published.

3.05 Conflicts often arise between the food production and marketing policies of individual countries of sub-Saharan Africa. For instance, a food imports substitution policy often will not be compatible with a policy that aims at providing food to the urban population cheaply, yet most food and agricultural development policies in developing countries, especially in those of sub-Saharan Africa, are often geared toward ensuring provision of cheap food to urban - consumers. Policy conflicts usually arise out of the fact that promotion of local food production would require the governments to offer or create some producer incentives, usually by way of fixing remunerative producer prices in addition to pursuing marketing regulations that make it attractive for the producers to be market-oriented in their production decisions: yet the same governments wish to fix and maintain consumer prices for food at reasonably low levels, usually without state food consumption subsidies. In brief, food production and marketing policies in most sub-Saharan African countries are in direct contrast to those policies that are pursued in most developed countries, especially those in Western Europe and North America, where the main objective appears to be the stabilization and maintenance of producer incomes, usually through farm price-support programmes. In most African countries, the urban population often has more contacts with government officials than docs the rural population. Hence the urban consumers tend to have more lobbying power and can often influence the policy-makers to ensure that food is available at retail prices that most of them can afford.

3.06 Promotion of local food production through a pricing policy to create producer incentives while attempting to keep prices of food supplies to urban consumers low with no direct state subsidies is unrealistic. In essence, consumers must ultimately meet the full cost of the products that they aspire to consume, unless governments are in a position to support farm prices and/or subsidize consumption in order to keep retail food prices low. Many governments in developing countries find subsidies to agriculture too costly, and a number of them have formally declared their intentions not to subsidize agriculture. Such an intention is implicitly stated in Kenya's National Food Policy document (Sessional Paper No. 4 of 1981, Republic of Kenya), which implies that consumers must bear the cost of their food if production is to be maintained or even expanded. Hence a strategy of local dairy development through the creation of producer incentives by a pricing policy (price controls, both at farm and retail levels) in most countries of sub-Saharan Africa has as its major limitation the need to strike a balance between the levels of producer price and consumer (retail) price.

Some experiences of dairy development and marketing policies in sub-Saharan Africa

3.07 The objectives of dairy marketing policies in most sub-Saharan African countries are intrinsically linked to the objectives of the national dairy development policies. Regions and even individual countries will often differ substantially in terms of their production potential, and this factor may be associated primarily with differences in geo-climatic as well as bio-technical conditions as one moves from one region and country into another. Even though many countries in sub-Saharan Africa state that the major objective of their dairy development and marketing policies is to promote local dairy production, one may expect substantial variations in the types and precise effects of the policy instruments which different countries in the region have adopted and deployed in order to try and achieve the objective of promoting local dairying.

3.08 The livestock production sector in sub-Saharan Africa can be described under two subcomponents:

(i) the traditional livestock production subsector; and
(ii) the modern livestock production subsector.

The terms "traditional" and "modern" are used to denote whether production is mainly geared toward producing for family consumption (under the traditional production systems) or for the market (under the modern or commercial production systems). The traditional livestock production subsector in sub-Saharan Africa is dominated by indigenous livestock breeds, while the modern livestock production subsector has some improved (crossbred. or upgraded) as well as exotic livestock breeds.

3.09 Most of the output of dairy products in the traditional livestock production subsector in sub-Saharan Africa is, by definition, consumed within the producing households. The modern dairying subsector, which produces mainly for the market, is relatively small in terms of its share in the estimated total regional output of dairy products. Generally, production and marketing of dairy products in the so-called modern subsector are organised more or less along the lines of commercial dairying in the advanced countries, and the terms "modern dairy marketing" and "traditional dairy marketing" in sub-Saharan Africa have often been used to describe dairy marketing activities in the modern and traditional livestock production subsectors in the region respectively. Since dairy production in the traditional livestock production subsector is primarily geared toward meeting basic family requirements of dairy products, only small and fluctuating amounts of surplus milk and milk products are usually available for marketing.

3.10 Dairy marketing in the traditional livestock production subsector often involves small-scale producers and some local traders (usually pedlars). However, dairy marketing in the modern subsector will usually involve the output of several producers, both small-scale and large-scale, as well as a number of marketing enterprises, ranging from small-scale individual traders or cooperative organisations to large- scale private and public organisations. Therefore, one can state that:

(i) traditional dairy marketing will often be effected through direct sales by producers to consumers, or through the sales of consumers by small-scale local traders who procure their supplies directly from producers; and

(ii) modern dairy marketing often attempts to integrate production and marketing activities by linking often distant rural production areas with the major urban consumer centres.

As a corollary to (ii) above, one can state that the modern dairy marketing system will often entail:

(i) the collection of milk from distant rural production areas,

(ii) the transportation of such milk to the dairy processing plants, which are often located in urban consumer centres, and

(iii) the processing and distribution of milk and milk products to the ultimate consumers.

3.11 The so-called modern dairy marketing systems tend to favour commercial producers, even though producers from the traditional livestock production subsector with only small and often fluctuating surpluses for sale can use the modern systems as long as they can organize themselves to deliver their supplies at the receiving ends for those channels. Considering the small amounts involved, most producers in the traditional subsector often find it more convenient and rewarding to use the traditional marketing channel as their sales outlet, unless this channel can no longer handle their produce, or unless government regulations force them to use the official and often large-scale dairy marketing channels.

3.12 Many livestock specialists believe that management is a major constraint to dairy development under both traditional and modern production and marketing systems in sub-Saharan Africa. Production in the traditional subsector is based on extensive grazing systems, which generally exist under a communal land tenure system. The communal land tenure system has been favourable to transhumant pastoral livestock production systems in the past, but such systems are not conducive to modern dairy production in which improvement in milking herd productivity is a major consideration. Improvements in milking herd productivity must entail investments in land improvements in order to raise fodder or feed production. Many traditional livestock production systems are seriously handicapped by feed shortage, yet communal grazing (under communal land tenure systems) only tends to worsen the feed supply problem.

3.13 Many livestock specialists also believe that increased milk production in sub-Saharan Africa can be achieved only through the introduction of improved livestock in the traditional livestock subsector. However, the role of good livestock husbandry in raising milk output even from traditional cattle herds cannot be overemphasized. Whatever livestock development strategy is to be pursued, such a strategy must be preceded or accompanied by the establishment of facilities or infrastructure that enhance good livestock management, particularly with regard to livestock nutrition and health. Further, it must be recognized that improvements in the production system must call for complementary improvements in the marketing system in order to ensure that there are sufficient outlets for the producers' milk (and other milk products). Official producer prices (subject to government control) must also be fixed at levels that ensure remunerative returns to producers. Therefore, government policies should not only focus on the installation of a modern marketing infrastructure (to ensure milk collection, processing and distribution), but such policies must also ensure the viability of investments in the dairy industry, through the adoption and use of the most effective policy instruments, given the objectives of the dairy development and marketing policies

3.14 There are substantial differences between sub-Saharan African countries in the objectives of their dairy marketing policies, policy instruments which they use, and the precise effects of these instruments on marketing systems. Such differences reflect the different political, economic, and social circumstances which these countries face as well as the idiosyncrasies of their policy makers. Nevertheless, while there are few generalisations about dairy policies which apply precisely and uniformly to all sub-Saharan African countries, useful - lessons can be learnt from experiences in different countries. A review of the overall national dairy development policies for Kenya, Ethiopia, Burundi, Zambia and Nigeria suggests that the major objectives that are often associated with dairy marketing policies include the following:

(i) To provide higher prices to producers;

(ii) To provide more stable prices to producers;

(iii) To secure reliable milk supplies for urban areas at reasonable prices;

(iv) To reduce marketing costs;

(v) To improve hygiene and quality of products;

(vi) To ensure minimum nutrition levels to certain sectors of the population by ensuring that they get easy and cheap access to milk;

(vii) To raise and channel investment funds into dairy production by using profits made from the resale of materials obtained as concessional imports or food aid, and

(viii) To provide consumers with convenient services at prices they can afford (or are willing to pay) - an indicator of economic efficiency.

3.15 The major policy instruments which countries deploy in order to try and achieve their objectives of marketing policies include the following:

(i) Setting up of monopoly/monopsony organisations, either private (e.g. cooperative) or parastatals, in order to:

(a) Secure economies of scale;

(b) Operate monopsonistic/monopolistic trading practices;

(c) Achieve improvements in hygiene/product quality by direct government action through its own controlled parastatal corporations;

(ii) Licensing and inspection of competing traders to ensure achievement of minimum hygiene and quality standards - as stipulated in law (or rules and regulations that govern trade in dairy products);

(iii) Subsidies to producers and/or consumers;

(iv) Encouragement of competition by making access to information, skill and capital easier;

(v) Provision of processing and storage facilities (e.g. for butter), constructed at government expense, to private traders at cost or at subsidized prices; and

(vi) Use of milk-buying chains to distribute dairy production inputs, thus facilitating the dairy production process.

3.16 The preceding account of the objectives of dairy marketing policies and the policy instruments that have been used in order to try and achieve some of these objectives is in no way all-inclusive. The account is merely illustrative of the range of policy objectives and instruments which have commonly been associated with dairy marketing policies in a number of countries. One can expect that a given country will have to base its choice of the policy instruments to be used to achieve its objectives on local circumstances. Hence there may be no single policy instrument which will prove effective in promoting dairying under different sets of circumstances.

3.17 One of the major policy instruments which a large number of countries in sub-Saharan Africa have adopted as a means to try and achieve their dairy marketing objectives is the establishment of large-scale and often parastatal marketing enterprises, which, in turn, have usually been given both monopsonistic and monopolistic powers over both the domestic and external trade in dairy products. Even though some countries have used other policy instruments, ranging from the imposition of restrictive dairy trade practices to the manipulation of domestic prices for dairy products with a view to cushioning and encouraging local dairy development, it appears that the question of what types of marketing systems should be adopted to accompany different dairy development projects under different sets of circumstances deserves some special consideration.

3.18 Many dairy development projects in sub-Saharan Africa in the past have been launched prior to detailed evaluations of the types of marketing systems that would best handle the marketable surpluses of dairy products which would accrue to such projects, and the same trend appears to continue even now. Where such projects have been established, they have usually been accompanied by the establishment of government marketing organisations to collect, process and resell milk and milk products. In some cases, such governmental organisations have been given responsibility to handle the factors of production. Some of these organisations appear to have been relatively successful, but others have had serious problems. In some cases they have initially been established primarily to serve the interests of large-scale farmers and have only later been charged with serving small-scale farmers as well. Such government dairy marketing organisations have tended to seek and have usually been granted monopolistic and monopsonistic powers which they have justified by reference to the interest of both consumers and producers. In a number of countries other non-government marketing systems exist; sometimes they occupy different sectors of the marketing chain to the governmental organisations; sometimes they operate in direct and often illegal competition with the government organisations in the same area, in the same section of the marketing chain and at the same time. Little is known of the costs and efficiency (including matters of hygiene, range of services offered, convenience etc.) of these private marketing systems relative to the ones owned by government. In some countries strong cooperative dairy marketing organisations also exist, and these may complement activities of the government marketing organisations or operate independently.

3.19 Relative efficiency of alternative dairy marketing systems can be examined and evaluated in terms of several criteria which include:

(i) reliability and stability of the services offered to consumers;

(ii) level of marketing costs;

(iii) convenience and responsiveness to consumer demand;

(iv) contribution to the improvement of the income of producers; and

(v) contribution to the achievement of certain goals which may be prescribed for the marketing system over a specified time period.

The ability of marketing systems to provide both an attractive producer price and a reasonably low consumer price simultaneously may be said to be an important criterion in the evaluation of the relative efficiency of alternative marketing systems. However, other criteria are equally important. Even though many countries often have both small-scale and large-scale dairy marketing enterprises, be they private or parastatal, operating alongside each other, little is known -about the merits and demerits of alternative dairy marketing channels in sub-Saharan Africa in terms of the criteria listed above. However, it appears that the governments tend to pursue policies that favour the large-scale enterprises, even though some evidence suggests that small-scale enterprises often incur lower marketing costs and are thus able to offer higher prices to producers. The large-scale and often state-owned marketing enterprises often face stiff competition from private traders or vendors when trying to secure raw milk supplies for processing in those areas or countries where private vendors are free to supply raw milk directly to urban consumers. For instance, Kakunze (1983) cites this as a major reason for the low levels of milk intake by the Bujumbura dairy plant in Burundi.

3.20 The establishment of large-scale dairy marketing enterprises with virtual monopsonistic and monopolistic powers over dairy marketing in many sub Saharan African countries has often been justified on the grounds that such marketing channels are relatively more efficient than alternative marketing channels, in spite of the lack of evidence to support that "justification". In fact, the outbidding of the modern large-scale dairy plants by private vendors when competing for raw milk supplies suggests that the setting-up of such large-scale marketing firms as a policy instrument designed to achieve economies of scale has not been effective in most cases. When faced by stiff competition for raw milk supplies from private vendors, the modern dairy plants have often resorted to government protection instead of making efforts to improve their efficiency, lower their operating costs, and hence becoming more competitive with private vendors. Such marketing firms have often used the fact that they have to pay producer prices and operate on marketing margins fixed by the government as the excuse for their financial difficulties. To protect modern dairy plants, governments often find it easy to bare sales of raw milk in urban areas by private vendors (e.g. KCC and the urban markets in Kenya). Even though the marketing policy briefs in many countries recognize the need to have a competitive marketing system as the basis for enhancing or improving marketing efficiency, government often tend to pursue policies that favour and usually end up protecting a few marketing firms in the industry. The example given in the previous paragraph whereby governments protect high-cost dairy operations through the banning of the participation of petty traders and other private vendors in dairy marketing raises an important and fundamental issue regarding the appropriate policy options.

3.21 The issue is whether governments adequately monitor the effectiveness of their selected policy instruments in terms of their achieving the policy objectives they are meant to serve, or whether the survival and continuation of the chosen instrument sometimes become an end in itself. For instance, does the ban of raw milk sales by private traders really contribute to or hinder the intended promotion of domestic dairy production, and what other options are available? Should the private/traditional marketing channels be free to compete along with or complement the activities of the large-scale marketing enterprise, and if so, under what conditions? Even if the small-scale marketing channel is less costly in its operations and can pay more remunerative prices to producers, can the channel meet certain minimum product quality requirements? Clearly, there is no universal answer to these questions, since the answer will depend on situations in different countries What appears to be clear is that an adoption of simpler and cheaper dairy processing, packaging and marketing methods could enable governments to fix more attractive milk producer prices while ensuring that the urban milk consumer prices are maintained at reasonable levels. The Indian dairy industry has achieved considerable success in this respect, primarily by integrating private milk vendors in the overall milk collection, processing and distribution system.

3.22 The preceding paragraphs have indicated that there has been quite a range in the types of policy instruments which many countries in sub-Saharan Africa have used in order to try and achieve the objectives of their dairy development and marketing policies. However, information on the effectiveness of these instruments on dairy development in different countries is relatively scanty, as will be discerned from the discussion which follows of experiences of dairy development and marketing policies in some selected individual countries in sub-Saharan Africa.

3.23 Pursuing a policy that aims at local dairy development is politically sound. However, circumstances may encourage individual countries to adopt policy instruments that encourage a deviation from the objectives of the original policies. Sub-Saharan Africa has become a vast food-deficit region during the last two decades; the availability of cheap food imports (i.e. food imports at concessional rates or prices) and food aid, for instance from the EEC, United States of America (under PL 480 Programme), and the World Food Programme (WFP), appears to have made food imports look an attractive option to the intensification of local food production, especially in the face of increasing domestic demand. This situation seems to have affected the dairy Industry in sub-Saharan Africa whereby the WFP and the EEC have made it particularly easy for many countries to establish modern dairy processing facilities in major urban areas to recombine dried milk and butteroil. Such dairy recombining materials have often been imported by way of food aid (from the WFP) or as "imports at concessional rates" (from the EEC), and they have enabled the recipient countries to supply cheap fluid milk to the urban consumers. However, there are risks in establishing modern dairy plants in urban areas just because cheap imports of dried milk and butteroil (for recombination) can be secured to keep the plants operating. Modern dairy plants entail heavy investments, and they should be installed if there are good prospects of obtaining raw material for processing from local sources in the medium-term or long-term future, particularly because a steady flow of imported raw material cannot always be guaranteed, and failure to keep such dairy plants operating for any "appreciable length of time is costly to the society. This kind of situation appears to have crippled the only dairy plant in Madagascar in the mid-1970s.

3.24 Basically, there is nothing wrong with taking advantage of cheap food imports, as long as this does not result in the overlooking of the need to promote local food production. However, recent tendencies for most countries in sub-Saharan Africa to depend heavily on cheap dairy imports could very easily lead to a situation whereby local dairy production and dairy marketing development projects to serve rural production areas are no longer given priority. One should note here, however, that the WFP food aid in dairy products (usually recombining materials) is usually geared toward the support of the recipient country's efforts in local dairy development. A number of countries appear to have failed to take advantage and utilize the WFP commodities to achieve that objective. Madagascar offers an example of a situation where the only dairy plant in the country's capital city had to close down following lack of raw material to keep the plant in operation after the imports of dairy recombining materials were no longer forthcoming. There is a need to identify what went wrong in such an instance and determine if some alternative policies could have led to success in the development of the local dairy industry.

A review of some experiences of dairy development and marketing in some selected countries in sub-Saharan Africa

3.25. Even though the effects of different policy instruments on dairy development and marketing in sub-Saharan Africa are likely to have differed between countries, there is still something to be learnt from the different experiences. This review gives the experience of Kenya as an example of a country in sub-Saharan Africa where dairy development and marketing policies appear to have had some success. The discussion of the Kenyan experience is also followed by a brief review of the state of dairy development and marketing systems in some other selected countries in sub-Saharan Africa.

Dairy development and marketing policies in Kenya

3.26 The development of the modern dairy industry in Kenya dates back to the late 1920s when the European settlers in the Kenya Highlands introduced exotic dairy cows into the country. The virtually monopsonistic and monopolistic dairy processing and marketing organisation in Kenya, the Kenya Cooperative Creameries Limited (the KCC), was established in the late 1920s to serve the marketing interests of these early European commercial dairy farmers in Kenya. Legally, the dairy industry in Kenya is now regulated through the Dairy Industry Act of Kenya. Under this Act, the Kenya Dairy Board (KDB) was set up "to organize, regulate, and develop efficient production, marketing, distribution and supply of dairy produce in Kenya, while taking into account" the various types of dairy produce that are required by different" classes of consumers" (Chapter 336, Laws of Kenya).

3.27 Kenya's latest dairy development and marketing policies are embedded in the Sessional Paper No. 4 of 1981 on Kenya's National Food Policy, whose broad objectives are: (i) to maintain a position of broad self-sufficiency in basic food stuffs; (ii) to ensure a reasonable degree of food security in all parts (regions) of the country; and (iii) to ensure that every citizen has a reasonable degree of access to a nutritionally balanced diet, through improvements in the marketing infrastructure and the distributive process, and through some social welfare programmes. These objectives apply to the general agricultural sector in the country, but the specific marketing policies are expected to be achieved through a combination of: (a) the promotion of increased rural production of milk, and (b) improvements in the dairy marketing system. With smallholder dairy farmers now being the main producers of milk (about 90% of total production) in Kenya, dairy development programmes aim to strengthen and maintain smallholder milk production through provision of AI (to improve animal productive capacity) and veterinary and extension services (to improve animal health and husbandry standards). Through a pricing policy, dairy producers are guaranteed a regular price review (once a year) to ensure that the prices they get for their dairy products reflect changing cost structures and that they remain remunerative enough to enhance increased dairy production. Consumer prices for milk and milk products are usually adjusted simultaneously to reflect changes in milk producer price, which ensures economic viability of the milk processing and marketing institutions. Failure to reconcile the two prices can have damaging effects. For instance, a 6-month delay in the adjustment of dairy produce consumer prices after the milk producer price had been increased at one time in the mid-1970s adversely affected the operations and profitability of KCC. The Government of Kenya also encourages the development of regional cooperative dairies, which arc expected to enhance improvements in dairy marketing. Promotion of stall-feeding (zero-grazing) systems in high potential, high population density areas (where most of the Kenyan population is found) is also seen as a means of sustaining the growth in dairy production.

3.28 Kenya managed to maintain a position of broad self-sufficiency and also export some dairy products up to the late 1970s. In fact, the country was able to inaugurate a school milk feeding scheme (SMFS) for children in primary schools in 1979, primarily as a means to dispose of surplus stocks of dry" milk which had accumulated during the last couple of years. However, like most other African countries, Kenya was hit hard by a spell of drought during the 1979/80 period and production of all major agricultural commodities declined substantially. Any carry-over stocks were depleted fairly rapidly by the end of the 1980. With shortages of basic foods, it became difficult to maintain the new school milk feeding programme, and local milk supplies had to be supplemented through imports of milk powder and butteroil, which were recombined and distributed as liquid milk. Towards the end of 1983, the nationwide dairy marketing institution in Kenya (KCC) claimed that Kenya was producing more raw milk than could be disposed of in the local market (personal communication, November 1983). However, the same dairy marketing corporation was quoted as stating that consumers would have to put up with reconstituted fluid milk, effective April 1984, until such time as raw milk supplies, which became adversely affected by the bout of dry weather during the first third of 1984, would be forthcoming from the producers (Kenya Times, April 6, 1984).

3.29 The above account of the experience of Kenyan dairy development and marketing throws some light on how the vagaries of weather can get a market that was relatively stable out of balance. The extra demand for milk created through the SMFS in 1979 certainly aggravated the milk demand and supply situation in the face of milk shortages that were caused by drought conditions, but the question that faces planners relates to what should be done in order to cope with such unforeseen circumstances. This question touches on the issue of food security strategies which is beyond the scope of this review. However, Kenya was able to cope with the situation through emergency importation of dairy products (dry skim milk and butteroil), but can this always be a viable solution to such a situation? We leave the answer to this question to be sought through country-specific case studies, since the answer has to be based on dairy production potential and other socio-economic conditions in individual sub-Saharan African countries.

3.30 An argument has been advanced elsewhere in this paper that the extent of direct government involvement in the marketing of a given commodity will influence the types of marketing systems that prevail for that commodity in different countries. There are some other factors which are equally important in influencing marketing systems, and these other factors include the location and volume of production in relation to the location and concentration of consumer centres, and the proportion of total output that is actually marketed, including the extent to which international trade in the given commodity occurs in different countries. For instance, Kenya has a relatively better developed internal dairy marketing system to link rural production and urban consumer centres when compared with the system in Nigeria, primarily because:

(i) the Kenyan dairy industry is tightly controlled by the government;

(ii) about 40% of total dairy output in Kenya enters the formal marketing system, and only about 1196 of total consumption of dairy products (in whole milk equivalents) in Kenya is derived from dairy imports; while

(iii) well under 10% of total dairy output in Nigeria can be said to enter the formal marketing system, and about 6696 of total consumption of dairy products (in whole milk equivalents) in Nigeria is derived from dairy imports, which cater primarily for urban dairy consumers.

The above estimates of the proportion of dairy Imports in total dairy consumption are for the 1980/82 period (von Massow, 1984 (a)).

Experiences on dairy development and marketing in some other countries of sub-Saharan Africa


(i) The case of Ethiopia in Eastern Africa
(ii) The case of Burundi in Central Africa
(iii) The case of Zambia in southern Africa
(iv) The case of Nigeria in Western Africa
(v) A recapitulation of dairy development and marketing systems in sub-Saharan Africa


(i) The case of Ethiopia in Eastern Africa

3.31 Using the terms "formal" and "informal" to describe "government-controlled" and "non-government controlled" (private) marketing systems respectively (as defined elsewhere), the dairy marketing system in Ethiopia can be classified in two subsystems:

(i) a formal dairy marketing subsystem;
(ii) an informal dairy marketing subsystem.

The formal dairy marketing subsystem caters primarily for commercial dairy producers (both small-scale and large-scale farmers), including the commercial dairy enterprises that are organised and operated through the Dairy Development Enterprise (DDE) of Ethiopia. The informal dairy marketing subsystem involves the marketing of milk and milk products (which may include butter and cottage cheese - called "Ayib" by Ethiopians) by smallholder producers, who may include pastoralists. Sales through the informal marketing subsystem may he effected through (i) inter-household sales, or farm-to-house arrangements, and (ii) trading at local centres in dairy products.

3.32 The farm-to-house arrangement for milk marketing usually involves a contractual type of arrangement in which individual producers may offer to deliver raw milk directly to the consumers at their homes or at some convenient location. This arrangement is especially common in the case of milk producers -who ore located in and around large cities, such as Addis Ababa. Rural areas which are distant to big cities have limited or little, if any, markets for liquid milk, and milk surplus in such areas will be converted into butter and/or ghee, and sometimes cheese, and sold in local markets. Such sales in local markets arc usually made through established local traders, who may buy directly from producers at farm-gate. Prices of butter and ghee, and cheese, vary within and between places, usually depending on season. Hence prices tend to be highest during the dry seasons,

3.33 The DDE is involved in both the operation or management of the state-owned large-scale dairy farms and the collection, processing and distribution of milk in the country. Milk collection is accomplished through about 40 established collection centres, which typically have no milk cooling facilities, and which arc located within about 150 km from Addis Ababa, but all are along the five main roads that lead to Addis Ababa. Milk suppliers to the DDE (and the share of respective suppliers in total deliveries) comprise state-owned large-scale farms (48%), medium and large-scale private farms (1596), and smallholders (3496).

3.34 A 1981 ISCDD13 Mission Report cites the main dairy development and marketing policies for Ethiopia as:

(i) provision of technical assistance to the farmers' cooperatives and/or individual peasant farmers, aimed at increasing their milk production substantially;

(ii) construction of milk processing units around larger towns which would function as ready buyers of the increased supply of milk production;

(iii) paving the way for processing methods for milk which would best fit the established rural organisation;

(iv) creation of an outlet for the surplus milk produced by livestock owners far from the centres of consumption;

(v) improvement of the hygiene standards of rural milk products; and (vi) establishment of large-scale state dairy farms so that at least the most urgent demand for hygienic, fresh milk in larger towns can be satisfied.

13 The FAO International Scheme for Coordination of Dairy Development Mission Report on Ethiopia, March 1981, p. 41.

3.35 As observed in the ISCDD Mission Report, milk produced by farmers close to urban centres, such as Addis Ababa, Asmara and Asella, where the DDE operates, commands a fairly reliable market, but such conditions do not generally exist for milk produced in the interior of the country. The general practice by the DDE is to collect fresh milk from collection centres, and from large-scale state and individual farms and to transport that milk for processing at its dairy plants before distribution. The only exception is the Asmara (ECCE) dairy plant, where the producers deliver milk directly to the factory. Generally, the dairy plants in Ethiopia receive uncooled milk, because cooling facilities do not exist at the collection centres and farms, a factor that is associated with a certain degree of wastage before processing. Generally, the main objective of dairy development and marketing policies in Ethiopia is to ensure that the development of regional dairy production is planned in such a way that any surpluses of dairy products over the needs of the local market can be channelled through to an ultimate market. Such an ultimate market is to be provided for primarily in the form of creating adequate manufacturing facilities, which are now managed by the DDE.

3.36 The DDE has dairy processing facilities at Addis Ababa and Asmara. The Addis Ababa dairy plant has a total processing capacity of 60,000 litres of milk per day; the facility can recombine milk powder and butteroil. The Asmara dairy processing facilities are within two units: the Asmara Milk Plant, which has a capacity to process 7000 litres of pasteurized milk per day, and, the Asmara Meat and Dairy Products Factory, which can process between 1500 and 2000 litres of raw milk per day into butter and cheese. The DDE also operates a small-scale dairy processing unit at Assela in the Arsi Rural Development Unit's farm. This facility can process up to 1000 litres of pasteurized milk per day. The DDE milk processing operations involve standardisation of liquid milk to 2.796 - 3.096 butterfat content before this milk is pasteurized and distributed as fresh milk. The butterfat recovered in the process is used in the production of butter. The DDE's pasteurized milk officially sells at prices much lower than those for the raw liquid milk that is sold through the farm-to-house delivery system, yet many observers believe that the raw liquid milk is of questionable quality and is often contaminated and/or adulterated. Nevertheless, it is estimated that between 10,000 and 15,000 litres of raw liquid milk arc sold in Addis Ababa through the farm-to-house milk delivery system every day. There is no doubt that the DDE is trying to implement the policies spelt out for the Ethiopian dairy industry under paragraph 3.23 of. this paper, through its dairy development and marketing activities as briefly highlighted in paragraphs 3.25 and 3.27 above. However, Ethiopia still has a long way to go before fully realizing its objectives of the dairy development and marketing policies. The estimated total milk production in Ethiopia is about 650,000 metric tons per annum. The liquid milk market is believed to account for only about 1096 of the total milk production. This market for liquid milk is located mainly in provincial towns and metropolitan areas (Addis Ababa and Asmara). The 1978 population census in Ethiopia indicated that only about 1396 of Ethiopia's population is urban, i.e. living in towns having populations of at least 2000). Further, Addis Ababa accounts for 4% of the total population, so that only 996 of the Ethiopian urban population lives in urban areas other than Addis Ababa. Despite the small proportion of the population that is urban, demand for liquid milk will often tend to be higher in urban areas than in the country as a whole, mainly as a result of the large concentration of such institutions as schools, colleges, hospitals, military establishments and industries or factories in such areas. Hence urban areas often tend to be under-supplied with fresh milk. However, per caput consumption of liquid milk in Ethiopia, which is estimated to be about 19 kg of milk per head per annum by the International Dairy Federation (IDF), is believed to be the highest in Africa.

3.37 With only about 10% of total milk production going into liquid milk sales, the market for non-liquid milk products in Ethiopia must constitute an important outlet for dairy produce, which is sold as butter, ghee or cheese- The market for such milk products is particularly important in the rural or traditional markets, where the sale of liquid milk is almost negligible. Conversion of milk into butter, ghee and/or cheese increases the product's shelf life and thus facilitates marketing especially in rural areas. Transformation of butter into seasoned butteroil, which is a preferred ingredient in the preparation of "wott", the traditional meat and vegetable stew is another significant milk processing technology in Ethiopia. Butter also tends to be used as a hair cosmetic in some sections of the Ethiopian community. Ayib, which is an Ethiopian type of cottage cheese, also constitutes an important diet ingredient for Ethiopians. Generally, Ayib is prepared by heating buttermilk (a byproduct in butter manufacturing) in order to coagulate the curd, and is similar to but more grainy than the conventional cottage cheese; it has a short shelf life due to its high acidity. Therefore, consumption of Ayib tends to be highly localized (in production areas). Except for small amounts of Gouda and Edam cheese that are produced in Addis Ababa and Asmara mainly for hotels and supermarkets, hard cheese is not manufactured in Ethiopia.

3.38 The preceding discussions indicate that Ethiopia has a relatively complex system of dairy processing and marketing in the sense that the modern (fairy processing facilities, which cater for the formal marketing subsystem, only handle a relatively small amount of marketed production of milk products. As such, the system involves quite a number of market intermediaries, both private traders and the official DDE system. However, little is known about the relative marketing efficiency and performance of the informal and the formal (urban DDE-dominated) dairy marketing subsystems in Ethiopia. Nevertheless, it is evident that the structure of dairy marketing in Ethiopia will vary according to whether one is looking at rural, provincial or metropolitan markets.

(ii) The case of Burundi in Central Africa

3.39 Burundi typifies a relatively underdeveloped dairy marketing system in the Central African subregion. However, Burundi has a high potential for dairy development, and some efforts have been and are being made to improve the marketing infrastructure in order to tap as much milk as possible from the rural areas for the supply of liquid milk to urban areas, where demand for liquid milk is growing rapidly. Production of milk in Burundi is primarily based on traditional livestock farming systems which involve extensive grazing systems on communal lands. However, Burundi is making efforts to modernize the dairy industry and some improved (exotic) dairy cattle breeds have been introduced in the country, primarily in the large state farms at Kiryama in Bututsi-land and at Gifurwe in Imbo-land, which have Friesian dairy cattle. Some small traditional farms also keep some exotic cattle dairy breeds, primarily the Jersey dairy breed.

3.40 An assessment of the development of the dairy industry in Burundi by FAO (1980) suggests that the dairy development and marketing policies for Burundi can be summarized as:

(i) to gradually transform the traditional extensive cattle raising husbandry which would satisfy the basic livestock production requirements of the population;

(ii) to improve the procurement and marketing of dairy products by providing the population in urban areas, especially that of the capital city of Bujumbura, with wholesome, hygienic milk products of controlled quality; and

(iii) to supply milk to vulnerable groups at subsidized prices.

Therefore, promotion of local milk production and the improvement of cattle (through artificial insemination) are seen as major dairy development programmes, which are to he supported through activities to improve the collection and marketing of milk, particularly in the rural areas.14

14 FAO/WFP Interim Evaluation Summary Report on Dairy Development in Burundi (Rome, October 1980).

3.41 Reliable data on milk availability in Burundi are difficult to establish because most of the milk which is produced in the country is consumed directly by the producing households, and the little surplus that there may be is sold through a rural inter-household marketing system whose operations and performance are difficult to evaluate. However, there are two large dairies in Burundi whose capacities and milk intakes can give an idea of the amount of milk that enters the formal (modern) milk marketing system in Burundi. The two dairies are:

(i) the cheese processing plant at Kiryama; and
(ii) the Central Milk Processing Plant at Bujumbura.

The Kiryama dairy plant has an annual processing capacity of 120,000 kg of milk, while the Central Dairy Plant at Bujumbura has an annual processing capacity of 1.6 million kg of milk.

3.42 Demand for liquid milk is relatively high in urban areas in Burundi, especially in the city of Bujumbura, where supplies of liquid milk can hardly keep up with demand, particularly during the dry season. The city of Bujumbura, which has a population of about 150,000 people, is estimated to have a per caput milk consumption of 0.07 litres per day (1983 estimate by Kakunze - see the list of selected references). This consumption estimate for 1983 does not appear to differ substantially from the 1980 FAO estimate, which placed the potential total demand for milk in Bujumbura at 10,000 litres per day in 1980. FAO emphasizes the deteriorating milk production situation in Burundi in 1980 by stating that while demand has constantly increased, the production of fresh milk has progressively decreased. This statement is supported by the observation that about 10,000 litres of milk a day were available in 1970 within a radius of 70 km of Bujumbura, but that the quantity available in 1980 was estimated to be in the order of about 6000 litres of milk a day.

3.43 Marketing of milk in Burundi involves both a formal (official channel) and an informal (private channel) marketing subsystem. The dairy processing plants represent the formal marketing subsystem. Both the private vendors and the dairy plants are involved in milk collection and distribution to ultimate consumers. As noted earlier on, there are only two dairy processing plants in Burundi (1983 situation).

3.44 The Kiryama dairy plant gets its milk supplies primarily from the Kiryama state-owned farms in Bututsi-land, while the Bujumbura dairy plant primarily relies on the Gifurwe state-owned farms in Imbo-land. However, the Bujumbura dairy plant also receives between 1000 and 1500 litres of raw milk per day from some farmers from neighbouring Zaire. The Central Dairy Plant at Bujumbura operates some organised milk collection and distribution routes. However, the plant faces stiff competition from private traders or hawkers, especially in the Ruzizi plain, and this factor often forces the Bujumbura dairy plant to seek out milk from the more remote areas of the flatland. This plant normally uses bicycles and lorries (especially when wet) to collect and distribute milk.

3.45 Table 19 gives an idea of the performance of the Bujumbura dairy plant in terms of milk intake during the 1978-1982 period.

Table 19 Milk Intake by the Central Dairy Plant at Bujumbura, 1978-1982

Rated Plant Capacity:

(1)1.6 million kg* of milk per year


(ii)About 4384 kg of milk per day

Year

1978

1979

1980

1981

1982

Intake: (i) Annual

6,32,028

631,485

681,945

585,081

671,445

(litres) (ii) Daily

1 732

1730

1 868

1 603

1 840

*A litre of standard fresh milk weighs nearly one kilogram, so that capacity in kg or litres poses no problem for comparison purposes.

SOURCE: Adapted from Kakunze, (1983).

The milk intake figures presented in Table 19 clearly indicate that the Bujumbura milk plant has been operating below capacity most of the time during the 5-year period. This factor may be attributable to two major factors: (i) lack of sufficient production to supply the plant; and (ii) the inability of the dairy plant to compete with local traders or hawkers within the periphery of Bujumbura because the private traders or hawkers can offer more competitive prices to producers in the neighbourhood of Bujumbura city.

3.46 The Bujumbura plant has to buy milk from producers at a price fixed and controlled by the Government, whereas private traders (vendors) vary their prices according to supply and demand. Hence these vendors will often outbid the dairy plant for milk supplies. By law, the Bujumbura dairy plant has to operate on a fixed margin of 1896, but Kakunze (1983) observes that private vendors' marketing margins may vary from 27% up to 42%. The official milk producer price in Burundi used to be FBu15 25 per litre before July 1982, and Kakunze (1983) blames the low producer price levels as the main cause of the low milk intakes by the Central Dairy Plant before 1982 (see Table 19). Milk intake by the plant improved substantially after the milk producer price was raised from FBu 25 to FBu 45 per litre. The level of the new producer price is said to have been so attractive that it immediately led to more raw milk supplies, even from the neighbouring dairy farmers in the Republic of Zaire.

15 FBu refers to Burundi francs, the currency of Burundi.

3.47 With the demand for liquid milk in Burundi outstripping local milk supplies, Burundi has been importing some dry milk, butteroil, butter and cheese, mainly. from Kenya and the EEC, in order to try and meet local demand for milk and milk products. The dry milk and butteroil have normally been recombined and sold as liquid milk by the Bujumbura dairy plant. Table 20 illustrates the development of the imports of different dairy products into Burundi during the 1977-1980 period and indicates that the value of dairy imports toy Burundi almost doubled during the 4-year period. The table also indicates that the imports of dry milk (and butteroil for recombination) have constituted the bulk of the dairy imports, implying that there is a fast market for liquid milk in the country which cannot be satisfied from local production. A comparison of annual milk intake by the Bujumbura dairy plant (Table 19) and the annual volume of dairy imports into Burundi (in whole milk equivalents, DIWME; Table 20), most of which are no doubt consumed in the major towns, especially in Bujumbura, clearly indicates the high degree of dependence of Burundi on dairy imports in as far as the consumption of dairy products that are procured through the marketing system is concerned.

3.48 Even though not much information is available about the product flows and market shares of the different marketing channels (marketing intermediaries)), it is apparent that Burundi has a largely rural dairy marketing system, with the formal marketing subsystem that serves primarily urban areas handling only a small proportion of total milk production in the country- The rural inter-household marketing arrangements appear to be relatively important in Burundi, but there are no data to support this proposition. Peri-urban to urban product (milk) flows through private traders/hawkers are an important means of getting raw liquid milk to urban consumers. Only the Central Dairy Plant at Bujumbura and the Cheese Plant at Kiryama appear to be involved in processing and distribution of milk and milk products. Little information is available on the forms in which milk in the rural traditional areas of Burundi is utilized (i.e. whether as fresh, sour, or processed milk products).

Table 21 Dairy Imports by Burundi, 1977-1980

Year

Product Type

Quantity (kg)

c.i.f. Value (FBu* 1,000)

1977

Whole milk powder

367,332

59,260


Skimmed milk powder

15,745

1,737


Fresh butter

41,902

7,533


Butteroil

2,507

350


Cheese

44,356

18,411

Total

DIWME**

3,603,161

87,291

1978

Whole milk powder

465,033

66,589


Skimmed milk powder

30,609

1,634


Fresh butter

63,300

7,494


Butteroil

971

202


Cheese

36,881

11,000

Total

DIWME**

5,354,704

86,919

1979

Whole milk powder

1,187,511

132,428


Skimmed milk powder

50,840

4,525


Fresh butter

51,067

12,461


Butteroil

5,443

752


Cheese

349,259

77,096

Total

DIWME**

11,328,793

227,262

1980

Whole milk powder

664,205

124,964


Skimmed milk powder

10,931

1,491


Fresh butter

38,400

18,126


Butteroil

49,135

5,994


Cheese

21,136

13,938

Total

DIWME**

5,870,552

164,513

Note: *FBu refers to Burundi francs.

** DIWME refers to the Gross Amount of Dairy Imports in Whole Milk Equivalents (calculation by author).

SOURCE: Kakunze,(1983).

(iii) The case of Zambia in southern Africa

3.49 The development of the dairy industry in Zambia reflects the trends of events in the country prior to independence. The dairy industry exhibits & dichotomous structure of a traditional sector and a modern sector. The modern dairy sector is still largely owned by European farmers, who own large farms through written tenure, while the traditional dairy sector consists of small-scale family farm units, which are. owned through customary tenure arrangements. It was originally envisaged that the railway line in Zambia would serve the farming areas occupied by European settlers during the pre-independence era. Consequently, the modern dairy sector has developed "along the railway line", while the traditional dairy sector has developed "off the railway line".

3.50 Commercial dairying in Zambia dates back to the 1920s, when the European settlers in the country introduced exotic dairy breeds. These early dairy farmers continued to contribute to the steady bulk of marketed milk production until 1964 when Zambia became politically independent. Since 1864, many of the European commercial dairy producers have either left the country or stopped milk production, a situation which has resulted in a steady decline in the supply of marketed milk in the country. In illustration, we note that marketed milk fell from 16 million litres in 1964 to about 10.5 million litres in 1974. Realizing the declining trends in local production of milk for the market, the Government of Zambia began establishing dairy farms in the late 1960s, but it appears that these farms have not performed as well as they were expected to.

3.51 Generally, dairy production in Zambia is relatively small a relation to the large domestic market for dairy products. The country was estimated to have about 600,000 small-scale milk producers (traditional dairy subsector) and about 100 large-scale commercial producers (modern dairy subsector) in 1982. The 600,000 small-scale producers basically provide for on-farm milk consumption by their households, and the estimated milk production from this subsector in 1982 was 28 million litres of milk. The 100 commercial large-scale dairy farms, including 11 state farms that are operated by the Zambia Agricultural Development Limited (ZADL), were estimated to have produced about 10.5 million litres of milk during the same period.16 Generally, marketed milk production is estimated to satisfy only about 30% of the domestic demand for liquid milk, as determined by demand in the formal (official) marketing subsystem, so that 70% of that demand has to be met through sales of recombined and/or reconstituted liquid milk from imported dry milk and butteroil. Generally, milk production from the traditional subsector is estimated to be twice the volume or the quantity of the milk produced in the modern (commercial) subsector, but little of that milk is marketed (Kaluba, 1983).

16 All these estimates are as reported in the FAO/ISCDD Draft Report on Mission to Zambia, June 1982 (FAO, Rome, June 1982).

3.52 Dairy development and marketing policies in Zambia aim to establish a sound basis on which the dairy industry can develop and expand in order to meet the ever-growing demand for dairy products in the country. The Government of Zambia recognizes the need to encourage milk production in places adjacent to the centres of demand, with a scheme that involves African farmers to the maximum. Since most African farmers are small-scale producers, promotion of increased domestic dairy production is not only seen as a means for improving farm incomes and substitution of imports, but also as a means to improve the nutrition of the people of Zambia. Within the overall national dairy development framework, a high priority is accorded to the development of marketed milk production in the traditional subsector17. - By June 1982, the Government of Zambia had already formulated a major programme for rural milk production and collection in an effort to implement the dairy production development and marketing policies.

17 Dairy Development Plan, as spelt out in the Third National Development Plan (Zambia), 1979-83, as summarized in ISCDD (FAO) Mission Draft Report, 1982.

3.53 The Dairy Produce Board (DPB) of Zambia is the statutory agency that executes the marketing policies in the country. The DPB was formally established in 1964 with the power to control the buying, manufacturing, importation and marketing of dairy products in Zambia. This statutory agency affects dairy marketing in Zambia through the operation of a number of milk depots at the main urban centres in the country, which are located "along the railway line", where the commercial dairy producers bring their milk for sale. The only exception to this formal marketing arrangement are the milk sales which are made by (i) individual producers (primarily in the traditional cattle areas); (ii) cooperative organisations (notably the Zambezi Cooperative Dairy in Livingstone, which was estimated to handle about 1 million litres of milk in 1981 when the DPB handled about 12.1 million litres of milk from local production); and (Hi) state dairy farms that are located in areas "off the railway line". For the state dairy farms that are located "off the railway line", their milk sales are made through established retail shops. Kaluba (1983) reports that there are some individual producers in Zambia who operate milk delivery services, by either hawking milk around the villages adjacent to production areas or trekking for several kilometers on foot or on bicycle to seek out buyers for their milk.

3.54 Commercial dairy producers are estimated to provide about 66% of the fresh milk intake by the DPB. For instance, such farms delivered 8 million litres of fresh milk to the DPB in 1981, when the total intake of fresh milk by DPB was about 12.1 million litres. The rest of the fresh milk intake by the DPB is from the 11 state dairy farms.

3.55 Commercial dairy farmers in Zambia appear to be very sensitive to the level of milk producer price. For instance, the daily intake of fresh milk by the DPB increased from an average of 17,000 litres in 1980 to about 30,000 litres in 1982 following substantial increases in the milk producer price (FAO, 1982). The substantial increase in daily milk deliveries to the DPB are believed to have resulted from the decision by individual commercial dairy producers to supply less and less milk to the informal dairy marketing subsystem as the price obtainable from the formal (official) dairy marketing subsystem became more and more remunerative.

3.56 With the domestic production of dairy products being far below the levels needed to satisfy domestic market demand for liquid milk, Zambia has had to depend on imports of dairy products to bridge that gap. The main dairy imports have been by way of food aid from the EEC in recent times. The EEC has been donating dry skim milk and butteroil to the Government of Zambia, which, in turn, has sold such dairy recombining material to the DPB in order to generate funds for further local dairy development Generally, products made from recombined liquid milk have been sold at prices much lower than those for products made from locally produced fresh milk There have been large fluctuations in the volume of sales of recombined liquid milk in Zambia since 1974. For instance, the recorded sales of recombined liquid milk (by DPB) were 20 million litres in 1974, 30 million litres in 1976, 11.2 million litres in 1980, 8.9 million litres in 1981, and an estimated 14 million litres in 1982. The major problem in maintaining sales of recombined liquid milk is not the lack of recombining material, but is associated with the fact that Zambia has not been in a position in recent years to raise enough foreign exchange to purchase sufficient packaging material for the final products. The donated (food aid) dairy recombining material from the EEC has to be packaged (after, recombination) in imported material (tetrapak paper).

3.57 The foregoing account of dairy marketing in Zambia suggests that the marketing structures in Zambia are fairly similar to those characterizing the dairy industry in Burundi. However, there is some evidence that any surplus milk from the traditional sector in Zambia will often be sold as sour milk, which does not appear to be the case in Burundi. For instance, a class of dairy market intermediaries who specialize in buying milk, mostly sour, from the cattle owners far away from markets in Mougu area and selling it in the settlement areas along the Zambezi plains is said to have sprung up in recent years (Kaluba, 1983). The sales of fresh milk in the traditional sector are often made using ¾ - litre bottles, but sometimes it is sold in 2½ - litre containers, while sour milk is sold in ¼ to ½ - litre cups. Government offices, schools, hospitals and rural trading centres or stores constitute the main market outlets for milk from the traditional cattle sector. The prices obtained in the traditional dairy sector, therefore, tend to decline with increasing distance from the location of these market outlets. Like Burundi, Zambia does not produce enough dairy products to meet domestic demand. Consequently, the volume of imports of dairy products into Zambia has continued to grow during the last two decades. The major items constituting these dairy imports are dry milk and butteroil for recombination into liquid milk.

3.58 The decline in commercial milk production in Zambia since 1964 is, to some extent, associated with the mass exodus of European settlers from the country after political independence. However, there is evidence too that the decline in production is associated with the declining competitiveness of dairying as an enterprise vis-a-vis alternative farm enterprises. The pricing system for dairy produce is said to have been relatively unresponsive to changing cost - price relationships in the dairy industry. For instance, FAO (1982) observes that milk producer prices in Zambia were not reviewed frequently prior to 1981, and that price increases did not cover the increased cost of production. The dramatic increase in the daily intake of fresh milk by DPB from 17,000 litres in 1980 to 30,000 litres following a substantial producer price increase in January 1982 is perhaps a good evidence for the preceding observation. In 1980 the milk producer price was K 0.2518 per litre, and in January 1982 it was fixed at K 0.43 per litre.

18 K stands for Kwacha, the Zambian national currency, which exchanged at about K 0.9 per 1 US dollar in 1982.

(iv) The case of Nigeria in Western Africa

3.59 Like Ethiopia, Nigeria has a relatively largo and important traditional livestock sector which accounts for the major part of local milk production in the country. Local milk production in Nigeria is from indigenous cattle breeds, which are kept primarily by the transhumant pastoralist tribesmen. The transhumance element in traditional pastoralist livestock production systems is a feature that is common to all extensive grazing systems. The main emphasis in all - traditional or pastoralist production systems seems to be milk production for family consumption, and the management system appears to be Intended to ensure a year-round supply of milk from the herd. Unfortunately, not much literature is available on the livestock production and dairy marketing in Nigeria, so that only a synoptic view of the situation that existed during the 1970s is presented in this review.

3.60 According to an official report19, 97% of the national herd of cattle in Nigeria comprises the indigenous cattle breeds, and the average milk production per cow is only about 0.74 litres per day, ranging from 1.27 litres of milk per cow per day during the wet season to 0.36 litres of milk per cow per day during the dry season. Milk production under modern intensive and semi-intensive systems in Nigeria contributes only about 3% of the national output of milk and is confined almost entirely to government and other institutional experimental farms. Nigeria is estimated to have been producing only about 50% of its total domestic requirements for dairy products by the mid-1970s, and the country has continued to be the largest importer of dairy products in Western Africa during the last two decades.

19 The Federal Ministry of Agriculture (FMOA) and the Green Revolution National Committee (GRNC) Livestock Production Plan for Nigeria, 1981 - hereafter referred to as FMOA/GRNC, 1981.

3.61 The major traditional cattle producers are the Fulani tribesmen. Traditionally, the Fulani women decide how much milk goes to family consumption and how much is sold. Increasing opportunities for the Fulani people to make contacts with the modern or formal sector in urban areas have increased the propensity of the Fulani to purchase consumer goods from such areas. This factor appears to be changing the traditional pattern whereby most milk was retained for family consumption towards the present situation whereby the Fulani women sell a greater proportion of their daily milk allotments from their husbands. Traditionally, men do the milking, after which they apportion and distribute the milk amongst their wives20. Generally, women with younger children appear to retain a larger proportion of milk for the family than that retained by women with comparable numbers of older children.

20 Waters-Bayer, A. (1983). "Small-scale Dairy Production Among the Fulani Pastoralists in Nigeria." ILCA Internal Communication (ILCA Subhumid Programme, Kaduna Nigeria).

3.62 The intensive and semi-intensive livestock production systems which constitute what might be called the modern dairy sector in Nigeria, even though this is very small in terms of its contribution (3%) to total national milk output, commenced with the establishment of a number of government Livestock Improvement and Breeding Centres (LBC) in different parts of the country during the late 1940s and early 1950s. The trend continued into the 1960s and started to attract a number of farmers in the private sector, who now engage in some mixed farming enterprises, either as individuals or in group cooperatives. Though cattle production in the mixed farms was initially influenced by the Fulani systems, the mixed-farm systems have an element of specialization (either into beef or into milk production) - see FMOA/GRNC Report (1981).

3.63 Farms in the modern dairy sector are stocked primarily with imported (exotic) breeds of cattle, mainly Friesian/Holstein, Jersey and Brown Swiss breeds. Some farms maintain purebred herds, while crossbreeding to improve milk production from the indigenous zebu cows has been attempted in some of the experimental farms, such as Vom, Shika, Agege and the University of Ibadan farm. Improvements (crossbreeding) have been effected through exotic bulls and artificial insemination (Al), though the results are not impressive yet. The cattle in the modern sector are maintained on cultivated pastures, with supplementary feeding with concentrates. The average herd size in this sector varies from 30 to 50 head of cattle in the experimental farms, and from 50 to 200 head of cattle in the urban dairy farms that are operated by the various State Ministries of Agriculture. The cattle in the modern sector are usually housed, and standard milk recording is practised in most farms. Milking is by hand or machines, and the farms have modern dairy processing facilities (FMOA/GRNC, 1981).

3.64 FAO (1975) cites the following as the major factors that limit dairy development in Nigeria:21

(i) nomadic way of cattle production;
(ii) unfinished land reform;
(iii) seasonal deficit of feed and overstocking of grazing land;
(iv) low genetic potential for milk production from local cattle;
(v) cattle diseases, such as trypanosomiasis and streptothricosis, as well as infertility problems;
(vi) inefficient extension work in dairying and animal husbandry;
(vii) inadequate marketing organisation for milk and milk products;
(viii) seasonal shortages and high prices for milk and milk products, which restrict expansion of consumption;
(ix) shortage of trained staff;
(x) lack of coordination and effective organisation of dairy industry;
(xi) lack of legislation, standards and control of milk and milk products; and
(xii) negative attitude toward dairying among some authorities.

21 FAO/ISCDD Country Mission Report on Nigeria (Rome, September, 1975), page 50.

3.65 Whereas not all of the above factors are mutually exclusive (for instance points (vi), (vii) and (x) are clearly interrelated), these factors have been cited by FAO and other dairy specialists as being the major ones limiting dairying in a number of other countries in sub-Saharan Africa, for instance in Ethiopia. Since 1975, Nigeria appears to have made some steady progress toward overcoming some of these bottlenecks to dairy development (FMOA/GRNC, 1981).

3.66 Nigeria does not appear to have had a coherent policy for local dairy development for a long time, since the country has been following a liberal imports policy despite efforts to establish government Livestock Improvement and Breeding Centres (LBC) to act as the nucleus for livestock development in different parts of the country since the late 1940s (see paragraph 3.56 of this paper). However, a framework for dairy development which is integrated within the Third National Development Plan (1975-80) of Nigeria suggests that the major objectives of dairy development and marketing policies in Nigeria are:22

i) to ensure adequate food supplies and to increase animal protein Intake, with a view to meeting the growing consumer demand for dairy products and improving the nutritional status of the population;

(ii) to pay special attention to the development of cattle production and make fuller use of existing potential for expanding the domestic milk output;

(iii) to improve rural employment and incomes by providing more productive work opportunities and by promoting an equitable distribution of the national income and a higher standard of living in the rural areas; and (iv) to enhance self-sufficiency by encouraging dairy imports substitution.

22 As summarized in the FAO/ISCDD Nigeria Country Mission Report of September 1975.

3.67 With the demand for milk and milk products being nearly twice the level of domestic production of these products, Nigeria is viewed as a country where imports of dairy products will continue to play an important role in bridging the local supply and demand gap for dairy products in the foreseeable future. With this understanding in the background, the FAO (1975) mission recommended that the liberal dairy imports policy should be continued while standing ready to regulate trade, if necessary, in order to avoid any interference in the steady expansion of the domestic production of milk and milk products. The need to improve domestic reconstitution/recombining and milk packages industry was also emphasized.

3.68 Generally, Nigeria has a relatively free-enterprise dairy marketing system, with minimal state interference. On the basis of the mode of production (traditional versus modern dairy production subsectors) and the marketing of imported dairy products, three dairy marketing subsystems can be identified:

(i) the traditional dairy marketing subsystem;
(ii) the modern dairy marketing subsystem: and
(iii) the dairy imports marketing subsystem.

3.69 Milk is an important ingredient of the staple diet of the people who produce milk in the traditional system, primarily the Fulani. However, milk has also become an important source of cash income for these people. Dairy marketing in the traditional sector is primarily undertaken by women, and the sale of milk and milk products among the Fulani people is becoming increasingly important with the monetarization of the traditional livestock economy. The Fulani women go to local markets regularly to sell sour milk (called "nono") and butter (called "mai") along with millet and sorghum flour balls (called "fura"). Little or no trade in fresh milk occurs in the traditional dairy markets. The "fura" is eaten with "nono". Hence the two products ("fura" and "nono") are usually sold together by the vendors, and are usually consumed on the spot. Household heads also often attend local markets, and the pattern of trading has been such that there has developed a natural affinity between herd movements and the location of population centres and local markets. The traditional dairy marketing subsystem thus caters primarily for rural dairy producers and consumers.

3.70 As noted in paragraph 3.62, the modern livestock production subsector, which may be said to be the commercial livestock production subsector in Nigeria, is estimated to contribute no more than 3% to the estimated total output of dairy products in the country. For this reason, dairy marketing in. the modern livestock production subsector has remained relatively simple in the sense that all farms that produce milk within the modern subsector ape generally located within easy marketing distance of the consumption centres. Milk in the modern sector is usually processed before distribution to consumers. The objective of dairy development in the modern subsector in Nigeria is to organize dairying along the lines of a typical commercial dairy enterprise in the developed countries, but there is still a lot to be done toward achieving this objective.

3.71 Marketing of imported dairy products occupies an important section of the overall dairy marketing system in Nigeria. Imported dairy products, which contribute more than 50% of all dairy products that are consumed in Nigeria, are marketed by private companies. Even though there is a considerable degree of competition for the domestic market amongst these private companies that import and market dairy products in Nigeria, FAO reckons that dairy products have remained beyond the reach of a large part of the population in Nigeria because the majority of the population have low purchasing power, while the prices of the available imported dairy products are relatively high. The Government of Nigeria would like to see the dairy products reach as many groups of the population as possible, yet it would be fairly difficult to rationalize the dairy marketing policies in order to direct the flow of marketed dairy products to achieve that objective when the distribution system is controlled by private companies.

3.72 Even though the efforts by the Government of Nigeria to introduce intensive and semi-intensive, livestock production systems since the late 1940s (see paragraph 3.52) to serve as the nuclei for modern livestock production systems in various parts of the country do not appear to have made a major impact yet, there are indications that some changes in the traditional livestock production systems have been occurring gradually during the last couple of decades. For instance, the FMOA/GRNC Report (1981) notes that there has been an important structural transformation of the traditional livestock production system during the last few decades. Of the traditional Fulani graziers who used to practice transhumant pastoralist livestock production systems, 40%-50% are now settled (sedentary), while another 20%-30% are estimated to be semi-settled. Thus only about 2096-40% of the Fulani tribesmen still follow the traditional transhumant livestock production practices. The Federal Government of Nigeria views these developments with great interest because they suggest that there is now more scope than ever before for the transformation of the traditional subsistence-oriented dairy production systems into systems geared toward producing milk and milk products primarily for the market.

(v) A recapitulation of dairy development and marketing systems in sub-Saharan Africa

3.73 The review of the dairy development and marketing patterns in Kenya and Ethiopia (for Eastern Africa), Burundi (for Central Africa), Zambia (for Southern Africa) and Nigeria (for Western Africa) generally suggests that only a small proportion of the total output of dairy products in sub-Saharan Africa actually enters the marketing system. Most of the output of dairy products is consumed within the producing households, and this is particularly true in the case of the traditional livestock production subsector, which is dominated by indigenous livestock breeds and whose production goal is normally to meet the household requirements of dairy products. The modern dairying subsector, which produces mainly for the market and has some improved (upgraded or crossbred) as well as exotic livestock breeds, is relatively small in terms of its share in the total regional output of dairy products.

3.74 Sub-Saharan Africa has become a large net importer of dairy products over the last two decades, and it appears that the region will continue to depend on dairy imports to close the gap between domestic production and effective demand for dairy products for some time in the foreseeable future. Most of the countries in the region will, no doubt, continue to import dry milk and butteroil as recombining material for the production of liquid milk to be supplied particularly to the urban areas. Therefore, measures to improve the marketing infrastructure and to facilitate the linking of rural and urban areas in order to improve the efficiency of the distribution of both locally produced and recombined dairy products should be accorded a high priority. Even though one can expect that a large proportion of imported dairy products will be consumed in urban areas, there is no doubt that it will often be necessary to distribute some of these products, especially the recombined liquid milk, to the rural areas as well.


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