BRIEFING ON KDB & THE KENYAN DAIRY

INDUSTRYNational Dairy Forum, Addis Ababa, Ethiopia, 23-

24 November 2010Presentation by;Martha Mulwa

Chairlady, KENYA DAIRY BOARD23th November, 2009

Background information on Kenya’s Dairy Industry1900: Colonial settlers introduce

commercial dairy farming1928: Formation of Kenya Co-operative

Creameries (K.C.C) 1950: Farmers started lobbying for a

regulatory body.1954: SWYNNERTON plan allowed

indigenous Kenyans to practice commercial dairying

1955: Mr. L.G. Troupe commission formed for the establishment of a regulatory body

Background information cont’1958: The enactment of the dairy industry

Act Cap 336 laws of Kenya established the Kenya Dairy Board

1964: The Kibaki Commission abolished contracted milk quotas

and opened up KCC to all farmers. KCC became a guaranteed market for milk producers with the monopoly to market and

distribute milk and milk products

• 1960’s: A strong smallholder dairy sector grew rapidly with the support of the govt.

• 1980’s: Smallholder farmer support by the Government became unsustainable

.

• 1992: The Dairy industry was liberalized resulting to price decontrols, private milk marketers, and privatization of dairy support services. K.C.C. was opened up to competition from private players, a situation which brought it to a near collapse.

Background information cont’

Kenya Dairy Board - MandateMandate

To Regulate, Develop and Promote the Dairy industry in Kenya

VisionTo be a world class Dairy Developmental and

Regulatory AuthorityMissionTo facilitate the stakeholders’ activities towards a

sustainable dairy industry that provides quality and affordable milk and milk products.

Kenya Dairy Board - functions• Advice the Government on Policy issues

related to the industry• Promote extension, research and other

related technology transfers in the dairy and related industries

• Establish and maintain data on the dairy industry within and out of the country and make it available to industry stakeholders

• Facilitate provision of technical advice and training on processing technologies, milk testing equipment, milk collecting centers

• Promote Local consumption as well as exportation of milk and milk products

• In partnerships with relevant institutions formulate rules and regulations , setting national quality standards for milk and dairy products, packaging materials

• Promote quality assurance programs and regulatory mechanisms for the purpose of protecting consumers against health hazards

• Advise the government on the management of national strategic reserves for dairy products

• Facilitate the development of efficient production, marketing, distribution and supply of dairy products that are consumer specific

• Regulation of imports and monitoring of exports

Kenya Dairy Board - functions cont’

Kenya Dairy Board Management Structure

Board of Directors

Managing Director

Technical Services Department

Finance Department

Administration Department

The Board of Directors consists of 14 members

appointed by the Minister of Livestock Development and representing various actors in the Dairy value

chain

RepresentationMoLDMoF

Kenya Dairy Board – Revenue baseMilk cess - @ 20 cts/LTRProcessors Levy-@ 20cts/Ltr MarketedAnnual License fees

Application Fees- Kshs 600 Primary Producer Licence Fee-Kshs 1,200 Cottage Industry-Kshs 4,000 Mini Dairy-Kshs 6,000 Milk Bar-Kshs 2,500 Cooling Plant(Below 5,000)-Kshs 1,000 Cooling plant (over 5,000)-Kshs 2,000 Processor –Kshs 25,000

Import levy - @ 7% C.I.FGovernment grants – about 20% of the

Board’s annual budget

Kenya Dairy Board - Branch network

KDB has presence in the

major milk production and consumption zones of our

country

Production approx. at 4.2 billion litres of milk per annum (2009)

Total Marketed milk per annum is approx. 2.4 billion litres (formal &informal)

Dairy herd population (2007) – 3.846 million

Contributes 4% of Kenya’s GDP (official figure) but recent estimate puts it at 8.3%

Over 1 million small holder dairy households engaged in dairy production

Current status of the Dairy industry

Generates 365,000 waged jobs and over 500,000 jobs in support services

Milk production in Kenya relies on rain fed agriculture leading to seasonal fluctuations in production

Milk surplus is normally experienced in April to September and a scarcity in January to March

There are 27 active milk processing companies (2008)

The industry has a capacity to process 3.5 million litres per day (however, current utilization is about 45%)

Current status of the Dairy industry cont’

Other categories of licensees (2009) include;64 mini dairies,78 cottage industries1138 milk bars.757 producers

Long life milk installed capacities:Milk powder: 190,000 LTRS/ dayUHT Milk: 400,000 LTRS/dayCheese: 31,500 LTRS/dayButter: 50,000 LTRS/cream/dayGhee: 4,000 KGS/batch

Current status of the Dairy industry cont’

Current status of the industry cont’

Potential to offload excess production through exports

Current status of the industry cont’

Drop in 2008 was attributed to the effects of the post election violence

The formal sector accounts for about 20% of the marketed milk

Current status of the Dairy industry cont’Exports and ImportsExports have grown while

imports have generally gone down-Import &Export regulations 2004

The major export destinations are Tanzania, Uganda, DRC, Rwanda, Burundi, Sudan, among others

Major export products are – (UHT, milk powder, butter, cheese, Ice cream, Yogurt )

Formation of the East African Dairy Regulatory Authorities (EADRAC) has facilitated intra-regional trade

Challenges facing the Dairy industry1. Farm level Issues Poor livestock sheds/milking parlours Personnel hygiene/clothing/medical checks Milk handling equipment Time taken to reach collection/cooling centre Non attainment of raw milk standards- TPC,

density, butterfat Insufficient extension/advisory services to dairy

farmers and training for dairy farm-hands and management,

Inadequate supply/poor access to clean water Low productivity/efficiency Poor milk handling equipment Non adherence to recommended drug

withdrawal periods – drug residues in milk

Challenges facing the industry cont’2. Animal FeedsFeeds -nutrient imbalanceContaminants in milk- (Antibiotics, Aflatoxins,

Herbicides, Pesticides)Inadequate use of concentrates or

leguminous plants to bridge the protein gapInadequate mineral supplementation-

lowered production and fertilityInadequate conservation of feeds for dry

season feedingInadequate monitoring of feed quality

standards.

Challenges facing the industry cont’3. Animal BreedingLimited access to A.I. services leading to

poor quality dairy cows, especially by small scale farmers;

Use of unselected bulls for breeding purposes in the face of poor accessibility to A.I. Services;

Low cow productivityLimited registration of stock and tracking of

breeding programme– risk of in-breeding

Challenges facing the industry cont’4. Animal Diseases ManagementPoor/limited adoption of appropriate disease

control practices by dairy farmers. High incidence of sub-clinical mastitis- poor

milk quality/spoilageHigh cost of drugs, vaccines and sera in the

face of poor practices in disease control;Uncontrolled livestock movement;High prevalence of breeding diseases causing

sterility and prolonged calving intervals and;Misuse of drugs, vaccines and sera leading to

poor efficacy and resistance to regularly used products

Challenges facing the industry cont’5. Milk Quality, Collection and CoolingLimited adoption of the code of hygienic

practice Poor road network in milk producing areas-

long time to reach cooling centreHigh degree of contamination- Adulteration

and poor handlingInsufficient/poor utilization and inappropriate

distribution and location of cooling facilitiesPoor state/distribution of milk collection

centresLimited access electricity, water & waste

disposal systemsLack of a residue management protocol

Challenges facing the industry cont’6. Milk processing and packagingPoor rural infrastructure, such as roads, electricity

and water to facilitate rural investments Inadequate information to guide investments.Narrow product range/limited value additionLimited access to affordable credit facilities for

setting up processing facilities;Limited technologies for small scale processing;Competition from raw/milk itinerant tradersUnder utilised processing capacitiesHigh cost of fossil fuel and packaging materialsLimited access to markets – failure to meet

international standards and lack of a milk traceability system

Priority Intervention areas in the Dairy IndustryImprove productivity per cowEnhance capacity/adoption of feed

conservation technologies by farmersImprove quality, safety and traceability of

milk and milk productsEnhance accessibility to dairy informationAddress the quality of animal feedsEnhance Dairy research and developmentPromote low cost technologiesStrategize on restocking measuresDevelop workable strategies to control

animal diseases

Priority intervention areas cont’Speed up review/enactment of pending

policies and billsStrengthen institutional capacity of

organizations serving the industry such as CAIS, DTI, KDB, among others

Create harmony amongst stakeholder organizations

Enhance stakeholders collaborationEnhance efficiency in the dairy value chainEstablish a sustainable financing of dairy

Regulatory, Developmental and Promotional programs (as in other developed dairy industries

Ongoing Stakeholder collaborationsThe Dairy Taskforce (DTF) -was appointed by

the PS, MOLD, in May 2007The DTF comprises of 23 key

institutions/departments in the Dairy industryRepresented are Breeders, Processors,

Development partners, stakeholder associations, Animal health providers and Government

Mandate is t0; Continuously review the performance of the

industry and recommend interventions Promote coordination of stakeholders activities

in Dairy Development Come up with actionable plans to address

constraints in the dairy industry

Areas of collaboration between MOLD and KDB

Department Areas of collaborations

Department of Veterinary Services

• SPS issues•Traceability issues •Implementation/enforcement of Dairy regulations•Sharing of information•Farmer registration•Accreditation of BDS providers

Department of Livestock Development

•Extension•Farmer registration•Animal nutrition•Information sharing

Planning Department Review of Dairy policies and regulations

C.A.I.S •Promoting breeding services•Registration of livestock•Sharing of information

D.T.I Short-term training of stakeholders

On going programs in the industryProgram Financier Implementor Main

objective

Kenya Dairy Sector Competitiveness Project (KDSCP)

USAID Land O’ Lakes Increase incomes to smallholder dairy farmers

East African Dairy Development Project (EADDP)

Bill & Melinda Gates Foundation

Heifer Project,World Agro-forestry center,ABS,

Promote marketing of milk and strengthening of SBO’s

Improving Quality Assurance in Milk Markets (IQAM)

MESPT SITE Enterprise Promotion

Improve quality along the dairy value chain by building capacity in SME’s

Small-Holder Dairy Commercialization Project

IFAD MOLD Commercialize dairy production

Key stakeholder associations in the industry

East Africa Dairy Regulatory Authorities Council (EADRAC)

Association of Kenya Feeds Manufacturers (AKFEMA)

Kenya National Dairy Producers Organization (KENDAPO)

Kenya Livestock Breeders Organization (KLBO)Dairy Traders Association (DTA)East and Southern Dairy Association (ESADA)East Africa Dairy Stakeholders Association

(EADAS)

Challenges facing the Kenya Dairy Board

Constraint Proposed interventions

Limited resources to fully and effectively undertake its mandate

Improve income base e.g. introduction of Dairy Development levy

Slow formulation and enactment of Dairy policies/regulations

Speed up review/enactment of relevant policies and bills e.g. Dairy policy and bill

Inadequate human resource capacity

Recruit more personnel/build capacity of existing staff

Inadequate working tools Construct a head office, acquire enough vehicles, establish a laboratory facility etc

Proposed Dairy Development LevyCess was introduced in 1959 – 2ctsBy the year 2000, the cess received was KSh 4

million/annumThis made the Board heavily reliant on the

exchequer and compromised on service delivery

In 2000, the cess was increased through a gazette notice to 20cts/LTR. This significantly increased the revenue and service delivery capacity of the Board

Despite the growth in revenue as more milk is marketed formally, the Board still faces financial constraints.

Proposed Dairy Development levy cont’The Board’s expenditure is expected to increase

with increased activities and services in line with stakeholders demands

Formal milk marketing is expected to saturate leading to stagnation of Board’s income

Government is cutting down support on parastatalsImport levy expected to remain low as the Board

regulates on ImportsCurrent cess is charged on producers. Processors, who

benefit significantly from the industry, make no direct contribution to the development of the industry unlike in other countries

Proposed uses of the Dairy Development levy1. Establish a Dairy Development levy• The idea had been initiated in the 1980’s

through the support of the WFP • WFP donated dairy produce (approx. KSh

300 million) to be sold by KCC. Revenue generated was to establish the fund

• Aim was to establish a revolving fund that could be accessed by stakeholders for development

• Collapse of KCC killed the initiative • There is still need to establish a revolving

fund for the industry

Proposed uses of the Dairy Development levy cont’2. Strengthening KDB Dairy Information/ ICT

base• Stakeholders have identified dairy information as

the most critical input in the Dairy value chain• KDB has established a Dairy Information center

to respond to this demand and rolled out e-dairy system for implementation of a Dairy Information Management System

• The system will address generation and dissemination of Dairy information, among others

• Support is required to extend the system countrywide

• The ICT infrastructure of the Board requires to be strengthened

Proposed uses of the Dairy Development levy cont’

3. Promotion of Kenyan Dairy producePromote local market especially value added

productsPromote exports to the regional and export

marketsThe future of the industry depends

significantly on exports

Proposed uses of the Dairy Development levy cont’

4. Improving Quality of Kenyan Dairy produceRecent studies have shown worrying trends in the

quality of raw milk and finished dairy productsThe standards for dairy produce have been

harmonized in the EAC and will soon be extended to COMESA.

The industry has to conform to these standards to sustain and grow dairy exports

Strategies required to adopt and implement GAP’s in milk production and GMP’s in milk handling processing

Traceability of Dairy produce also requires urgent attention

Proposed uses of the Dairy Development levy cont’

5. Advising, Organizing and Facilitating stakeholders

• Enforcement of the Dairy Industry Act, Cap 336

• Capacity Building of stakeholders• Strengthening BDS provision

6. Strengthening stakeholder organizations • Breeding organizations• Dairy Training centers• Genetic Improvement centers• Farmers Training centers• Producer groups etc

Proposed uses of the Dairy Development levy cont’7. Strengthening KDB’s Capacity Human Resource DevelopmentWorking tools

8. Support Research and DevelopmentProduct DevelopmentStudies and surveysLow cost technologiesDissemination of research

findings/technologies

Comparison of KDB levies with other Parastatals Organization

Mandate Levies charged

Budget 2008/2009 (Ksh millions)

Catering and Tourism Development levy Trustees

Promotion of training, marketing, and the development of tourism industry in Kenya

2% of sales 855

Kenya Sugar Board

Regulating, developing and promoting sugar production and marketing

4% of the ex-factory price at the mills and 4% C.I.F on imported sugar

1,500

Electricity Regulatory Board

To regulate production and distribution of electricity

3cts/Kwh 134

Comparison of KDB levies with other Parastatals

Organization

Mandate Levies charged

Budget 2008/2009 (KSh. millions)

Tea Board of Kenya

Develop. Promote and marketing of tea

1% of sale price of Kenyan tea

384

Kenya Plant Health Inspectorate Services

Coordinate all matters relating to crop pests and diseases

1% of value of imports/exports

887 (inclusive of a G.O.K grant of 400 million)

Kenya Dairy Board

Regulate, develop and promote the dairy industry in Kenya

20 cts/LTR of traded milk and 7% C.I.F on imported milk

146

Dairy Development levies in other countriesAdministrator Payments Uses

Danish Dairy Board

Milk Levy fund paid by milk producers and processorsAt rate of Kshs 5.60 per KG of milk

Support to a number of activities including provision of dairy information, research and development, market promotion etc

Dutch Dairy Board

Dairy levy paid by milk producers and processors

Dairy research, information, animal health and quality issues

Canadian Dairy Commission

Dairy levy on milk paid by producers, processors and distributors

Enforcement of regulations, market promotion, support to dairy information

Dairy Development levies in other countriesAdministrator

Payments Uses

United States of America Food and Drug Administration

Various charges as follows;Farms – Grade A milk 200 US dollars/annum - Grade B 125 UD dollars/annum Processors – -Procurement fee 0.02 US Dollars per litre-processing 0.07 US Dollars--Licence fee 500 US Dollars/annum

Regulation of the industry, conducting inspections/sur-veillance

Australian Dairy Commission

Dairy Service Levy/Dairy structural adjustment fund paid by milk producers and consumers as follows;-liquid milk-kshs 0.16 per LT-milk fat kshs- 1.30 per KG-protein- kshs 3.20 per KG-Consumers kshs 5.60 per LT

Research, extension, support to dairy information etc

End of presentation------------------------------

Thank you