THE CAMEL MILK INDUSTRY IN KENYA

Results of a study commissioned by SNV to explore the potential of Camel Milk from Isiolo District to access sustainable

formal markets

By

Muli Musinga David Kimenye Peter Kivolonzi

November 26, 2008

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Table of Contents Executive Summary ………………………………………………………………………. iii Acknowledgements ………………………………………………………………………. viii Abbreviations and acronyms ……………………………………………………………… ix

1. INTRODUCTION ………………………………………………………………………. 1 1.1 Overview ………………………………………………………………………………… 1 1.2 Background ……………………………………………………………………………… 1 1.3 Study objectives ………………………………………………………………………… 2 1.4 Study methodology ……………………………………………………………………… 3

2. CAMEL MILK IN KENYA: An Overview ……………………………………………. 4 2.1 Overview ……………………………………………………………………………….. 4 2.2 The population of camels ……………………………………………………………… 4 2.3 Production and supply of camel milk ……………………………………………. 11 2.4 Demand for camel milk ……………………………………………………………… 16 2.5 Demand-supply gap ……………………………………………………………… 20

3. THE CAMEL MILK VALUE CHAIN ……………………………………………. 21 3.1 Overview ………………………………………………………………………………. 21 3.2 Production ………………………………………………………………………………. 21 3.3 Milk assembly, bulking and transportation ………………………………… ………… 34 3.4 Processing ………………………………………………………………………………. 40 3.5 Wholesale and retail trading ……………………………………………………………… 41 3.6 Input supply ………………………………………………………………………. 45 3.7 Service providers ………………………………………………………………………. 46 3.8 Summary ……………………………………………………………………………….. 46

4. POLICY, REGULATORY AND INSTITUTIONAL FRAMEWORK ………… 48 4.1 Overview ………………………………………………………………………………. 48 4.2 Policy and regulatory environment …………………………………………………….. 48 4.3 Institutional framework ……………………………………………………………… 49

5. THE CAMEL MILK SUB-SECTOR MAP ………………………………… ………… 56 5.1 Overview ………………………………………………………………………………. 56 5.2 The Sub-sector Map ……………………………………………………………… 56 5.2.1 Channel 1: Raw milk to rural consumers ………………………………… …. 58 5.2.2 Channel 2: Raw milk to low-end urban market ……………………………………. 59 5.2.3 Channel 3: Pasteurized milk to high-end urban health market …………………… 60

6. SUB-SECTOR DYNAMICS ……………………………………………………… 62 6.1 Overview ……………………………………………………………………………….. 62 6.2 Driving forces ………………………………………………………………………. 62 6.3 Points of leverage ………………………………………………………………………. 64

7. KEY CONSTRAINTS AND OPPORTUNITIES ………………………………………. 68 7.1 Overview ……………………………………………………………………………….. 68 7.2 Major Constraints ………………………………………………………………………. 68 7.3 Key opportunities ………………………………………………………………………. 71 7.4 Potential interventions …………………………………………………………………… 73

References ……………………………………………………………………………………. 75

APPENDICES Appendix 1: List of persons and institutions interviewed Appendix 2: Study methodology and instruments Appendix 3: Study Terms of Reference Annex 1: Field Notes (attached as a separate report)

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Executive Summary In September 2008, the Netherlands Development Organization (SNV) contracted a leading Kenyan development consulting company, Resource Mobilization Centre (RMC), to undertake a value chain analysis of the camel milk sub-sector in Kenya with a focus on milk originating from Isiolo District. The main purpose of the study was to explore the potential of camel milk from Isiolo District to access sustainable formal markets and, in so doing, establish whether the value chain presents a business case for investment by the private sector and development agencies interested in increased livelihoods of pastoral communities and other actors involved in the value chain. For SNV, this information is expected to assist its Northern Kenya portfolio in making a decision on whether there is sufficient justification for its involvement in the camel milk sub-sector and, if so, the priority areas for intervention. Using the value chain analysis (VCA) research methodology, the study was carried out over a period of 30 days in the months of September and October 2008. Both secondary and primary data was collected covering the whole camel milk value chain from production to the market as well as the policy, regulatory and institutional framework under which the sub-sector is operating. From a careful analysis and interpretation of information obtained from these sources, the study team makes the following seven main conclusions: 1. The camel milk sub-sector is large and has the potential to permanently change the

livelihoods of poor communities living in Kenya’s arid and semi arid lands.

Kenya has the fifth largest camel herd in the world estimated to number 1.06 million traditionally kept by the Somali, Rendille, Gabbra, and Turkana communities living in the country’s harshest arid and semi-arid lands of North and North-Eastern Kenya which are also ranked as the poorest parts of the country. Camel milk production in 2007 is estimated to have stood at over 340 million litres valued at over Ksh 8 billion at the farm level. This estimate makes the camel milk sub-sector much larger than cotton and pyrethrum sub-sectors put together, and only comparable to much bigger sub-sectors such as coffee. The fact that camels thrive in the harshest of Kenya’s agro-ecological zones and is generally able to withstand the frequent droughts which decimate cattle, goats and sheep populations, continuing to produce decent quantities of milk places camels as perhaps one of the most suitable avenues through which increased livelihoods of communities living in these arid lands can be achieved. This is a potential that has already been recognized by a number of pastoral communities, and camels are now slowly spreading to other parts of the country – Laikipia, Samburu, Pokot, Kajiado, Narok and many other parts of Kenya. This is therefore a sub-sector that deserves much higher attention than it is currently getting from government and development partners.

2. Only a small proportion of the potential of Kenya’s camel milk sub-sector is currently

tapped An analysis on what happens to the camel milk currently produced shows that only 12% of the milk is marketed, the bulk of which is sold in raw form to rural consumers (10%) and only 2% reaches urban consumers. From the remaining milk (88%) that does not reach the market, 38% is directly used by camel keeping households and their herders as part of their food requirements and the remaining 50% (or 170 million litres) goes to

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waste1. This roughly means an opportunity for increasing the incomes of camel keeping communities by Ksh 4 billion annually is lost at current level of development of the sector. Yet the current production level is even far below the full production potential of the camel milk sub-sector and therefore, the lost opportunity is likely to be several times higher than what is reported here. Tapping into this potential even modestly would mean billions of Shillings in the hands of camel keeping households and other stakeholders in the value chain.

3. There is a big unmet demand for camel milk in Kenya and internationally

Camel milk is currently reaching the market through three main channels. The first is an informal channel under which raw milk from both small and large-scale camel herders is handled by informal traders (almost 100% women) to urban consumers, largely comprising the Somali community in Nairobi’s burgeoning Eastleigh estate (and business hub) where most of it is bought by households and restaurants, and a smaller but increasing proportion is forwarded to other estates in Nairobi and other urban areas as far as Kampala, Uganda. This channel currently handles about 70% of marketed camel milk from Isiolo District and is fairly efficient with fresh milk delivered to consumers in Nairobi in two days at fairly competitive prices of Ksh 80 per litre compared to farm-gate prices of Ksh 25-30. Estimates show that this channel (currently handling about 4,000 liters per day) is meeting only 20-25% of current demand. The current market can take up to 20,000 litres of raw milk per day even without any further development. At current prices, this is a business worth Ksh 1.6 million per day – or Ksh 0.6 billion in a year and the potential for growing this business several times over through well targeted market development efforts seems high. The second channel represents pasteurized, high quality camel milk from quality conscious small and large-scale producers mainly in Laikipia District processed by the only camel milk processing plant in Kenya (Vital Camel Milk Limited based in Nanyuki) for high-end urban consumers in Kenya and Internationally. Although this channel is the smallest and currently accounts for only about 5% of marketed camel milk from Isiolo and its environs, it represents the highest potential for growth and impact. Driven by the increased international recognition of camel milk as a natural health product in treatment of diabetes and a number of other ailments, the potential demand for camel milk for this market segment nationally and, even more so, internationally is estimated to be far higher than the 300 million litres of camel milk currently produced in the country annually. All indications are that with proper market development, camel milk from Kenya can effectively penetrate the international health market which would make camel milk a high value commodity offering sufficiently high returns to players to justify the significant investments required in developing the sub-sector. The third channel is a raw milk rural consumer channel where raw milk is supplied directly by producers or through intermediaries to rural households and restaurants. Estimates place the current volume handled under this channel at around 25% of marketed milk from Isiolo District. Prospects for growth of this channel are also positive although not as high as in the other two channels. Positive growth is expected as a result

1 The term ‘wasted’ should be treated with caution in the case of camel milk as it largely refers to milk which could have been milked from the camels but was not extracted due to lack of a market after the household milk needs were met. These computations do not include milk that is suckled by the calves, but rather, milk that could be extracted from the lactating herd.

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of increased acceptability of camel milk among non-traditional camel keepers and, indeed, as the only milk available in arid lands during drought periods. The main limiting factor in the growth prospects in this channel are as a result of its close correlation to growth in rural incomes and population which are likely to remain modest in the short and medium term.

4. There are six main constraints inhibiting realization of the potential of the camel milk sub-sector in Kenya

Although there are many factors constraining the development of the camel milk sub-sector, the following six are the main ones: low milk productivity; low quality of milk; poor organization of actors in the chain; poor business orientation of producers; inadequate physical and institutional support infrastructure; and poor market development. From a combination of these factors, the majority of smallholder milk producers are unknowingly making losses in their activities related to camel milk production and profitability among all other players in the value chain are low. From these factors also, the high growth potential pasteurized milk channel is struggling to survive and massive losses have so far been incurred which threaten collapse of the entire channel.

5. The constraints facing the camel milk sub-sector require a value chain approach to be

effectively addressed

A careful analysis of the constraints facing the camel milk sub-sector shows that most of them are cross-cutting and cannot be effectively addressed through piecemeal interventions which do not take a holistic view of the interconnectedness of actors in the value chain. At the foundational value chain segment of production, low milk productivity among farmers is tied to issues of market access, poor organization of the producers as well as traders to collect the milk, and also to poor development of support infrastructure. This in turn has resulted to only small volumes of milk getting through the value chain which is adversely affecting profitability among all other players in the chain. A similar situation also applies to the issue of poor milk quality and so do the other constraints. The starting point in addressing these constraints to pave way for increased competitiveness of the sub-sector is for all actors to realize that their fate is tied together – they fall or rise together. Unless actors have a common vision and strategy for development of the sub-sector and agree to work together towards its realization, the camel milk value chain will remain with its great potential but players will continue struggling with low profitability, losses, and poverty at the producer level. Acting together will mean significant prospects for increased growth and competitiveness of the sub-sector with increased share of benefits for all actors.

6. There are significant opportunities in the camel milk value chain which can be built upon to hasten development of the sub-sector

A careful analysis of the camel milk value chain suggests that significant opportunities for private and public sector interventions in the sub-sector revolve around five broad areas. The first opportunity relates to the large unmet demand in the urban market for raw milk (in Eastleigh) which, at current prices, is a business opportunity worth Ksh 1.6 million per day – or Ksh 0.6 billion in a year and there seems to be high prospects for growing this business several times over in the medium term. Unmet demand in the high-

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end health market is even higher. The second opportunity relates to the enormous potential of increasing camel milk supply in the immediate and short term without any need for a lengthy gestation period. The milk is already there, and what is required are investments in market access and organization of players to trigger increased extraction and supply of milk in the value chain. The existence of identifiable and well established system nodes in the value chain for leveraged interventions is another opportunity area. Key leverage points include two rapidly commercializing production clusters in Isiolo District (Mlango-Ngarentare-Burati areas in Central Division and Kulamawe in Kinna Division); the Isiolo bulking and cold storage hub currently handling 4 tonnes of milk every day even during the dry season; and the Eastleigh informal camel milk market concentrated in 7th, 12th and Jam streets. All these present important intervention points which could unlock the entire sub-sector’s potential. The fourth opportunity is represented by an emerging trend in commercialization of camel milk production where lactating camels are kept close to the Isiolo market or along milk collection routes. This increased market orientation of producers provides tremendous scope for provision of market based solutions in tackling production related constraints including provision of business services, and the yet to be developed supplementary feeding business for camels. The Draft Bill on dairy sector which seeks to bring in camel milk under dairy sector regulation is also a significant opportunity for stakeholders in the sub-sector to start re-adjusting their operations to address key issues of milk quality which are currently stifling prospects for significant market expansion of the sub-sector.

7. There is a strong business case for private and public investment in the camel milk sub-

sector An analysis of the camel milk sub-sector shows strong justification for interventions in five broad areas:

(a) Increased milk productivity among camel keepers

Priority interventions here include: (i) Farmer awareness and education on the business sense of increased productivity.

This should be packaged within the framework of turning camel milk production into a profitable business which could cover productivity as one of the essential components along with others, such as herd structures.

(ii) Establishment of strong farmer organizations for joint action in market access to justify investments towards increased production.

(iii) Support for increased capacity of the Isiolo Holding Ground as a facility that can nurture and entrench current trend of producers to maintain lactating herds within easy reach of the market.

(iv) Support for increased availability of camel milk business development service providers able to advise farmers not only on husbandry issues but also on business practices, market access and farmer organization.

(v) Facilitate increased accessibility of financial services to camel milk producers and other actors in the value chain.

(b) Increased availability of quality camel milk

(i) Facilitate investment in better workspace for traders in the Eastleigh camel milk market. In liaison with the City Council, identify interested investors (private sector or otherwise) to develop clean and high quality structures for handling camel milk similar to the concept used in cow milk bars or the increasingly

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popular fruit kiosks (such as those near Nairobi Hospital). A popular model used is a private developer to invest in construction and lease to current operators.

(ii) Support market-based awareness campaigns to stimulate demand for quality camel milk among consumers.

(iii) Facilitate development of simple and easy to use testing equipment for camel milk quality.

(iv) Support information dissemination and awareness campaigns on the need for high quality standards in milk production and supply, and on ways of ensuring quality.

(v) Facilitate acquisition of appropriate milk handling containers among producers and other players in the value chain.

(vi) Facilitate increased availability and utilization of a cold chain for camel milk covering milk collection points, bulking centres and transportation.

(vii) Support mechanisms for setting of appropriate quality standards in camel milk and their enforcement – both by players (self regulation) as well as by authorities.

(viii) Facilitate investment in basic packaging of camel milk for ease in quality transportation and distribution to consumers.

(ix) Support entry of commercial providers of suitable camel milk transport services with sufficient capacity to handle available milk to the market.

(c) Interventions for increased market development

(i) Facilitate development of a market development strategy – for both domestic and export markets;

(ii) Support mechanisms for increasing the supply of quality milk for the pasteurized milk channel to support private sector efforts for building a sustainable penetration to the international market

(d) Sector organization

(i) Facilitate formulation of a joint vision and strategy for development of the camel milk sub-sector.

(ii) Support establishment and strengthening of stakeholder common interest groups at production, product assembly and trading levels.

(iii) Facilitate establishment and capacity development of a resource centre for information on camels. This is in recognition of the rapidly building body knowledge on issues related to camel both in Kenya and internationally generated from research and other empirical works which currently remain scattered and unorganized for effective utilization by stakeholders in the sector.

(e) Increased visibility and recognition of the camel milk industry

(i) Support stakeholder engagement with government to lobby for increased recognition and support for the sub-sector.

(ii) Support selective publicity to raise visibility of camel milk sub-sector among policy makers, development agencies and the general public.

(iii) Facilitate stakeholder support for increased resources for research and development on issues related to the camel industry in Kenya. This should include support for improved diffusion of research results into better practices in all segments of the camel milk value chain.

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Acknowledgements The study team would like to acknowledge the contribution of the many people who actively participated in making the execution of this task a success. While it is impossible to mention all those who contributed in one way to another, we would like to mention Messrs Charles Naimoi and Thomas Were for providing invaluable technical support, giving honest feedback, and ensuring logistical support was always available when we needed it. Special acknowledgement also goes to the entire management, staff, partners and stakeholders who shared their candid views and comments about the camel milk value chain. Without such sharing, the consultants would not have gained sufficient understanding to undertake this assignment. Kindly accept our sincere gratitude. Finally, we sincerely thank the drivers and all of you who participated and contributed in one way or another to make this assignment possible. However, any problems with reference to the report are ours and ours alone. We recognize that the SNV management has the prerogative not to accept all our suggestions and recommendations. Resource Mobilization Centre

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Abbreviations and Acronyms AA Automobile Association (of Kenya) AfDB African Development Bank ALLPRO ASAL-Based Livestock and Rural Livelihoods Support Project ALRMP Arid Lands Resource Management Project ASAL Arid and Semi Arid Lands BDS Business Development Services BSMDP Business Services Market Development Program DANIDA Danish International Development Agency ENNDA Ewasso Ng’iro North Development Authority FARM Africa Food and Agricultural Research Management (FARM) – Africa DfID Department for International Development (of the British Government)

FHK Food for the Hungry – Kenya GoK Government of Kenya ILRI International Livestock Research Institute KARI Kenya Agricultural Research Institute KCA Kenya Camel Association KEMRI Kenya Medical Research Institute Ksh Kenya Shilling (Kenyan currency exchanging at 76.6361 to the US$ on

November 5, 2008) MESPT Micro Enterprises Support Programme Trust MoLD Ministry of Livestock Development PPA Participatory Poverty Assessment PRA Participatory Rural Appraisal SNV Netherlands Development Organization USAID United States Agency for International Development VCA Value Chain Analysis VCML Vital Camel Milk Limited

1 INTRODUCTION

1.1 Overview This report presents findings of a Value Chain Analysis of the Camel Milk sub-sector commissioned by the Netherlands Development Organization (SNV) in September 2008 to explore the potential of camel milk from Isiolo District to access sustainable formal markets. The study was undertaken by a team of three senior Consultants from Resource Mobilization Centre (RMC) over a period of 30 days beginning September 22, 2008 using a participatory approach that covered all key players in the camel milk industry. Interviews were held with over 70 key informants including herders, camel owners, input suppliers, processors, traders, consumers, and officials of relevant government bodies, sector associations and development agencies involved in camel milk development (see Appendix 1). Field work was carried out in Isiolo District, Nanyuki (camel milk processing plant) and Nairobi. The study also involved a review of available secondary information on the camel sub-sector in Kenya and other parts of the world. It is information from these sources that the basis on which this report has been prepared.

1.2 Background

The Netherlands Development Organization (SNV) is an international not-for-profit development organization which provides capacity development services to nearly 2,500 local organizations in over 33 countries worldwide to support them with the fight against poverty. SNV is dedicated to a society where all people enjoy the freedom to pursue their own sustainable development. SNV advisors contribute to this by strengthening the capacity of local organizations. The focus of SNV on these organizations is underpinned by the fact that they play a key role in reducing poverty in a sustainable manner and in improving the lives of the poor. Therefore, SNV aims to:” support local actors to strengthen their performance to effectively realize poverty reduction and good governance”. SNV operates in nine countries in the East and Southern Africa (ESA) region including: Ethiopia, Kenya, Sudan, Uganda, Tanzania, Rwanda, Zambia, Zimbabwe and Mozambique.

In Kenya, SNV focuses most of its capacity building support to the Arid and semi-arid areas of the country. Specifically, SNV currently operates in three portfolio offices namely: South Rift, located in Nairobi but serving the districts of Kajiado, Narok and Transmara; North Rift located in Eldoret, serving the districts of Keiyo – Marakwet, Pokot, Turkana; and Northern Kenya located in Nanyuki, serving the districts of Samburu, Marsabit, Laikipia, Isiolo and Moyale.

In its contribution towards development efforts and overall poverty reduction, SNV Kenya embraces specific country level poverty reduction goals, targets and governance policies and has chosen to place all its work in two broad impact areas namely:

Access to basic services -Education, water and sanitation, and Economic Development - along two value chains of the Livestock and Tourism sectors Within the livestock value chain, SNV has been aware of the significance of camels in the livelihoods of pastoralist communities in Northern Kenya and in 2006 the Northern Kenya portfolio initiated discussions with a number of stakeholders in the camel milk sub-sector to

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explore possibilities for its involvement. After preliminary discussions will key stakeholders in the value chain of camel milk originating from Isiolo District, SNV entered into a Memorandum of Understanding with the Vital Camel Milk Limited – the only camel milk processing plant – to support its initiatives of sourcing quality camel milk from producers in Isiolo District. From a combination of factors however, VCML stopped sourcing milk from smallholder producers in Isiolo District and therefore the initiative with SNV fell through. From available information on the sub-sector suggesting that only a small proportion of milk produced in the district is able to access the market, SNV has continued to feel that focused interventions in the camel milk value chain could assist in unlocking the immense potential of the sub-sector. It is to make an informed decision on whether there exists a business case in intervening in the sector and, if so, the specific areas deserving priority attention that SNV has commissioned the study on the basis of which this report has been prepared.

1.3 Study Objectives The focus of the study was to analyze and document the Camel Milk Value Chain that originates from Isiolo District. In essence, the study sought to establish whether there is a business case in the camel milk value chain (are the poor, especially producers, able to make money through camel milk?). This was to be ascertained by gathering data and documenting business opportunities that exist for the producers as well as for SNV (and other actors) to facilitate increased competitiveness in the camel milk sub-sector (using sustainable market-based solutions). In addition, the study identifies leverage points along the chain that can make the chain sustainable and competitive. Also, the study gathers sufficient information that would be desirable to a strategic private sector investor whilst remaining cognizant of the sectors' potential role in addressing poverty reduction.

The specific terms of reference for this assignment include to:

1) Assess the current status of Camel milk production and marketing in isiolo District;

2) Identify the actors, their roles and current functions, and interrelationships along the value chain (including governance aspects) (from the producers within the district to the destination market, including the different services providers along the chain) and document the graphical presentation of the Sub sector;

3) Map out the key drivers of the camel milk value chain and document the graphical presentation of the Sub sector;

4) Identify and analyze the constraints (efficiency and effectiveness) along the value chain with emphasis to existing market delivery channels whilst highlighting opportunities for strengthening its access to markets. The constraints should be presented along key aspects such as technology, market access, organization management, policy/regulation, finance, input supply and infrastructure among others;

5) Identify and discuss market based solutions that would enhance the performance and economic viability of the desirable camel milk value chain;

6) Identify existing and potential service providers along the value chain; 7) Identify and analyze the significance of micro, small and medium enterprises, and

lead firms involved in camel milk and the current and potential role of women in the chain; and

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8) Provide input for a one day validation workshop on the study. The complete terms of reference the study are attached to this report as Appendix 3..

1.4 Study Methodology The study was carried out by three Senior Consultants from RMC assisted by two Research Assistants. Their approach and methodology in undertaking the study included:

Meeting senior management of SNV in order to fully understand their requirements and develop an agreeable work plan for the assignment;

Collecting and reading literature from SNV in order to better understand the sub sector;

Searching in the Internet and elsewhere for relevant additional data on the sub sector; Developing study instruments and data gathering tools and sharing with the SNV

management for approval before visiting the field; Visiting and collecting primary data in the field through observations, one-on-one

interviews, focus group discussions, and telephone interviews among other methods. These interviews were carried out with value chain actors in Isiolo District, Nanyuki, Eastleigh, super and mini markets, and in institutions;

The team members holding meetings to discuss their findings and recommendations, critique each others work, and identify critical gaps that needed to be filled as part of data collation and quality check and a way of ensuring the TORs were fully addressed;

Drafting and sharing the first draft report with the SNV management for feedback; Meeting the SNV management in Nanyuki for presentation of preliminary analysis

and a de-brief; Stakeholder vetting and strategic workshop held in Nairobi on November 20, 2008 to

discuss results of the study and map out a way forward for development of the sub-sector. This workshop brought together over 70 key stakeholders in the camel milk sub-sector including producers, processors, traders, researchers, government and development agencies.

Continuously and closely working with the SNV management in the development and finalization of the report.

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2 CAMEL MILK IN KENYA:

An Overview

2.1 Overview This section provides an overview of the camel milk sub-sector in Kenya by exploring the distribution of camels in the country, the production and supply of milk, and an assessment of current and potential demand for camel milk to show the extent to which there exists a demand-supply gap. While the focus of the study was Isiolo District and its environs, for purposes of contextualization, the section opens with an overview of the global perspective and narrows down to the Kenyan context before focusing on issues within Isiolo District. On the supply side, a key issue explored in the section is the existence of production clusters within which leveraged interventions can be targeted, while on the demand-side, the various segments of the market and prospects for growth within each are some of the key areas of focus.

2.2 The Population of Camels (a) The Global Perspective

The Food and Agriculture Organization (FAO) estimates the total population of camels in the world today to be 22 million, of which 89% are one-humped dromedary camels and the remaining 11% are the two-humped (camelus bactrianus) generally found in the cold deserts of Asia. Although historical records show that the domestication of camels first took place in the Arabian peninsula about 3000 years ago from where they spread to other parts of the world, over 80% of the world’s camel population is today found in Africa with the highest concentration in North East Africa which accounts for 63% of the world camel population (Table 2.1; Chart 1). Kenya is estimated to have the fifth largest camel herd in the world after Somalia, Sudan, Ethiopia and Mauritania, in that order. All camels found in Kenya, estimated to number 1.06 million in 2007 are of the dromedary (one-humped) type. Chart 1: World camel population, 2007

Global Distribution of Camels, 2007

Kenya

5%

Pakistan

4%

Other

countries

25% Somalia

32%

Sudan

17%

Mauritania

7%

Ethiopia

10%

Camel types

Camelus

dramedari

us

89%

Camelus

bactianus

11%

Source: FAO Statistics, 2008 Database

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Table 2.1

World Population of Camels, 2007 Country Number of

camels Country Number of

Camels Africa 18,304,243 Asia 3,698,004 Somalia 7,000,000 Pakistan 900,000 Sudan 3,700,000 India 632,000 Ethiopia 2,300,000 Yemen 361,000 Mauritania 1,600,000 China 269,000 Kenya 1,060,000 Saudi Arabia 260,000 Chad 749,500 United Arab Emirates 260,000 Mali 476,000 Mongolia 253,500 Niger 430,000 Afghanistan 180,000 Algeria 265,000 Kazakhstan 138,600 Tunisia 230,000 Iran 146,000

Egypt 120,000 Other Asian Countries 297,904

Eritrea 76,000 Other parts of the World 7,185 Other African Countries 297,743 World Total 22,009,432 Source: FAO Statistics, 2008

Globally, it is estimated that there are about 50 types or breeds of camels – usually classified by naming them after the tribes that rear them, by their colour, geographical origin, physical characteristics and even their different uses for milk, meat production or racing. In broad terms however, camels may fall in one of the following three major categories:

• Back or work camel • Dairy camel • Riding or racing camel

From this categorization, the main economic value of camels is derived from their milk, meat, use in transportation, and for riding in sports (racing), tourism or corps2. In general terms however, milk and meat dominate the overall value derived from camels. Table 2.2 shows that global production of camel milk is about five times higher than of camel meat, placing milk as the most significant product of camels.

Table 2.2 Global production in camel milk and meat, 2007

Production (in Metric tons) Production (in Metric tons) Country Milk Meat

Country Milk Meat

Africa 1,316,310 212,817 Asia 159,501 99,848 Somalia 870,000 44,000 Pakistan - - Sudan 94,000 45,000 India - - Ethiopia 175,000 14,000 Yemen 18,100 3,248 Mauritania 28,000 24,000 China - 16,000 Kenya 32,500 19,800 Saudi Arabia 90,000 41,000 Chad 23,610 1,500 UAE 40,000 15,500 Mali 55,700 7,620 Mongolia 950 8,500 Niger 11,000 3,300 Afghanstan 5,400 3,800 Algeria 8,700 3,400 Kazakhstan - - Tunisia 1,000 1,400 Iran - 1,680

Egypt - 40,000 Other, Asia 5,051 10,120

Eritrea 5,100 732 Other, World 50 160 Other, Africa 11,700 8,065 World Total 1,475,861 312,825 Source: FAO Statistics, 2008

2 Many countries with desert environments continue to have armed camel corps units among their troops.

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Globally, the milk productivity of camels is five times lower than that of cattle. In arid zones where camels are reared, however, the milk yield in camels is higher than in cattle. In drought-stricken areas of the world (and particularly, Africa) where severe drought frequently decimates cattle, sheep and goat populations, only the camel can survive continuing to produce milk. Indeed, one of the most remarkable features of camels is their ability to continue lactation, producing milk that is highly diluted with over 90% water content even during periods of severe draught. In most other animals (ruminants such as cattle, sheep, goats), the reservoir for milk water is lost for cooling and via faecal and urinary excretions. In cattle, sheep and goats, the lack of water leads to cessation of lactation. A 600 kg camel, however, has 200 litres of fluid in the alimentary tract, which is available for milk production, giving up to 20 litres per day to guarantee ample food with the desired water and other nutrients for their calves and humans as well over an extended period of 10 – 15 days without water. From an environmental perspective, camels are also far better suited than cattle, goats and sheep in arid lands. Unlike these other livestock (and particularly goats, which chew to the roots and denude areas around oases and other areas of concentrated herding), camels take only a few bites from shrub/bush and then move on. They are therefore true browsers, not destroying their habitat. The foregoing are among the many factors (see Text Box 1) that are globally driving the increased popularity and interest in camel production, particularly for milk. It is largely out of this that the United Nations Food and Agriculture Organization (FAO) sees bright prospects for camel milk, which could not only provide more food to people in arid and semi-arid areas, but also give nomadic herders a rich source of income from the enormous demand for camel milk and milk products which is rapidly building up, largely driven by the medicinal value of camel milk in an increasingly health conscious world. (b) The Kenyan Context Chart 2 and Table 2.3 show the population of camels and their distribution in Kenya. Although no credible camel census has been done in Kenya since the 1969 national livestock census, MoLD has collected data that indicates the relative camel populations in the country (see Map 1). As per this set of data, the leading district in camel populations is Wajir followed by Mandera and Turkana. Isiolo is ranked 7th with a population of 40,460 camels in 2007.

Chart 2: Camel Population in Kenya

Population of Camels in Kenya: 1960 - 2007

0

200000

400000

600000

800000

1000000

1200000

1400000

60 70 80 90 00 01 02 03 04 05 06 07Yrs

Cam

els

Camel Population by District

Turkana

17%Mandera

18%

Tana River

6%

Garissa

10%

Marsabit

8%

Isiolo

4%Others

3%

Wajir

34%

Source: FAO Statistics, 2008 Source: Ministry of Livestock Development, 2007

16

Text box 1: Some Key Tit Bits on Camel Milk

Tit bit 1: Milk Yield Globally, the milk yield of camels is a controversial and hotly debated topic. In the scientific literature, daily milk yield have been variously reported at between 3 and 40 litres. The great inconsistency is due to a variety of misunderstandings and misconceptions. The facts are: 1. Although camel milk has been used for centuries, camels have never been systematically selected for their

milk quality. There are no large-scale camel dairy enterprises in the world. 2. Calves, which graze with their dams (mothers) for more than a year, will suckle approximately 10 litres

per day even when the calves start to graze. This fact is often not taken into account. 3. Lactating camels are not always regularly milked because the families of the owners and herders do not

require large amounts of milk, and markets for camel milk are not well established for selling surplus milk. Even if milking is done every day, it is always incomplete, because only the amount required is milked, and also because camel milking is also a heavy task, usually requiring two people per camel. These practices of not emptying the udder usually lead to reduced milk production due to hormonal influence.

4. Negative selection of milk camels: The poorest milkers are allowed to give birth once a year by mating them shortly after parturition. These do not contribute to the milk support of the family while good milkers are milked for more than a year without being mated, giving birth only once every 2 to 3 years. This practice favours calves with negative genes for high milk yield.

5. Duration of milk let-down is very short – around two to three minutes. Milking from both sides is therefore essential, while camels must be milked four to six times daily to gain optimal milk yield. This is hardly done in most camel keeping communities.

Tit bit 2: Key factors affecting milk production The factors affecting the milk yield of camels are those common to all dairy animals: genetic potential, health and nutrition. Improving the genetic potential of camels is therefore a key priority in research towards establishment of commercial camel dairies. Successful research in Israel, UAE, Saudi Arabia and other parts of the world show that it is possible to breed dairy camels with a uniform mammary glad producing 30 to 40 litres of milk per day. With artificial insemination and embryo transfer technology, which has already been successfully used in breeding camels for racing, this should be possible in the very near future.

Tit bit 3: Medicinal quality of Camel Milk Camel Milk has over a long period been valued for its acclaimed medicinal properties which did not have rigorous substantiation from proper scientific investigations. Increased research in camel milk in the recent past has however yielded data that now provide scientific prove that camel milk contains properties suitable for treatment of several ailments, including the following (Ulrich Wernery, Central Veterinary research Laboratory, UAE): (i) Autoimmune diseases: multiple sclerosis, Crohn’s disease, Psoriasis, Lipus, Pemphigus; (ii) Allergies: Asthma, rash (iii) Juvenile Diabetes (iv) Infectious diseases like tuberculosis (v) Strengthening of the Immune system (vi) Stress: peptic ulcers (vii) Cancer: skin cancer: lotions or creams with camel fat may protect against cancer (cosmetics,

pharmaceuticals).

Tit bit 4: Camel Products While the greatest amount of camel milk in the world is consumed fresh or as a naturally fermented product, camel milk has a wide range of products that include the following: 1. Fresh raw or pasteurized milk. Pasteurized camel milk is in only a few countries in the world; 2. Fermented milk generally called Susa in North Eastern Africa (including Kenya); 3. Yoghurt 4. Cheese 5. Butter – made through centrifugation since camel milk does not cream up 6. Ice creams 7. Puddings 8. Chocolates of different flavours 9. Beauty products: anti-wrinkles creams; camel milk cleansing soap bars etc

17

In Kenya, the camel is traditionally, a Northern Districts animal kept mainly by people of Cushitic ethnicity largely the Somali, Rendille and the Gabra. The Turkana are also traditionally an important camel keeping community. Since the middle nineteen seventies, however, camels stopped being the preserve of the inhabitants of Kenya’s North. Some ranchers in Laikipia (e.g. Ol Maisor and Kisima) started keeping small numbers of camels for bush control and supply of milk to their workers. Other ranchers followed suit and as at today, a significant number of ranches (mostly in Laikipia District) stock camels, some in the hundreds. Development projects, starting with the GTZ Wamba Food Security Project in Samburu District, Freedom from Hunger/ Catholic Mission in East Pokot at Kositei and the SNV Kajiado ASAL programme introduced camels in these districts. The FARM Africa programme in Northern Kenya also supported the keeping of camels in areas where camels had not been reared before. Significant initial resistance was observed in Maasai land but the increased frequency of drought has, over time, served to convince them of the usefulness of camels and, today, Kajiado boasts of a herd of more than 2,000 camels. Although there are no official statistics on numbers, authoritative information indicates that camels have now spread to many more districts of Rift Valley, Eastern and Coast Provinces than those reported in Table 2.3.

Table 2.3 Camel Population in Kenya, 2007

District Number Per cent Breed Wajir 335,000 33.1% Somali Mandera 183,000 18.1% Somali Turkana 172,400 17.0% Turkana

Garissa 101,000 10.0% Somali Marsabit 84,300 8.3% Gabbra/Rendille Tana River 58,000 5.7% Somali Isiolo 40,460 4.0% Somali Moyale 22,000 2.2% Gabbra/Rendille East Pokot 7,700 0.8% Mixed Samburu 3,800 0.4% Somali Laikipia 2,300 0.2% Somali Kajiado 2,300 0.2% Somali West Pokot 1,000 0.1% Mixed Baringo 204 0.0% Mixed Narok 94 0.0% Somali

Total 1,013,558 100.0% Source: MoLD Annual Report, 2007; Kenya Camel Association, 2008

Breeds: Kenya has three main sub-categories or breeds of camels. These are associated with the ethnic groups which traditionally kept camels - the Somalis of North-Eastern Province; the Oromo Gabbra and the Rendille sub-tribes of Marsabit and Moyale Districts; and the Turkana of Rift Valley. Camels which originated from among the Somalis are referred as Somali breeds and are generally much larger than other breeds in the country with adult females weighing between 500 – 600 kg and males 600 – 800 kg. The Somali breed has the highest milk yield estimated at 5 – 8 litres per day (Farah Z. et al, 2004). Camels kept by the Gabbra and Rendille are referred as Gabbra/Redille (G/R) breed and are generally smaller than the Somali breed with adult females weighing 350 – 450 kg and males 400 – 500 kg. Milk yield is also lower averaging 3 - 4 litres per day for a lactation period of 12 months. The Turkana breed is the smallest camel found in Kenya averaging 350 kg for females and 400 – 450 kg for males. Milk yields are also much lower with yields averaging 2 – 3 litres per day over a lactation period of 9 to 10 months. Besides these three main traditional breeds found in Kenya, some ranches have introduced Pakistani dromedaries in order to improve milk

18

production through crossbreeding and these crossbreeds are now also found among some pastoral communities.

Map 1

19

Chart 3 shows that the Somali breed accounts for the largest proportion of camels in Kenya followed by Turkana and the Gabbra/Rendille breeds. On the whole however, camel breeds in Kenya are highly mixed through sales, stock exchanges and even rustling. (c) Camels in Isiolo District

The greater Isiolo District (comprising Isiolo and the newly created Garbatulla Districts) is largely inhabited by Turkanas, Somalis, Boranas and Samburus. All these groups keep camels. Findings of this study corroborate results of a 2006 Isiolo District Livestock Survey by ALRMP which indicated that most of the camels kept in the district are of the Somali breed. There are however a few camels of the Turkana breed kept by Turkanas. A few Pakistan-Somali crossbreeds were also observed in the Chumvi area of the Central division of the district. Since the Somali breed of camels is known to have higher milk yields than the other breeds in Kenya, it can therefore be argued that the district is well placed for camel milk production. The greater Isiolo is a predominantly cattle keeping area where camels were largely introduced only in the last two - three decades. Although there is no full agreement on which divisions of the district were keeping most camels at the time of this study, there is some consensus on where camel keeping is quite established. This situation is largely as a result of the fact that camels are an extremely mobile animal and there are frequent movements of camels from division to another, largely in search of pasture but also as a result of security reasons. Available data (see Table 2.4) shows that the Central division leads in camel population. It is closely followed by Kinna (with Kulamawe location), and Garba Tulla. The data shows a fairly constant population except in 2005 when the population reduced following the drought and ethnic tensions of 2004. At the time of this study which was done during the height of the dry season (September/October), the areas with high concentration of camels were: the Kula Mawe location of Kina Division (about 7000) camels Gotu area (2000), the central division areas between Isiolo town, Gambella, Shab, Lombolio (10,000), Chumvi area, the Isiolo Holding ground and the areas bordering Meru North districts (3000)

C hart 3 : C am e l bre e ds in K e nya

S o m ali

71 %

G /R

11 %

T u rkan a

1 8 %

Source: MoLD, 2007

20

- some were pasturing in Meru North district areas of Kangeta where camel owners had hired Euphorbia fences for browsing by their camels. The total population of camels in Isiolo district was estimated at 40,460 in 2007 making it the district with the seventh largest camel population in Kenya. Even with the seventh position, the district has a paltry 3.8% of the Kenyan herd and from relative perspective should actually be an insignificant contributor to marketed camel milk in the country. This is however not the case as this study shows that Isiolo currently contributes to more than 90% of marketed camel milk reaching national urban markets. Various reasons can be given for this unusual contribution. These include the proximity to Nairobi, good tarmac road, the market orientation of the Somali segment of the Isiolo population, among others. While these reasons are plausible and significant, the study team is strongly of the view that these are merely factors that have facilitated continued commercialization of the camel milk value chain from Isiolo. Our take is that the commercialization of the Isiolo milk cluster represents the typical growth and commercialization of production clusters. It is highly possible that, the trigger for commercialization of this cluster may have come from the business community of livestock traders; the donor community or even a much less significant factor. This is generally what happens to clusters – the trigger is many times not necessarily a significant factor, but what is important is the existence of facilitative environment for growth which can be replicated to stimulate growth of other clusters.

Table 2.3 Population of camels in Isiolo District, 2004 - 2007

Division 2004 2005 2006 2007 Central 10,400 3,200 10,100 10,400 Kinna 8,300 7,300 8,060 6,200 Merti 4,160 9,400 4,000 4,160 Sericho 5,200 5,600 5,040 5,200 Garba Tulla 6,200 5,600 6,050 6,200 Oldonyiro 3,640 3,200 3,530 8,300

Total 37,900 34,300 36,800 40,460 Source: MoLD, Annual Report Isiolo District, 2007

2.3 Production and Supply of Camel Milk There is general agreement that there is no adequately reliable estimate of camel milk production in Kenya. Production figures reported by the FAO (Table 2.2) are seen as gross understatements possibly only capturing estimated marketed camel milk. The Ministry of Livestock Development reports a production of 220 million litres based on the 810,000 herd size of 1999/2000 (Livestock Policy Paper, 2008). The study team therefore used available information and combined it with own field findings along with the extensive experience of the lead animal production consultant in the team3 to make its estimations. Estimates were built considering: the estimated camel population, the predominant breed in the district and its milking potential, the proportion of lactating camels and milk yields corrected for lactation length. To obtain a gross value, estimated farm gate prices were used derived from various sources including a 2006 AU-IBAR/NEPDP Kenya Livestock sector Study. This information is shown in Table 2.4.

3 Dr. David Kimenye has over 30 years experience in animal production in Kenya, many in Northern Kenya

Map 2

Table 2.4 Estimated National Camel Milk Production in Kenya, 2007

District Number of camels

Breed % herd milking

Milk yield per camel

pa (litres)

Total annual milk yield

(litres)

Farm gate price (Ksh)

Gross value Ksh

Wajir 335,000 S 25 1460 122,275,000 25 3,056,875,000 Mandera 183,000 S 25 1460 66,795,000 25 1,669,875,000 Garissa 101,000 S 25 1460 36,865,000 25 921,625,000 Turkana 172,400 T 20 1200 41,031,200 15 615,468,000 Tana River 58,000 S 25 1460 21,170,000 25 529,250,000 Isiolo 40,460 S 25 1550 15,678,250 25 391,956,250 Marsabit 84,300 G+R 22 1280 23,738,880 25 593,472,200 Moyale 22,000 G 22 1280 6,195,200 25 154,880,000 East Pokot 7,700 Mixed 25 1400 2,635,325 18 47,435,850 Samburu 3,800 S 25 1400 1,330,000 20 26,600,000 Laikipia 2,300 S 25 1800 1,035,000 30 31,050,000 Kajiado 2,300 S 25 1550 891,250 25 22,281,250 West Pokot 1,000 Mixed 25 1400 350,000 18 6,300,000 Baringo 204 Mixed 25 1400 71,400 18 1,285,200 Narok 94 S 25 1550 36,425 20 728,500 Total 1,008,460 1,342 340,097,930 24 8,069,082,250 Notes: S= Somali; G=Gabbra; R= Rendille;T= Turkana breeds Source: Various sources for background data; Estimates by RMC/SNV Camel Milk value Chain study, Sept/Oct, 2008

Estimations of milk production have been made before. The current one is higher than the earlier ones largely because it is based on current estimates of camel population but also possibly because it considers each district separately. Overall, the estimated total annual production of more than 300 million liters shows that camel milk cannot be ignored by planners. Even with conservative farm-gate prices provided in Table 2.4, this volume of production yields a staggering national production value of Ksh 8 billion. Compared to other sub-sectors in Kenya such as Pyrethrum (Ksh 98.6 million); Cotton; Coffee (Ksh 9.1 billion); and Maize (Ksh 7.9 billion – marketed) which receive significant attention, it is clear that the Camel (and particularly the camel milk sub-sector) deserves serious attention as well. The sub-sector is not just huge from a value of production perspective only but, perhaps most critical, from a food security and sustainable income source for one of the most marginalized communities in Kenya – the pastoralists – who operate in the harshest environments of the country. As will be discussed in subsequent sections of this report, this study shows that the significant size of the sub-sector demands attention not only from the government and other social investors from its development impact potential, but also from the private sector as it presents significant scope for profitable business opportunities.

Milk production in Isiolo District

Table 2.5 and Map 3 show that Isiolo can be said to have four main camel milk production clusters. These include the Mlango-Ngarentare-Burat cluster in Central Division; the Kulamawe cluster in Kinna Division and two minor clusters of Modogashe-Eldera in Sericho and Boji-Galfarsa-Malkadaka cluster in Garbatulla. Only two of these clusters, the Central Division and Kulamawe clusters are significantly developed and operating at meaningful levels of commercialization. As will be discussed in Section 3, distance from the milk bulking and cooling hub of Isiolo town is the main factor for the poor development of the more distant Garbatulla and Sericho clusters. Only milk from Central and Kulamawe clusters

23

currently reaches Isiolo for onward transmission to the national urban market. Milk from Garbatulla is generally consumed within the District’s urban and commercial centres while that produced in Sericho is marketed within the district and into neighbouring Meru North District (Maua town). Estimates show that more that three quarters of milk reaching Isiolo town comes from the Central Division cluster.

Table 2.5

Camel milk production clusters in Isiolo District, 2008 Division Area of production Level of

production 1. Mlango High 2. Lombolio High 3. Lagilaba High

4. Ngare ntare High

5. Burat II High

6. Burat I High 7. Maili Saba Medium 8. Kiwanjani Medium 9. Biliqo High 10. Maili nane Low

11. Chumbi Low

1. Central

12. Dabaa Low Kulamawe area :

1. Yak Barsam Medium

2. Baranibate Medium 3. Daka Dima Medium

2. Kina Division

4. Moliti Medium 1. Boji Low 2. Galfasa Low

3. Garbatualla

3. Malkadaka Low 4. Merti 1. Biliqu Medium

1. Modogashe Low 5. Sericho

2. Eldera Low

Source : RMC/SNV Camel Milk value Chain study, Sept/Oct, 2008

Map 3: Camel Milk Production Clusters in Isiolo District, 2007

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2.4 The Demand for Camel Milk The demand for camel milk in Kenya may be categorized into four largely distinct market segments: home consumption by camel-owning households and camel herders; rural households in camel keeping communities (largely restaurants and households with dry camel herds or no camels at all); raw milk urban consumers largely from camel keeping communities; and a high-end health market segment of consumers both in the national and international market. 2.4.1 Consumption by camel keeping households and herders This segment does not strictly fit the description of ‘market segment’ and comprises of camel-owning households and camel herders who, at times, survive on camel milk only. Estimates show that average pastoralist households with camels require up to about 7 litres per day for their own needs as a major part of their diet and, indeed, staple food in some communities. Using this rough figure against the total estimated number of 50,000 camel keeping households in Kenya suggests a national annual ‘demand’ for milk by this segment of 128 million litres or an equivalent of 38% of current national production. This closely corroborates rough estimates of 30 – 40% given by key informants in Isiolo District regarding the proportion of milk consumed by camel keeping households in areas where there is a ready market for the milk. In production clusters and zones where there is no ready market, up to 100% of the milk extracted is merely consumed by herders and camel keeping households staying in manageable distances from the herding grounds. Under these cases, however, only required milk is extracted and, instead of milk getting extracted and left to get spoiled, ‘wastage’ is more from the perspective of the lost opportunity of extracting the full milk potential of the lactating camel herd. Considerations of the demand for milk by this ‘market’ segment are important, first from a household food security perspective; and second, as a result of the inherent calf health-household need-market tradeoffs in rapidly commercializing camel milk clusters. From a food security perspective, it is important that pastoralist households access the milk they require for their consumption needs. It is not enough for the households to have sufficient herd sizes of good milk yielding capacity, the milk they require needs to be extracted and transported to the households in acceptable quality. Although there are no market transactions that take place in this segment, it should be considered as the first constituency whose ‘demand’ needs to be met and therefore should not be overlooked while designing “market oriented” interventions. The second important consideration is a phenomenon increasingly termed by camel owners as “five-litre camel disease” – “Ugonjwa ya five litre”. This phenomenon refers to the over-extraction of camel milk for the market without due consideration for the calf and its mothers’ health as well as the needs of the household. During times of drought which also coincide with famine, some camel owners are known to put more emphasis in over extracting milk from their camels and selling most of it leaving insufficient amounts for the calf and for home consumption, particularly by their young children. Unless this ‘market’ segment is sufficiently taken into account and planned for, efforts geared at value chain development of the camel milk sub-sector could be counterproductive to the very basic development goals of food security and increased livelihood they are geared at achieving. 2.4.2 Rural households and restaurants in camel keeping districts Discussions with key stakeholders in the camel milk value chain in Isiolo district indicate that a small but significant proportion of total milk produced is sold to rural households either

26

directly to those with milk-deficits or to restaurants in local urban/shopping centres for making tea or for direct consumption by their customers as a beverage (usually in fermented form). Well-versed informants estimate a 50:50 proportion of the quantity of milk going to local restaurants and households in this market segment. Estimates of the proportion of milk currently consumed in the rural households and restaurants market segment are highly varied. For milk production clusters in Isiolo which have good access to the markets reached through the Isiolo town milk bulking hub, the rural household and restaurants segment is estimated to take up to 25% of marketed milk. There are, however, many camel-milk producing clusters in Isiolo and other parts of the country which have no access to other markets and this segment constitutes the only market outlet for camel milk. The proportion of milk to this market segment also varies during wet periods when there is milk from other sources (especially cow milk among non-camel keeping communities) to dry months when camel milk is the only milk available. Taking all these variations into account and putting this within the perspective of total milk production, overall estimates suggest that this market segment is taking about 10% of total camel milk produced in the country. This works out to an annual estimate of about 34 million litres for this segment which, observers in the camel milk industry feel is adequately meeting demand. Prospects for growth in demand within this market segment are positive but limited. Positive because there is an increasing acceptability of camel milk among non-traditional camel keeping communities which, in a number of pastoralist districts such as Isiolo, are significant; and also as a result of the frequent extended dry periods during which cow milk is largely unavailable. Growth in this segment is closely tied to growth in rural populations and household incomes and is therefore expected to remain modest in the short and medium term. 2.4.3 Urban raw milk market largely among the Somali community This market segment comprises of consumers from camel keeping communities, mainly the Somali, now living in various urban areas in Kenya and, indeed, other parts of the World. Information from knowledgeable informants in the camel milk sector credit this market segment for the emergence of a commercial camel milk industry in Kenya. While this market segment is to be found in all major urban areas in Kenya which have a significant Somali population, the bulk of the market is in Nairobi’s Eastleigh estate which has in recent years become a bubbling business hub for medium and low income people. Available information suggests that the emergence of a commercial camel milk industry in Kenya is largely associated with the 1991 fall of the Central Government in Somalia and the subsequent armed conflicts in the country that displaced large numbers of Somali Somalis into Kenya (and other parts of the world). A significant number of these ended up in Nairobi’s Eastleigh estate (now predominantly a Somali community area). As traditional consumers of camel milk (indeed much more so than Kenyan Urbanized Somalis) and without their camel herds in the country, it is argued that it is this influx of camel milk consumers that created a significant thrust in the demand for camel milk in Nairobi which triggered commercialization of the industry. From this perspective it could be argued that the commercial camel milk industry in Kenya is relatively young dating no more than 18 or so years ago. From an analysis of the value chain of camel milk originating from Isiolo District and its Environs, available information suggests that this market segment is currently receiving no more than 15,000 litres per day (at the national level). During the time of the study, only 4,000 litres were reaching the Eastleigh market. Out of this volume, 3,600 litres were coming

27

from Isiolo, 300 litres from Garissa4, and about 50 - 100 litres from Namanga in Kajiado District. This volume generally doubles during the rainy season. It is largely milk through Eastleigh that is forwarded onward to other large urban areas in Kenya, including Nakuru, Mombasa, Kisumu and as far as Kampala, Uganda. Some milk is also sent to Kakuma refugee camp (currently 60 litres per week) and some even exported once in a while to Turkey and other parts of the World through customers who buy the milk when travelling to these countries. There are indications that a significant portion of milk from Garissa is sold in Dadaab refugee camp. Overall, triangulation of primary and secondary information gathered during the study suggests that the annual consumption of milk in this segment is currently about 5.5 million litres annually (up to 15,000 litres daily). Discussions with traders in Eastleigh market indicated that current milk supply in the market is all quickly bought within 3 – 5 hours after landing. Their perceptions are that the market can easily take 4 to 5 times of the current supply, even without any significant promotional or other marketing initiatives. This suggests that current supply is only meeting about 20 – 25% of current demand in this market. Camel milk in this market segment is generally consumed in raw form, either fresh or naturally fermented. Information gathered during the study shows that the largest demand is for fresh milk largely for making tea by households or in restaurants, or for consumption in fresh form by their young children. This accounts for about 80% of camel milk consumed in this segment while the balance is consumed in fermented form. Discussions with consumers indicate that their demand for camel milk is largely driven by perceived superior quality compared to cow milk (in terms of flavour and need for little milk:water ratio when making tea) as well as the acclaimed medicinal value. As a substitute to cow milk particularly in making tea, demand in this market is significantly sensitive to prices. Four mini-markets in Eastleigh which were stocking pasteurized high quality milk from VCML have recently stopped stocking the commodity due to the high price of Ksh 120 charged for ! litre compared to the price of Ksh 40 for an equivalent quantity of raw milk supplied by informal traders in the Eastleigh market. While on the whole, milk quality particularly with regard to hygiene and food safety is important to some consumers in this market segment, it is not a major concern to the majority as many have a traditional belief that camel milk has essential medicinal properties that make it unlikely to be harmful to human health even when precautionary hygienic measures such as boiling and proper handling have not been maintained. Under current supply arrangements where hygiene and food safety standards are not key considerations, the growth in demand in this segment seems bound within traditional camel milk consumers. Many non-traditional camel milk consumers are generally put-off by the unhygienic handling and are unlikely to enter into this market segment. The growth potential, while good to the extent that there already exists a large unmet demand, is therefore still fairly limited at the national level. Milk quality is therefore a key element if milk predominantly supplied to this market segment is to be expected to go beyond the traditional milk consumers to other segments of the population. 2.4.4 High-end health market in Kenya and the international market As discussed in Section 2.1, camel milk is internationally increasingly recognized as a natural health product in treating a number of ailments (see Text Box 1)5. While there is still 4 Actually Bangale town in Tana River District 50 km from Garrissa town along the Mwingi Garissa road 5 There are a number of publications which have reported scientific authentication of the health properties of camel milk. These include, Agrawal, A.P et al (2005); Wernery, U (2003)

28

ongoing debate on the extent to which these claims have scientific backing, the high-end natural (organic) health products market segment has already caught on both locally, but even more so, internationally. The Food and Agriculture Organization (FAO) estimates this market to be internationally valued at over US$ 10 billion a year comprising over 200 million consumers in the Midle East, Europe and the Americas6. This market segment is highly sensitive to quality and adherence to international standards governing food safety in general as well as those for the organic food market. In this market segment, demand for camel milk is not generally from a food perspective (in competition with cow milk) but rather as a health product and therefore price sensitivity is not as high as in the food market. The market (particularly the international market) is generally able to take the product at significantly high prices provided guarantees are made on the medicinal value and safety standards. In Kenya, this segment of the market is currently supplied by the only camel milk processing plant in the country - the Vital Camel Milk Limited (VCML) based in Nanyuki. Although the installed capacity of the plant is 3,600 litres per day (on three shifts), it is currently producing and supplying 2,000 litres per week to the market. Discussions with management of the company however revealed that it used to supply higher quantities in the past. The current level of supply suggests that annual supply to this market segment stands at only 104,000 litres. This represents a minute 0.3% of the current national production and only about 5% of total marketed camel milk from Isiolo District and its environs. Growth in this market is however enormous. Authoritative estimates put the potential national demand for this market segment anywhere between 50,000 and 150,000 litres per day – approximately an annual demand of 18 – 55 million litres or 5 – 16% of national production. This market segment is however poorly developed and there is a significant mix between customers seeking camel milk for its health qualities with those valuing the milk from a food perspective (and substitute to cow milk). This market segment is therefore still significantly price sensitive and requires continued efforts for it to be developed to levels where it can be relied upon to take meaningful quantities of camel milk in relation to national production. At the international level, while there are no reliable estimates of demand under this market segment, rough guesstimates put the annual demand at over 300 million litres (FAO). Although this represents potential demand (which is not necessarily current demand), VCML has made significant efforts to penetrate this market and attests that current market demand far exceeds current supply and, by and large, the market can take as much camel milk as can be supplied provided it meets required quality standards and regulatory hurdles in some markets (such as the EU) are cleared. VCML has supplied milk to this market segment in South Africa, the USA (California) and even as far as Chile in Southern America. The current issue is therefore not whether there is sufficient demand, but rather, whether the supply can guarantee required quality standards, volumes and consistency. On the whole, this is the market segment that holds the highest potential for driving growth of the camel milk industry in Kenya (and globally) and sufficient efforts must be put towards addressing issues in this segment. It provides significant scope not just for absorbing significant levels of current potential production but also presents camel milk as a high value commodity whose returns should be sufficient to justify investment of the enormous resources (and efforts) required to overcome current supply constraints to meet volume and

6 Mathews, C: The Next Thing: Camel Milk; FAO, 2006

29

quality standards demanded by the market. It is also the market segment that would push camel production to the required good animal husbandry practices which are not only important for addressing demand in the other (less stringent) market segments but which are also important for meeting food security needs of the pastoral community.

2.5 Demand-supply gap in Camel Milk Chart 4 shows the RMC study team’s estimates of the extent to which current milk supply to the various market segments discussed in section 2.4 exhaust current production. It points at a general situation where only 12% of current estimated production is marketed, about 38% is consumed by households of camel owners and herders, and 50% is “wasted”. As discussed in Section 2.4.1, “wastage” is here largely in the form of wasted opportunity of extracting the milk from lactating camel herds due to lack of market opportunities rather than through ‘spoilage’. Yet, from scientific research showing that failure to empty the udder leads to reduced milk productivity, suggests that current camel milk production is much lower that the actual potential and therefore the “wasted” proportion could actually be much higher than the rough estimates made here7. Discussions made in section 2.4.4 show that there are significant opportunities for increasing the current market uptake of camel milk. While immediate market opportunities are highest in the urban raw milk market among traditional camel milk consumers, the most significant potential is held by the high-end health market, particularly in the international market. Efforts must be put in developing these two markets.

Chart 4: Shortfalls in current market uptake of camel milk production

Source: RMC/SNV Camel Milk VCA Study, Sept/Oct 2008

7 Current production estimates are build on average production of 2 – 2.5 litres per day compared to known productivity of 5 – 8 litres for Somali breeds (Farah Z et al, 2004) and of 20 – 40 litres for well selected dairy breeds (Wernery, U, 2003).

C am e l M ilk P ro duc tio n-m ark e t s ho rtfall

" W a st e d" m ilk

5 0 %

H igh - e n d

h e a lt h m k t

0 %

O wn

c o n sum p t io n

3 8 %

R ura l m a rk e t s

1 0 %

U rba n r a w

m ilk m k t

2 %

30

3 THE CAMEL MILK VALUE CHAIN

3.1 Overview The value chain for camel milk from Isiolo District currently involves seven distinct value-adding activities which go into the production of the milk and its delivery to final consumers in the market. These activities include input supply; production; bulking and product assembly; cold storage; processing; transportation; and wholesale and retail trading. This section explores the actors involved in each of these segments of the chain and their interrelationships with other players; the value they add to the product; and the constraints and opportunities they face. A key purpose of the section is to identify the type of interventions required at each chain segment which, if well implemented, could spur growth and increase competitiveness of the overall value chain. Each activity segment is discussed separately and opens with an analysis of the actors and the process through which the chain functions are undertaken, then moves on to provide a detailed value analysis of the sub-activities of the chain segment before closing with a discussion of constraints, opportunities and possible interventions required for the segment. 3.2 Production Production is the foundational segment of any value chain, and largely determines the extent to which the entire chain can grow and remain competitive. If fundamentals are not right in this segment, efforts made in enhancing efficiency and competitiveness at other levels of the chain are bound to bear insignificant impact on the whole chain. For most agricultural value chains in developing countries such as Kenya where production is generally in the hands of smallholders, this is also where most players in the chain are found and, these normally constitute the main target group for development efforts targeted at improved livelihoods. For this reason, this paper gives significant weight to production issues in its analysis. 3.2.1 Producers The producers of camel milk in Isiolo District and its environs can be generally put into three broad categories: small-scale pastoral herders; medium and large-scale pastoral herders; and ranchers, most of them found in Laikipia District. 3.2.1.1 Small, medium and large-scale camel producers Camels in the greater Isiolo district are kept mainly by Somalis who moved from the neighboring North Eastern Province in search of pastures and stayed on after establishing themselves in the district partly by force and partly by agreement with the indigenous Borana people. Other ethnic groups such as the Samburu, the Turkana and a few Borana are also keeping small herds of camels.

Herd sizes The camel herd sizes are extremely variable. In Kampi Shariff on the road to Gambella, there is a group of Ajuran Somalis that stated that most of their camels were stolen and only a few are now left. The village of about 200 households has a total herd of about 1,000 camels giving an average of 5 camels or 2 milking camels per family. This total herd is managed in groups of about 20 camels and the owners herd the camels in turns. The milk produced is sold in Isiolo market. The foregoing indicates that even the owners of the smallest herds are also

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selling milk to the traders in Isiolo and some of it is getting to Eastleigh in Nairobi. According to a driver of the DLPO in Isiolo, there are many such small herds (including his) and the owners are selling milk. It is difficult to make a good estimate of the number of small scale camel owners in Isiolo mainly because many of the herds are combined to form economic sizes for herding purposes. Some data were collected in Kulamawe and they showed that the average herd size was 44 camels per group. The poorer half of the camel keeping families (76 families), with less or equal to 40 camels, owned about 24% of the camel herd in the area. The richer half owned 76%. This indicated that most of the camels were owned by the relatively richer people. In the Gambella, Shab and Lombolio triangle (the area with the largest concentration of camels during the time of this study), the team observed small herds as small as 5 and large ones of up to 200 camels. Information obtained through interviews indicated that there were many combined herds. For example, a Mr. Kula had 28 camels, 8 of which belong to his relative but he milks the lactating ones and sells the milk in Isiolo. Information gathered in Isiolo town from milk buyers, showed that in the whole of Isiolo district, there are about 50 large camel herd owners, with herd sizes ranging from 100 to as high as 500 or on average 200 camels. This group of camel owners could be categorized as medium and large scale producers – medium with between 100 and 200; and large ranging from 201 – 500. Using the average herd size of 200 camels, the total number of camels owned by this group is estimated at about 10,000 and accounts for 25% of the total camel population in Isiolo District. The majority of producers in this group are business people involved in different types of enterprises within the district (many in livestock trade). Most of them are found in Isiolo town. With a 25% stake in the entire district’s camel herd, this small group of producers constitutes an important segment of players who cannot be ignored in the camel milk value chain in Isiolo District. Indeed, from its command on economic resources, exposure/education, and connections; it is a group that wields significant sway in influence within the district, not just in camel production issues but also on all matters with a bearing on development. The fact that the majority of members are found within Isiolo town makes the town an important concentration area (cluster) through which this group can be reached. Innovations made by this group in camel milk production or other areas of the value chain are likely to be felt by the rest of producers within a short time through linkages (for instance in the case of milk transportation for farmers in Central Division) or through diffusion. Although there are possible arguments for further categorization of owners of herd sizes of lower than 100 camels into two (5 – 39; and 41 – 99), information gathered during the study showed that this category of producers is highly homogenous particularly from their production systems and ways of operation. We have therefore retained this group as one category which we generally term as small-scale herders. From a scale perspective however, producers with less than 40 camels could be termed as ‘micro’ producers (lactating camels usually up to 10) while those with 41 – 99 camels could be termed “small”. Table 3.1 shows the different categories of producers within Isiolo District and the estimated number of camel population owned by each category. Triangulation of information gathered from interviews with key informants in the camel sub-sector and data from secondary sources puts the total number of camels within Isiolo at about 40,000 camels owned by about 2,050 producers. From estimates that put the number of medium and large-scale producers at around 50, it is likely that the number of camel owners with less than 100 camels is about

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2,000 accounting for 98% of producers. Out of this number, about three quarters (1,700 producers) are the very poor with an average of about 15 camels while the remaining quarter (300 producers) are relatively better-off with an average of slightly over 30 camels each. All these could however be still regarded as poor and within the direct target group of SNV and other development agencies targeting low income households.

Table 3.1

Camel producers in Isiolo District, 2008 Producers Camels Producer category

Number Per cent Number Percent Average Small producers: <100 camels 2,000 97.6% 30,000 75.0% 15 Micro: 1 – 39 1,700 82.9 20,000 50.0% 12 Small: 40 – 99 300 14.6 10,000 25.0% 33 Medium and Large: 100 - 500 50 2.4 10,000 25.0% 200 Total 2,050 100.0% 40,000 100.0% 20

Source: RMC/SNV Camel Milk VCA, Sept/Oct, 2008

3.2.1.2 Ranchers Isiolo District has no ranches and therefore has no camel milk producers in the category of ranchers. The only nearby ranches rearing camels are those in Laikipia District. Ranchers as a category of producers therefore only comes in when discussing about camel milk production from Isiolo and neighboring districts. Estimates put the number of ranches in Laikipia District keeping camels at around 10, each with an average of 200 camels. While this is the same average as that of medium and large scale producers in Isiolo District, ranchers greatly differ from those large herders in Isiolo from the animal husbandry and management systems they apply in production. Although on the whole, this category of producers is relatively small both in terms of numbers and even the total proportion of camels kept, it is an important group due to the role they could play in driving innovation particularly in terms of productivity and quality standards. Just like the case of the cattle-based dairy industry, this group could be particularly important in breeding a high milk-yielding dairy camel stock for purchase by progressive producers in the pastoral system and other farming communities in the country that gets interested in camel milk production.

3.2.2 Milk production process As was discussed in Chapter 2, the annual volume of milk producible in Isiolo District is estimated to be 15.7 million liters valued at Ksh 392 million (see Table 2.4). On a daily basis, this works out to 42,000 litres. As highlighted in Section 3.2.1 above, there are three broad categories of producers: the small scale herders; medium and large-scale herders; and ranchers. The production systems adopted by medium and large scale producers are largely similar to those of their small-scale counterparts and we therefore combine these two categories in our discussion of the production process below. No discussion is made on the production process within ranches as this lay outside the scope of this study. (a) Production system All camel milk producers in Isiolo District use what is technically known as extensive production system that uses natural pastures that have not been improved by man. Camels are known selective browsers that feed on many different plants per day and this is what confers medicinal qualities to the milk. Such plants are interspersed in the land – usually called rangelands. Camel producers use age-old techniques to pasture their animals, water them,

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provide salt (sometimes in salt-licks), remove parasites such as ticks and apply ethno-veterinary medicine to remove internal parasites such as worms. (b) Pasturing/herding The greater Isiolo has abundant pasture resources in different areas. Some of these pastures however, are in areas where water is difficult to get and are thus used only during the wet season. An example of such area is the one between Shab and Kachuro. There are other areas especially in Sericho (part of Lorian Swamp) that have much grazing and are also near water. The Isiolo holding ground in Central division is a major grazing resource with water but not that well managed. Due to poor rainfall distribution, different areas have differing grazing potentials at different times. Due to this, pastoralists are forced to move their livestock to where they consider to have better grazing. Such movements, however, cause conflicts over grazing as some pastoralists want to reserve some areas for their clans. Water is obtainable mainly in the Ewaso Nyiro river, some seasonal rivers, dams and water pans. The district, however is fortunate to be part of the Merti aquifer where it is usually easy to strike water using boreholes. There are a number of boreholes in the area and for these water has to be paid for. Unfortunately for Pastoralists, paying for water is done only when they cannot get water pan or river water. They prefer to travel far distances to water their animals for free. This taxes the livestock costing them weight gains and reduction in milk yields. Pastoralists dig wells in seasonal rivers and they extract the water communally as about 4-5 persons are needed for watering livestock during the dry seasons. On the whole, however, Isiolo is a dry district and water is generally scarce. The increase in water facilities has to match the grazing potentials or else it will cause local desertification due to high concentrations of livestock. Water for camels is not a big issue since they can water every 7days during the dry season and during the wet season they get all their water requirements from the green plants they feed on. Water is also available in many pools during the wet season. Each livestock keeper or owner makes it their business to know areas where most rain was received, the growth of the pastures, water availability and even security status for both livestock and herders. On the basis of the above knowledge, he/she decides where to take the camels for pasturing. Usually many herders take their camels to the same areas but space them for better pasture utilization. Herds are usually split into the settlement-based herds and the migratory herd components – a fraction usually influenced by the total herd size and milk requirements of the nuclear families. The settlement-based herds are pastured near the manyattas while the migratory herds move long distances and spend nights usually far away from the settlements (in mobile camps called Foras). Herding of the settlement-based herds is done by boys or girls depending on labour availability. The herding of the migratory herds, on the other hand, is done by strong young men who can also water the animals. In Isiolo, the herding of the migratory herds is done by family members who herd either in turns or charge the ones that are not herding. Such herders double as milkers. Stock associations are common as they are needed while watering and herding the smaller herds.

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(c) Husbandry practices Camel milk producers use traditional practices in watering, provision of salts (sometimes in salt-licks), removal of parasites such as ticks and applying ethno-veterinary medicine to remove internal parasites such as worms. Occasionally, they purchase de-wormers (usually the cheap types) and when they notice their camels have trypanosomiasis, they buy trypanocides and inject it themselves. Their major inputs are salts (minerals), de-wormers, trypanocides and some antibiotics such as Adamycin. Generally, the small scale camel milk producers do not use the state veterinary services as the former not only feel they know more but in some cases the vets in the district have little knowledge of camel diseases. (d) Milking Milk is extracted by hand from lactating camels. Lactating camels only let their milk down to their calves and thus the calves are used for stimulating milk let down. After the stimulation, the milk is squeezed out by a milker as quickly as possible. Camels are milked while milker is standing (not bending or seated as in cattle). They are milked usually twice a day. Small scale camel milk producers do not wash the camel udders before milking and this is why the milk is usually contaminated with dirt, the camel’s urine and other debris. The milk extracted per camel under the small scale camel milk production system is about 3 liters per day, a bit higher than that extracted by the larger scale producers. This is so because the former needs the milk more and they also need the cash from the milk sales more. (e) Use of the milk (i) Calves

Camel milk production is usually intended for the calf. However, it is milked and used by humans. The proportion used by the calf is not easy to determine, but since the calves live on it for most of the time and do grow on it, it is highly likely that the calves drink at least as much as the milk extracted by herders depending on the human competition for the milk (about 2 - 3 litres per day). There is a general practice among pastoralists of leaving two teats for the calf while milk is extracted from the other two (which are normally tied during the day to prevent the calf from suckling). This suggests as 50:50 sharing. The proportion of milk going to the calf is however, not included in the calculations of milk production since, unlike cattle, camel calves are not handfed with milk.

(ii) Household use

Pastoral households use more milk per capita than non-pastoral ones (Njiru, 1985). This is so because, when milk is plentiful, families stop buying expensive grains and subsist on milk. In Isiolo, data obtained from camel owners indicated about 7 litres are used by households out of the 17 litres milked. This gives a large percentage (41%). This data was obtained during the height of the dry season and may not be representative for the whole year. There are reports in literature indicating the reverse as when the milk production is low, the prices go up and the pastoralists sell as much as they have and use the proceeds to buy grains that have also gone up during the dry seasons.

(iii) Marketed milk

Data obtained from Isiolo camel milk producers showed that they sold about 12.5 litres out of the 18.75 they milked. This gave 67% of the extracted milk.

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(iv) Herders Under ordinary camel milk production, herders are catered for in the milk for household use. If the herds are far from home, the herders milk a little from each camel after selling the bulk of the milk. Thus usually there is no separate provision for herders.

(e) Production costs Table 3.2 presents information provided by four producers with different sizes of camel herds regarding their production costs and revenues. This information provides the basis on which key assumptions and costs structures for value and gross margin analysis can be made. A key point illustrated in the Table is that for the four producers, average herding costs per camel stand at Ksh 8.40 per day. The main cost element in this is the cost of herders which account for 82% of herding costs per camel.

Table 3.2 Revenue and cost estimates in camel production at the farm level

Case 1 Case 2 Case 3 Case 4 Total Avg/camel/ day

Herd size 28 40 70 200 338 No lactating/milking 7 14 15 80 116 Total milk extracted (litres/day) 20 30 20 100 170 1.50 Home use (litres/day) 5 10 0 10 25 0.20 Market supply (litres/day) 15 20 20 90 145 1.25 Farm-gate selling price (Ksh) 30 20 35 30 29.30 29.30 Daily revenue (Ksh) 450 400 700 2700 4,250 36.60 Monthly revenue (Ksh) 13,500 12,000 21,000 81,000 127,500 1,099

Costs Herding: Salaries (Ksh/month) 4000 3000 15,000 30,000 52,000 5.10 Miraa for herders (Ksh/mth) 2800 - 2,800 0.30 Food for herder (Ksh/mth) 2000 7000 - 6000 15,000 1.50 Sub total – herders 8,800 10,000 15,000 36,000 69,800 6.90 Watering (Ksh/month) - 500 1000 - 1500 0.15 Supplementary feeds (Ksh/mth) - - - - - -

Healthcare inputs (Ksh) Salts 400 150 1000 3000 4,550 0.45 De-wormers and Vet drugs 1,000 1400 2400 2500 7,300 0.70 Acaricides 650 - 600 600 1,850 0.20 Milking costs8 - - - - - - Total direct costs (Ksh/month) 10,850 12,050 20,000 42,100 85,000 8.40

Other costs Management time (imputed)* 1,875 1,875 1,875 1,875 7,500 0.70 Milk transportation costs 450 - 13,500 3,000 16,950 4.90

Total Variable Costs 13,175 13,925 35,375 46,975 109,450 943.50 Net income (unadjusted) 325 (1,925) (14,375) 34,025 18,050 116.60

* Management time of 1 hour per day (at a rate of Ksh 500/day) is assumed to be required per herd Source: RMC/SNV Camel Milk VCA, Sept/Oct, 2008

3.2.3 The Camel Milk Production value chain The value chain for camel milk production at the farmer level can be divided into four main distinct value adding activities:

8 Milking is an important activity in camel production and includes the actual milking and delivery to homestead (manyatta) or collection point. This activity is however performed by herders and is not costed separately. Rough estimates however suggest it accounts for up to 20% of herders’ time when milking is done twice a day.

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• Acquisition of milking camel heifers either through raising of young female calves or through purchase of mature camel heifers;

• Herding; • Health care; and • Milking

Transportation of milk to the market, although not strictly a production cost, could also be included here since most camel producers in Isiolo are the ones responsible for delivering milk to traders – straight to Isiolo town for farmers in Central Division, and to collection points for farmers operating longer distances from Isiolo town such as those in Kulamawe area. There is also an overall need for management inputs of the camel owners in coordinating all the activities related to production including efforts in identifying areas with pastures, water and no security threats; provision of required husbandry inputs and coordination with market agents for collection of extracted milk and payment of proceeds besides the overall supervision of the herders. Table 3.3 uses the general cost structures developed in Table 3.2 for the total camel herd to estimate the specific costs related to camel milk production. It shows three scenarios: for farmers who get their milking camels by raising their own heifers from female calves, mating them at 4 years and managing a 2 year calving interval for 8 calves in the life of the camel. Scenario 2 is also for farmers who raise own heifers but mate them at age 5 and manage calving intervals of 3 years for a total of 5 calves over the life of the camel. Scenario 3 is for farmers who obtain already bred (mature) heifers and manage them at two year calving intervals for 8 calves in total.

Under the three scenarios, farm-gate milk production cost per lactating camel per day is Ksh 22.65; Ksh 31.00; and Ksh 27.05 for the three scenarios, respectively. Information for scenario 1 is summarized in Figure 1 showing the milk production chain map.

Figure 1: Camel Milk Production Value Chain at the farmer level

Source: RMC/SNV Camel Milk VCA, Oct 2008

Acquisition of milking heifer –raising or purchase

19%

Herding

63%

Health care

12%

Milking

0%

Herder Salaries 74%

Herder Food& provisions

26%

Although salaries are generally low, ranging from as low as Ksh 1,500 – 3,000 per month, labour turns out to be the largest component in raising, herding and milking of camels

Vet. Drugs 52%

Watering 2%

Salt lick 33%

Sprays 15%

Advice 0%

Although important, extension services in camel husbandry are hardly used - largely due to unavailability & quality

No specialized breeding farms for dairy camel Lack of labour

constrains full milk extraction

Management

6%

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Table 3.3 Camel milk production analysis

Scenario 1 Scenario 2 Scenario 3 1. Basic assumptions 1.1 Maturity age of female camels (yrs) 4 5 - 1.2 Number of calves in lifetime 8 5 8 1.3 Lactating period (months) 12 14 12 1.4 Calving intervals (years) 2 3 2 1.5 Economic life of female camels (yrs) 20 20 20

1.6 Number of lactating months in camel lifetime 96 70 96 1.7 Number of lactating days in a camel lifetime 2,880 2,100 2,880 1.8 Estimated cost of keeping a camel per day (Ksh) 8.40 8.40 8.40 2. Cost of raising a camel heifer 2.1 Number of days required (maturing age x 365) 1,460 1,825 2.2 Cost of raising heifer to maturity (days x cost per day) Ksh 12,264 15,330 2.3 Purchase price of in-calf camel heifer (Ksh) 25,000 2.4 Required cost recovery per lactation day 4.30 7.30 8.70 3. Herding costs 14.25 18.40 14.25 3.1 Number years camel herded after starting producing 16 15 16 3.2 Number of days camel herded (inc. lactating & dry months) 5,840 5,475 5,840 3.3 Herders Salaries 3.3.1 Salaries paid over herding period (herding days @ 5.10/) 29,784 27,923 29,784 3.3.2 Salary cost recovery over lactating days (Ksh/day) 10.30 13.30 10.30 3.4 Herder food & provisions 3.4.1 Herder food and other provisions over herding period 10,512 9,855 10,512 3.4.2 Herder food & provisions cost recover per lactation day 3.65 4.70 3.65 3.5 Watering costs 3.5.1 Watering costs over herding life of camel 876 821 876 3.5.2 Cost recovery of water costs per lactating day 0.30 0.40 0.30 4. Health care costs 2.70 3.50 2.70 4.1 De-wormers and other veterinary drugs costs (@Ksh 0.70) 4,088 3,833 4,088 4.2 Cost recovery per day for de-wormers & vet drugs 1.40 1.80 1.40 4.3 Salts costs over herding days (@Ksh 0.45) 2,628 2,464 2,628 4.4 Salts cost recovery per day of camel lactation 0.90 1.20 0.90 4.5 Acaricide costs over herding life of camel (@ Ksh 0.20) 1,168 1,095 1,168 4.6 Cost recovery on Acaricides from milk/day 0.40 0.50 0.40 5. Cost of management 5.1 Management cost over herding life (@ Ksh 0.70) 4,088 3,833 4,088 5.2 Management cost recovery from milk/day 1.40 1.80 1.40 6. Total farm-gate production cost/day per camel 22.65 31.00 27.05

7. Transport cost per day (see Table 3.2) 3.40 3.40 3.40 8. Total cost including delivery to the market 26.05 33.40 30.45 9. Average milk production per day per camel 1.50 1.50 1.50 10. Price per litre 29.30 29.30 29.30 11. Total revenue from milk per day 43.95 43.95 43.95 12 Gross margin per camel per day 17.90 10.55 13.50 13. Gross margin per litre of milk produced 11.90 7.00 9.00 14. Average monthly net income: (avg of 29 lactating camels) 15,573 9,179 11,745

Source: RMC/SNV Camel milk VCA, Sept/Oct 2008

The analysis shows that herding accounts for 63% of milk production costs, the bulk of which go to salaries and provisions (food and miraa) for herders. The other significant cost, which is many times overlooked by producers, is imputed capital cost recovery for the dairy camel. From a business perspective, the dairy camel must pay for itself through milk production and

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sales – not just for the period it is in lactating, but also for the period it is dry as well as the costs incurrent in raising it to maturity (or its purchase if it was bought). The capital investment costs account for 19% of milk production costs. 3.2.4 Breakeven analysis: are camel producers making money? Tables 3.4 (a) through (d) address the basic question of whether camel producers are currently making money through milk production. The first Table (a) uses the scenario provided by the four key informants presented in Table 3.2 showing an average milk production level of 1.5 litres per day for a herd structure comprising 25% lactating camels at any one time. It shows that at a milk productivity level of 1.5 litres per day, camel producers do not make money regardless of the herd size. At this level of productivity, milk yield is so low that it cannot absorb both the fixed and variable costs of production. Small herders are the hardest hit, with those with only up to 20 camels recovering less than half of their costs. While this scenario may present an extreme case given that the study was conducted during a dry period, our assessment is that the situation on the ground is not far from this and, for many producers, milk production is currently a loss making venture if all costs are properly taken into account. Like the scenario of most other smallholder activities in the country, camel keeping is more of a “way of life” rather than a viable business venture under current management practices and cost structures.

Table 3.4 (a) Break-even analysis for camel milk production: Scenario 1 – Current Situation

Item/variable Herd size 1 10 camels

Herd size 2 20 camels

Herd size 3 30 camels

Herd size 4 40 camels

Herd size 5 60 camels

Herd size 6 80 camels

1. Assumptions

1.1 Min. herders required 2 2 2 2 3 4 1.2 Max. herd capable of handling 40 40 40 40 60 80 1.3 Monthly cost per herder (Ksh) 3,674 3,674 3,674 3,674 3,674 3,674 1.4 Proportion of milking camels 25% 25% 25% 25% 25% 25% 1.5 Number of camels in lactation 3 5 8 10 15 20 1.6 Avg. milk yield per camel/day lt 1.5 1.5 1.5 1.5 1.5 1.5 1.7 Proportion of milk sold 80% 80% 80% 80% 80% 80% 1.8 Price per litre of milk – bulk’g pt 30 30 30 30 30 30 2. Monthly Costs 2.1 Herder salaries & provisions 7,348 7,348 7,348 7,348 11,022 14,696 2.2 Cost of watering milking herd 27 45 72 90 135 180 2.3 Healthcare (drugs etc) 243 405 648 810 1,215 1,620 2.4 Management costs 1,875 1,875 1,875 1,875 1,875 1,875 2.5 Milk transportation costs 306 510 816 1,020 1,530 2,040 2.6 Capital investment cost 387 645 1,032 1,290 1,935 2,580 2.6 Total monthly costs 10,185 10,827 11,791 12,433 17,712 22,991

3. Monthly revenue 3.1 Total milk produced/ month (lt) 135 225 360 450 675 900 3.2 Total milk sold per month (lt) 108 180 288 360 540 720 3.3 Total revenue per month (Ksh) 3,240 5,400 8,640 10,800 16,200 21,600

4. Net income (6,945) (5,427) (3,151) (1,633) (1,512) (1,391)

5. Viability (Revenue/Costs)% 31.8% 49.9% 73.3% 86.9% 91.5% 93.9% Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

There are many ways through which producers can move to profitability. Scenarios (b) and (c) pick one two of these – herd structure, and milk productivity. By increasing the proportion of lactating camels from 25% to 35%, a producer is able to move to

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profitability. Per current cost structures, however, a farmer requires up to 10 lactating camels (in a herd of 35-40) to break even.

Table 3.4 (b)

Break-even analysis for camel milk production: Scenario 2: Herd composition: 35% lactating Item/variable Herd size 1

10 camels Herd size 2 20 camels

Herd size 3 30 camels

Herd size 4 40 camels

Herd size 5 60 camels

Herd size 6 80 camels

1. Assumptions

1.1 Min. herders required 2 2 2 2 3 4 1.2 Max. herd capable of handling 40 40 40 40 60 80 1.3 Monthly cost per herder (Ksh) 3,674 3,674 3,674 3,674 3,674 3,674 1.4 Proportion of milking camels 35% 35% 35% 35% 35% 35% 1.5 Number of camels in lactation 4 7 11 14 21 28 1.6 Avg. milk yield per camel/day lt 1.5 1.5 1.5 1.5 1.5 1.5 1.7 Proportion of milk sold 80% 80% 80% 80% 80% 80% 1.8 Price per litre of milk – bulk’g pt 30 30 30 30 30 30 2. Monthly Costs 2.1 Herder salaries & provisions 7,348 7,348 7,348 7,348 11,022 14,696 2.2 Cost of watering milking herd 36 63 99 126 189 252 2.3 Healthcare (drugs etc) 324 567 891 1,134 1,701 2,268 2.4 Management costs 1,875 1,875 1,875 1,875 1,875 1,875 2.5 Milk transportation costs 408 714 1,122 1,428 2,142 2,856

2.6 Capital investment cost (Table 3.2) 516 903 1,419 1,806 2,709 3,612 2.6 Total monthly costs 10,507 11,470 12,754 13,717 19,638 25,559

3. Monthly revenue 3.1 Total milk produced/ month (lt) 180 315 495 630 945 1,260 3.2 Total milk sold per month (lt) 144 252 396 504 756 1,008 3.3 Total revenue per month (Ksh) 4,320 7,560 11,070 15,120 22,680 30,240

4. Net income (6,187) (3,910) (1,684) 1,403 3,042 4,681

5. Viability (Revenue/Costs)% 41.1% 65.9% 86.8% 110.2% 115.5% 118.3% Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

The situation however significantly changes with improved milk productivity (scenario 3). This scenario shows that, as is the case in most production systems, increased productivity has the highest pay-offs in moving producers towards profitability. At daily productivity of 2.5 litres per camel, a farmer is able to break-even with only 6-7 lactating camels in a herd of 25-30. This productivity level is however still low for generally poor farmers with smaller herds to make money and productivity must, therefore, go beyond this level for producers to be in business. The last scenario shows the effects of simultaneously changing the herd structure to increase the number lactating camels at any one time while at the same time introducing measures that lead to increased milk yield per camel. Increased milk yield to an average of 2.5 litres per day and herd structure of 35% lactating camels per herd makes smallholder farmers with only 20 camels to operate profitably, with the break-even hard size standing at around 18 camels. Further analysis of further variations shows that, even without structural changes in the management systems under which pastoralist camel milk producers operate, some conscious changes from a business perspective can turn camel herding for milk purposes a profitable business through which improved livelihoods for pastoralists and their households can be achieved.

Table 3.4 (c)

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Break-even analysis for camel milk production: Scenario 3 – Milk yield of 2.5 litres/day Item/variable Herd size 1

10 camels Herd size 2 20 camels

Herd size 3 30 camels

Herd size 4 40 camels

Herd size 5 60 camels

Herd size 6 80 camels

1. Assumptions

1.1 Min. herders required 2 2 2 2 3 4 1.2 Max. herd capable of handling 40 40 40 40 60 80 1.3 Monthly cost per herder (Ksh) 3,674 3,674 3,674 3,674 3,674 3,674 1.4 Proportion of milking camels 25% 25% 25% 25% 25% 25% 1.5 Number of camels in lactation 3 5 8 10 15 20 1.6 Avg. milk yield per camel/day lt 2.5 2.5 2.5 2.5 2.5 2.5 1.7 Proportion of milk sold 80% 80% 80% 80% 80% 80% 1.8 Price per litre of milk – bulk’g pt 30 30 30 30 30 30 2. Monthly Costs 2.1 Herder salaries & provisions 7,348 7,348 7,348 7,348 11,022 14,696 2.2 Cost of watering milking herd 27 45 72 90 135 180 2.3 Healthcare (drugs etc) 243 405 648 810 1,215 1,620 2.4 Management costs 1,875 1,875 1,875 1,875 1,875 1,875 2.5 Milk transportation costs 306 510 816 1,020 1,530 2,040 2.6 Capital investment cost 387 645 1,032 1,290 1,935 2,580 2.6 Total monthly costs 10,185 10,827 11,791 12,433 17,712 22,991

3. Monthly revenue 3.1 Total milk produced/ month (lt) 225 375 600 750 1,125 1,500 3.2 Total milk sold per month (lt) 180 300 480 600 900 1200 3.3 Total revenue per month (Ksh) 5,400 9,000 14,400 18,000 27,000 36,000 4. Net income (4,785) (1,827) 2,609 5,567 9,288 13,009

5. Viability (Revenue/Costs)% 53.0% 49.9% 122.1% 144.8% 152.4% 156.6% Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

Whereas from the analyses presented in the four scenarios show that it is possible to bring down the break-even herd size by adopting better husbandry and management practices, they also show that there is certain herd-size threshold below which farmers cannot make money from camel production. Our analysis suggests that under current practices and cost structures, producers must have at least 5 lactating camels for them to make money in this business. This has to be the starting point in developing the camel milk value chain.

Table 3.4 (d) Break-even analysis for camel milk production: Scenario 4 – Milk yield of 2.5 lts; 35% lactating herd

Item/variable Herd size 1 10 camels

Herd size 2 20 camels

Herd size 3 30 camels

Herd size 4 40 camels

Herd size 5 60 camels

Herd size 6 80 camels

1. Assumptions

1.1 Min. herders required 2 2 2 2 3 4 1.2 Max. herd capable of handling 40 40 40 40 60 80 1.3 Monthly cost per herder (Ksh) 3,674 3,674 3,674 3,674 3,674 3,674 1.4 Proportion of milking camels 35% 35% 35% 35% 35% 35% 1.5 Number of camels in lactation 4 7 11 14 21 28 1.6 Avg. milk yield per camel/day lt 2.5 2.5 2.5 2.5 2.5 2.5 1.7 Proportion of milk sold 80% 80% 80% 80% 80% 80% 1.8 Price per litre of milk – bulk’g pt 30 30 30 30 30 30 2. Monthly Costs 2.1 Herder salaries & provisions 7,348 7,348 7,348 7,348 11,022 14,696 2.2 Cost of watering milking herd 36 63 99 126 189 252 2.3 Healthcare (drugs etc) 324 567 891 1,134 1,701 2,268 2.4 Management costs 1,875 1,875 1,875 1,875 1,875 1,875 2.5 Milk transportation costs 408 714 1,122 1,428 2,142 2,856 2.6 Capital investment cost 516 903 1,419 1,806 2,709 3,612 2.6 Total monthly costs 10,507 11,470 12,754 13,717 19,638 25,559

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3. Monthly revenue 3.1 Total milk produced/ month (lt) 300 525 825 1,050 1,575 2,100 3.2 Total milk sold per month (lt) 240 420 660 840 1,260 1,680 3.3 Total revenue per month (Ksh) 7,200 12,600 19,800 25,200 37,800 50,400

4. Net income (3,307) 1,130 7,046 11,483 18,162 24,841

5. Viability (Revenue/Costs)% 68.5% 109.9% 155.2% 183.7% 192.5% 197.2% Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

3.2.5 Production constraints and opportunities Constraints in camel milk production are many. To start with there are limitations of how much milk the camels can produce even with the best nutrition and management. This is termed genetic potential and in the case of Isiolo, the Somali type of camel has the best potential among the indigenous types. There are however problems of breeding management such that inbreeding is not kept at a bay and this eventually reduces the genetic potential. The potential is not realized because of nutrition, water, pasture, parasite, disease and mineral supplementation problems. Most of these are well known but not as appreciated as they should be. Pastures are not improved and in some cases are degraded and this leads to poor nutrition. Diseases especially Trypanosomiasis and mastitis are common and these directly negatively affect milk production. Pastoralists have treated Trypanosomiasis for a long time but mastitis appears a real challenge because the control and through the management of the milking process something pastoralist are not accustomed to. Helminth control is also practiced very poorly as it is not done strategically when the treatment can be effective. Besides, pastoralists do not use the more effective drugs such as Ivomectin arguing it is very expensive. Management issues have their roots in ignorance or the lack of full appreciation of the usefulness of the various practices. Management is also implicated in poor milking i.e. not extracting enough milk from the camels. This has to do with the biology of milk let down and if the milkers are not fast enough, the camels retain the milk for their calves. Labour shortage is implicated, but more importantly, the work plan. This becomes a big issue in the large scale production system. The greater problems are in unhygienic milking. The udders of milking camels in Isiolo are not washed before milking. All manner of excuses are given the most common being that the milk of camel is always clean. Calves are used for stimulating milk let down and the pastoralists have extended the suckling to mean disinfection by the calf saliva! Milkers also do not wash their hands. Again the most common excuse is the lack of water. The reality, however is that clean milking is poorly appreciated and the fact that the consumers so far have not demanded cleaner milk has given the pastoralists a license to produce and sell dirty, if not dangerous, camel milk. This will continue to be the most significant barrier to milk processing especially for milk destined for the high-end local and export markets. Milk spoilage has other dimensions such as spoilage due to poor transportation. This as shown elsewhere in this report is one of the most intractable problem as it is linked to poor infrastructure (roads especially), the use of old vehicles, delays by women bringing milk from far interior etc. The problem is greater during the wet season as some of the roads become impassable.

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Most of the above constraints would have fewer effects if pastoralists saw camel milk as a market commodity and produced it with customers in mind. The business orientation as shown by the type of milk marketed leaves a lot to be desired. This is an area that needs to be properly addressed through appropriate training using farm budget approaches for the pastoralists to see where they are losing value in the chain. Finally, the pastoralist tends to operate individually. This of course is grounded on plausible reasoning especially when it comes to mixing milk from different producers. Unfortunately individual operations are vulnerable to shocks and the future is for those who unite, set standards and police them.

Table 3.5 Summary of production constraints and possible interventions

Constraints Possible interventions Low genetic potential of the camels

• Improve breeding especially by avoiding inbreeding

Diseases especially mastitis and Trypanosomiasis

• Improve milking hygiene practices, separation of sick camels and milking them last.

• Treatment for the two main diseases Production of low quality milk • Training of pastoralists on clean milk production Poor transportation of quality milk in plastic containers

• Encourage pastoralists to use metallic containers that can be cleaned easily.

Shortage of pastures especially during the dry season

• Improvement in water distribution so that pastures can be used.

• Planting of Euphorbia for use during the dry season.

• Better management of the Isiolo holding ground (water and pasture use)

Poor transport for milk • Improve roads • Better organize producers to better organize their

transport. Individualized milk marketing • Organize the milk marketers into groups and

provide various types of training Milk spoilage especially during the wet season

• Train pastoralists on milk preservation

General recommendations

1. A proper camel census is needed. This will give more reliable data than the current approximations. The greater Isiolo is a small district and a livestock census should not be a difficult undertaking. This would enable better planning for targeted interventions.

2. A gradual increase in improving the quality of milk produced and transported. Such improvement can be started with the large or medium scale producers and other producers roped in over a period of time.

3. Promote the use of the Isiolo Holding ground as an all season grazing area for lactating camels.

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3.3 Milk assembly, bulking and transportation Discussions in Section 3.2 have shown that the herd structures and production systems adopted by most camel keepers in Isiolo district make camel milk production from the district an essentially small-scale activity at the individual farmer level, regardless of the herd size. Even farmers with camel herds of up to 500 will have only up 35% lactating camels and with the general low yield per camel, even the largest farmers will have milk production of no more than 500 litres per day at the best of times. The majority of farmers, with an average of 20 camels are able to produce only up to 10 litres of milk per day. None of these levels of production are large enough for farmers to operate on their own. It is therefore essential that milk from different farmers is assembled together for economies of scale in transportation and market access. This section discusses the milk assembly, bulking and transportation activities involved in getting camel milk into the urban market. 3.3.1 Milk Assembly Information obtained during the study shows that most of the camel milk reaching Isiolo town comes from two main clusters – the Central Division cluster of Mlango-Ngarentare-Burat areas and the Kulamawe cluster of Yak-Barsan-Baranbate-Dakadima-Moliti areas. The milk assembly process in the two clusters is slightly different due to distances to Isiolo town. In clusters close to Isiolo town or for farmers with significant quantities of milk, farmers sell their milk directly to Isiolo town traders. For clusters much further off (more than 10 km), however, milk is assembled from different farmers by local traders (mostly women) who then forward it to Isiolo-based traders who bulk the milk further, put it under cold storage overnight and forward it to the Nairobi urban market. Estimates for Central Division roughly put a 40:60 proportion of milk marketed directly by farmers to the one that goes through intermediaries. In Kulamawe and other far off clusters, milk assembly is largely done by local camel milk traders. Due to the relative proximity (up to 20 km) of many milk production clusters within Central Division, there is a varied range of transportation means for milk from farmers to Isiolo town. Donkeys are the main means of transportation for most milk coming from within a radius of 10 kms. Most farmers have 2 – 5 donkeys which they use as beasts of burden and these are the ones used for transporting milk from production clusters near Isiolo town. Bicycles (mainly for hire – i.e. boda boda) are also an important means of transportation. During the study, a lot of milk from Shab, Maili Nane and other areas in Meru where camels have migrated for pastures was being ferried to Isiolo by bicycles for hire at a rate of Ksh 400 per trip with a load of 100 – 150 litres of milk. A few farmers much nearer Isiolo town sometimes just carry the milk on their backs. In addition to donkeys and bicycles, a number of large-scale farmers in Central Division have their own vehicles (Land Rovers and Land Cruisers) which they use to transport their milk and that of other milk producers at a fee. Discussions with key informants indicated that there are four (4) such vehicles used during the peak season. At the time of the study there were two – a LandRover and a Land Cruiser each able to carry up to 1,500 litres during the peak season. Charges are Ksh 20 for 3 litre jerrican; and Ksh 30, Ksh 60, and Ksh 120 for 5 litre, 10 litre, and 20 litre jerricans, respectively – roughly Ksh 6.00 per litre although farmers with 3 litre jerricans end up paying more (Ksh 6.70/litre). During the dry season when the quantity of milk is not high, these vehicles are also used for passengers and whatever other luggage there may be along the route including charcoal, goats, sheep, anything. During the

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wet season, these vehicles are however used exclusively for milk transportation. The owners reckon that, with full capacity utilization, transporting milk can be a profitable business. Due to the small quantities of milk produced per farmer per milking (evening and morning), the most commonly used containers are 3 litre and 5 litre plastic jerricans. Evening milk is not mixed with morning milk. For Central Division clusters, farmers sell their milk directly to traders in Isiolo and therefore they are the ones responsible for transportation. Milk transported by vehicles is taken by hand/back or donkey to milk collection point along the collection route (road) by 9.00 am. This is then picked and delivered to Isiolo, usually starting 12.00 noon to 3.00 pm, to the designated customers – local traders within Isiolo town or traders who take their milk to Nairobi. For clusters much further from Isiolo town such as Kulamawe (about 70 km from Isiolo town), milk is generally handled through intermediaries and not directly by farmers. Farmers are therefore responsible for milking and delivering their milk to designated collection points – shopping centres such as Kulamawe, Kashuru and others, or along the road. From here, milk is handled by local traders some of whom may sell part of the milk to rural households and restaurants and send the remaining to Isiolo traders. Transportation to Isiolo town is by an old lorry which is the only means of transportation along the Kulamawe-Kashuru-Isiolo route. This Lorry makes a one way trip each day and is therefore only able to transport milk every other day – one day to Isiolo, the other day back. To make its trip to isiolo town by 5.00 – 6.00 pm, the Lorry needs to depart Kulamawe by 11.00 am and therefore milk must be delivered by this time from the interior where the camels are kept. Although some farmers and traders start bringing in milk as early as 8.00 am, estimates indicate that there is a substantial amount of milk that is not able to reach Kulamawe (and the lorry route) by the time of departure and therefore that milk ends up wasted. The Lorry normally ferries 200 – 300 litres per day (trip) during the dry season and up to 700 litres during the wet season. In the Kulamawe route, charges are Ksh 20, 35, and 70 for 3 litre, 5 litre and 10 litre jerricans normally used – an average of Ksh 7 per litre. Milk arrives in Isiolo town from 5.00 – 6.00 pm. Because the lorry is the only means of transportation in this route, milk is therefore transported along with all else that needs to be taken to Isiolo - passengers, livestock, charcoal etc. It is also noteworthy that only milk produced each other day is able to access the Isiolo-and-beyond market due to the current limitation of transportation means. When the vehicle is not in operation, or even worse, when it breaks down mid-way, milk spoilage becomes inevitable. A number of other transporters have tried the route in the past, but due to the rough road and volume of business, they have in due course withdrawn their services due to losses. Although the transporter reckons he is breaking even, he feels that the profits are generally marginal due to the increased fuel costs and high maintenance costs due to the bad road. Table 3.6 and figure 2 show that there are positive margins in milk assembly. This notwithstanding, current average monthly returns per product assembly agent are fairly low largely due the low volumes they manage. Overall, this is mainly caused by the long distances which producers must cover to reach milk collection centres; the poor state of roads within Isiolo and the general state of high fuel costs in the country. In addition, the product assembly activity is operating inefficiently due to the poor organization of farmers to a level where they could take joint action in milk delivery to collection points to assure time of collection and volumes.

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Table 3.6 Milk assembly value chain analysis

Cost item Central– farmers

Central – local traders

Kulamawe Total Average cost/litre*

Volume of milk per day (litres) 1,800 2,700 200 4,700 Monthly volume of milk 54,000 81,000 6,000 141,000 Imputed costs for milk to collection points 2.20 2.20 2.20 2.20 Farm-gate price/ litre (collection point) - 25.00 20.00 26.70 Monthly cost of buying milk from farmers 1,350,000 2,025,000 120,000 3,495,000 24.60 Transport costs to Isiolo/litre - 6 7 Total monthly transportation costs 118,800 486,000 42,000 646,800 6.10 Price of milk in Isiolo town 35 35 35 35 Gross monthly income from sale of milk 1,890,000 2,835,000 210,000 4,935,000 Gross margin to assembly agents/litre 7.80 4.00 8.00 Monthly Gross margin for assembly 421,200 324,000 48,000 793,200 4.30 Number of farmers/agents 100 50 12 162 Average monthly income for assembly 4,212 6,480 4,800 4,891

* average costs for product assembly used trader channels Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

Figure 2: Milk assembly value chain: from producers to Isiolo bulking points 3.3.2 Milk grading & bulking, cold storage and transportation There are three distinct value adding activities that camel milk goes through once it reaches Isiolo town for it to reach the Nairobi urban market. These include grading and bulking, cold storage and transportation to Nairobi. Grading, bulking and cold storage activities are undertaken by Isiolo-based camel milk traders (over 90% women) estimated to range from around 25 during the dry season to about 60 during the wet season of peak camel milk production.

Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

Milk assembly to collection points

17.5%

Transportation

48.4%

Trader/ assembly agent costs + margin

34.1%

Fuel 60-70% Maintenance 20- 25%

Labour/margin 5 – 10%

Farmers operating individually, in areas distant from collection points, a lot of time wasted waiting for delivery or collecting little volumes. Cold storage to allow bulking at collection points could add significant value

High fuel prices and bad roads combine to reduce profitability of transportation services unless with large volumes

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Milk grading, bulking and cold storage The biggest demand for camel milk in Kenya is in its fresh form, largely for preparing tea or for young children. It is therefore important that milk is able to reach consumers while it is still fresh. Since milk to the Nairobi urban market is transported by buses that depart Isiolo town by 6.30 am, milk from farmers has to stay in Isiolo overnight so that it can be loaded into the buses in time for the early morning departure. This requires cold storage and, in response, an elaborate business for cold storage has emerged in the town. A census carried out during the study of the number of businesses involved in cold storage of camel milk showed that there are seven cooling hubs in Isiolo town with a cold storage capacity of 8,020 litres of camel milk per day (Table 3.7). These could be termed as bulking and cold storage centres.

Table 3.7 Cold storage capacity in Isiolo town

Cooling hub No. of freezers

Storage Capacity (litres)

Current (dry-season) utilization

(Litres)

Per cent utilization (%)

1. Addis Shop – Anoley W.G 12 1,440 600 42% 2. Dubai Shop – Anoley W.G 12 1,440 600 42% 3. Jedda Shop – Anoley W.G 12 1,440 700 49% 4. Al-amin shop – Anoley W.G 12 1,440 800 56% 5. Safi Estate – Anoley W.G 10 1,200 400 33% 6. Safi Estate – Abdi Rahman 4 480 200 42% 7. Abdi Rahman Shop* 5 600 400 67%

Total 67 8,020 3,700 46% * Abdi Rahaman also has cold storage/ice making plant bought from a fish processing firm that has a

cold storage capacity of 20,000 litres. It however needs repair to function. Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

At the time of the study which was during the dry season, only 46% of the storage capacity was being utilized as a result of milk shortage. Five of the cooling hubs are owned by an association of 52 women (Anoley women group) all of whom are camel milk traders9. The other two hubs are owned by a businessman in Isiolo town (Abdi Rahman Abdile) who is also a camel owner with 100 camels and buys milk from other farmers to take to the Nairobi urban market. The cooling hubs can therefore be said to be part and parcel of the camel milk trading activity and, as mentioned, can actually be termed as bulking centres. Cold storage can however also be seen as a business on its own right. For instance, Anoley women group only owns about a half of the 58 freezers in their cooling hubs with the rest leased from different business people at a rate of Ksh 2,000 per month. Any trader who is not a member of the women group is charged Ksh 50 per 20 litre jerrican of camel milk stored overnight (i.e. Ksh 2.50/litre). Once milk arrives at the bulking/cooling hub, it is weighed to confirm volume and tested using a combination of three simple methods – physical appearance; testing by mouth; and dipping of a wooden cooking spoon (mwiko) to see if the fermentation process has began. Milk from evening milking is separated from milk from morning milking which are then pooled into 20 litre jerricans. Fresh milk is also packed separately from fermented milk – most of it in 20 litre jerricans. Although camel milk is not regarded as spoiled when it is received in fermented form and actually fetches the same price as when fresh, the demand for “fresh” is higher than that for “fermented” and, therefore, “fresh”is preferred. Once milk is

9 These women traders operate individually each currently handling only about 100 – 150 litres per day depending on supply and capital. Only about half of the members were actively buying and selling milk at the time of the study.

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weighed and graded, records are taken (supplier, volume, grade) and, for some traders, money paid on the spot. Some traders however, pay the suppliers with a one-two day lag until they are paid by their agents in Nairobi. Milk is then put in freezers for cold storage until the following day.

Transportation The transportation activity has two segments. The first involves transferring the milk packed in 20 litre jerricans from the bulking/cooling hubs to Nairobi bound buses. This is done by casual labourers using wheelbarrows, each ferrying 2 – 5 jerricans per trip depending on the distance. Some cooling hubs are just a stone throw away from the bus stages and Ksh 20 is paid per trip. Others are however quite some distance (e.g. Safi Estate hubs) and Ksh 20 is paid per jerrican. This milk transfer activity is handled by a group of about 5 – 10 young men depending on the season. Transportation to Nairobi is by four buses plying the Isiolo-Nairobi route, departing between 6.00 – 6.45 am each morning and getting to Nairobi (Eastleigh final stage) by around 11.00 am. Table 3.8 shows the capacity and charges by each of the buses.

Table 3.8

Milk transportation capacity: Isiolo-Nairobi Bus company Capacity Current

volumes transported

Price per 20 litre Jerrican

Price for money transfer – Nairobi:Isiolo per envelop – paid to driver on delivery

Isiolo Star 1,600 1,200 50 100 Busways/Buscar * 1,200 1,200 50 100 Northern Horse 1,600 1,200 50 100 Isiolo Coach** 800 60 50 100

Total 5,200 3,660 50 100 * The bus can take up to 80 jerricans of 20 lt each but since it has no carrier, two chambers (of 10

jerrican capacity each) are reserved for other luggage ** bus used to utilize full capacity but former conductor/driver ran away with traders money; it is now

only used by one trader (60 litres), other than time when either of the other buses is broken down Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

At the time of the study, the four buses were ferrying to Nairobi on a daily basis 3,660 litres of milk at a charge of Ksh 50 per 20 litre Jerrican. This represents a 70% utilization of the milk cargo capacity of the buses. For this 3.7 tonnes of milk, the total amount paid is Ksh 9,150. Compared to AA rates for a 3 tonne truck, this transportation mechanism for milk is about 40% cheaper than the real transportation costs which would normally be incurred in transportation of goods. While this can be considered to be a conducive factor contributing to efficiency and competitiveness of the sector, it can also be looked at from a negative perspective. The current transportation capacity of the buses is limited and, taken together, the four buses are unable to take significantly much higher volumes of milk such as those in supply during the rainy season. Furthermore, the bus transportation is not suitable for milk transportation especially when important hygiene and food-safety considerations are taken into account. Indeed, information from milk traders indicate that part of the reason they do not use aluminum cans is because the buses have rejected them, largely due to the increased weight. The continued provision of milk transportation services by buses at the current (under-cut) rates therefore undermines the emergence of a specialized transportation business for camel milk to Nairobi which would be capable of taking increased volumes and offer high quality standards in hygiene and food-safety.

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Table 3.9 and Figure 3 present an analysis of the bulking-cold storage-transportation value chain for camel milk from Isiolo District to the Nairobi urban market. They show that on the whole, this is an efficient segment where, although actors involved are making positive margins, real profitability could only be achieved through increased volumes.

Table 3.9

Bulking centre – Nairobi market chain analysis Cost item Anoley WG hubs Abdi Rahman shops Total Cost/litre Volume of milk per day (lts) 3,100 600 3,700 Monthly volume of milk (lts) 93,000 18,000 111,000 Purchase price per litre (Ksh) 35 35 35 Total cost of milk/month (Ksh) 3,255,000 630,000 3,885,000 35.00 Cost of freezers (@ 2,000/month 116,000 18,000 134,000 1.20 Wheelbarrow transport/20 lt 20 20 20 Monthly wheelbarrow costs 93,000 18,000 111,000 1.00 Rental costs/month 15,000 6,000 21,000 0,20 Electricity costs/month 10,000 5,000 15,000 0.15 Cleaning of jerricans/month 22,500 4,500 27,000 0.25 Total costs for bulking (Ksh) 256,500 51,500 308,000 2.80 Transport to NRB per 20lts 50 50 50 Monthly transport costs 232,500 45,000 277,500 2.50 Money transfer costs/envelop 100 100 100 Monthly money transfer costs 78,000 3,000 81,000 0.70 Total value added/month (Ksh) 567,000 99,500 666,500 6.05 Purchase cost + directs costs 3,822,000 729,500 4,551,500 41.00 Selling price in Nairobi/litre 45 45 45 45 Total monthly revenue 4,185,000 810,000 4,995,000 Gross Net Income/month 363,000 80,500 443,500 4.00 Average traders involved 25 1 26 Monthly Gross income/trader 14,520 80,500 17,058 4.00 Imputed labour/mgt costs/day 200 200 200 Total monthly labour costs 150,000 6,000 156,000 1.40

Overall Total monthly costs 3,972,000 735,500 4,707,500 42.40

Profit margin/trader 8,520 74,500 2.60 Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

Figure 3: Bulking centre – Nairobi market value chain

Source: RMC/SNV Camel Milk VCA, Sept/Oct 2008

Cold storage

37.8%

Transport 33.8%

Milk payment 9.5%

Labour/mgt costs 18.9%

Freezer 44%

Transfer 35%

Other 21%

Includes rental (7%); Electricity (5%) and Container cleaning costs (9%)

Capacity of the buses that ply Isiolo-Nairobi route a major limitation to capacity utilization especially during rainy season when milk supply is not constrained. Current rates charged are only 40% of cost of alternative means

Capacity utilization of cold storage limited by milk supply into Isiolo town – partly due to low milk production & transportation problems for milk to Isiolo

Poor organization of traders making them work individually, low margins – temptation to adulterate milk/water to increase margins

Each trader charged Ksh 100 for money transfer by drivers – M-Pesa would cost half, more secure

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3.4 Processing Although there have been many discussions and initiatives towards camel milk processing in the past, it is only the Vital Camel Milk Limited plant based in Nanyuki, Laikipia District, that is currently processing camel milk in Kenya. This, indeed, makes it one in only a handful of camel milk processing plants in the World (FAO, 2008). The plant was established in 2005 with the aim of sourcing camel milk from Isiolo District and other neighbouring districts to process it largely for high-end urban consumers in Kenya and the international market at large. VCML has a fully operational plant in Nanyuki town with a daily processing capacity of 1,200 litres on a one 8-hour shift10. The plant is however currently receiving only 200 litres of camel milk per day but processing twice a week with an average weekly average of 2,000 litres. Milk is currently sourced from 15 accredited farmers, all from Laikipia District (Rumuruti, Dol Dol, Laikipia West, Kimanju area and other areas around Nanyuki town. Current workforce is 5. For farmers to supply milk to the plant, the company must do an analysis of husbandry practices and quality of milk produced. Milk is also laboratory-tested every time it is delivered to the factory by the farmer. The plant is currently producing fresh milk (in half litre units), fermented milk (mala/susa), Yoghurt and Cheese. It also has a machine for Ice-cream making but is currently not producing this product. Past production levels were however much higher. At its peak level of operation in the past, VCML had 63 farmers from Laikipia alone (including 5 Ranches) and was also sourcing milk from camel milk producers in Isiolo as far as Kulamawe and even Laisamis in Marsabit. At this time it had up to 36 workers and would handle up to 4,000 litres in a day11. The current low level of production is largely as a result of problems faced in supply of milk into the international market, initially to South Africa and Chile, and lately to California (USA) where substantial losses have been incurred due to quality issues. Discussions with the Managing Director however paint a positive picture of a re-bounce following successful marketing missions to the US, EU and Middle East Markets. Camel milk is currently delivered to the factory although the company has 2 Land Rovers for milk collection which it uses for milk collection during periods of high demand. Factory gate prices to farmers are Ksh 40 per litre. Although the study team could not access detailed costing information, estimates by the Managing Director indicates that, at current level of production, operational costs amount to about Ksh 30 – 40; packaging Ksh 35, and transportation Ksh 80 per litre. The milk is supplied to wholesalers in Nairobi and other parts of the country at Ksh 84 per half litre (i.e. Ksh 168 per litre) with a recommended retail price of Ksh 94 per half litre. From a survey of retail outlets however all retailers with VCML milk are retailing the milk at Ksh 120 per half litre. Figure 4 presents the VCML processing to retail value chain analysis. Even without inclusion of capital costs, marketing expenses and a margin, it is clear that the company is far from breaking even. The main culprit is the low capacity utilization which appears to be related to the low level of market development.

10 This is from information provided by the Operations Manager. Some secondary information on the plant have reported 6,000 litres and some even 10,000 litre capacity. The RMC team was not able to verify actual capacity 11 This seems to corroborate documented information that the plant has an installed capacity of 6,000 to 10,00 litres per day.

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Figure 4: VCML camel milk processing value chain This is also the same reason why retailers have loaded a 25% margin on the product in an attempt to recover costs of the low moving item. As will be discussed in Section 3.5.2, this high price is however counterproductive to efforts made towards development of the market. Since the local (Kenyan) market is significantly price sensitive, efforts towards increasing efficiencies in the processing segment must be built on increased capacity utilization through volumes. With lower prices, there are strong indications that efforts targeted at market development could have significant payoffs in a relatively short period. Just like has emerged under the other segments of the chain, the common thread for increased efficiency and competitiveness of the value chain is volume, productivity.

3.5 Wholesale and retail trading Camel milk wholesale and retail activities are best analyzed under the various market segments or channels. The first relates to the raw milk market to urban areas while the second is for the high quality pasteurized milk to urban and international markets. 3.5.1 Wholesale and retail value chain for raw milk in Nairobi Table 3.10 and Figure 5 present an analysis of the wholesale and retail value chain of raw camel milk in Nairobi’s Eastleigh market. There are three general selling points of camel milk in Eastleigh – 7th street near the Isiolo bus stage; 12th street near the Garissa bus stage; and a street in between these two streets called Jam street. The 7th street largely sells camel milk from Isiolo and so does Jam street which handles slightly more milk than the 7th street. Camel milk sold at 12th street is much less than in either of the other two selling points and comes from Garissa, Isiolo and Namanga. Eastleigh has about 50 traders who receive milk from the three sources – Isiolo, Garissa and Namanga. These traders, all women, can be regarded as wholesalers. They receive milk mostly in 20 litre plastic jerricans at a price of Ksh 1,000 (Ksh 50/litre) during the dry season and Ksh 900 (Ksh 45/litre) during the wet season. Depending on milk availability, each trader handles between 3 – 10 jerricans (60 – 200 litres) per day. Milk received is transferred from the buses to the selling points using handcarts which charge Ksh 20 per 20 litre jerrican from the Isiolo buses to any of the three milk selling points. The transfer charge is Ksh 10 per 20 litre jerrican from the Garissa bus stage to the 12th street selling point because the distance is shorter.

Raw milk from farmers 21.6%

Factory operations 16.2%

Packaging 18.9%

Transportation 43.2%

Local market is not yet well developed and outlets are only taking small volumes meaning heavy transportation per unit

Low capacity utilization of the whole process implies high per unit costs. Significant increases in capacity utilization are possible and these would cut down per unit costs significantly

Farmers in Laikipia have shown a capacity to supply quality milk. This could be replicated elsewhere

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Out of the total milk received, about 50% is sold directly to large volume consumers at a wholesale price of Ksh 1,100 per 20 litre jerrican. These include restaurants within Eastleigh (estimated to be more than 10 which deal in camel milk) and some households who have freezers and are able to take volumes of 5 litres or more to store. Some of the milk is also forwarded to other traders outside Nairobi – in particular, Kakuma refugee camp, Kisumu and Kampala. A number of the wholesale traders also have occasional buyers who take up to 10 litres every time they are traveling abroad (one to Turkey). The remaining 50% of milk is sold at wholesale price to retailers or even directly to consumers at retail prices of Ksh 80 per litre, usually in units of ! litre. Although most of the wholesalers sell their milk in bulk (wholesale) some opt to retail part of the milk because the retail margins are much better (one 20 jerrican able to fetch ksh 1,600 under retail instead of the Ksh 1,100 wholesale price).

Table 3.10 Wholesale and retail value chain raw milk in Eastleigh market*

Item 7th street (Isiolo bus

stage)

Jam street (in between 7th & 12 st)

12th street (Garissa bus stage)

Total Average cost/litre

Volume of milk received per day 2,000 2,500 500 5,000

Monthly volume of milk handled 60,000 75,000 15,00 150,000 Number of agents/wholesalers 20 25 5 50 Source of milk:

Isiolo 2,000 2,500 200 Garissa/Bangale - - 200 Namanga - - 100

Purchase price/ 20 litre jerrican (Ksh) 1,000 1,000 1,000 Purchase price per litre 50 50 50 Total monthly expenditure buying milk 3,000,000 3,750,000 750,000 7,500,000 50.00 Bus stage – selling point transfer cost/20lt 20 20 14 Monthly bus transfer expenses 60,000 75,000 10,500 145,500 1.00 City council licenses @ Ksh 25/2 days 6,000 7,500 1,500 15,000 0.10

Total expenses by wholesalers 3,066,000 3,832,500 762,000 7,660,500 51.10 Wholesale price per 20 litre jerrican 1,100 1,100 1,100 1,100 Wholesale price per litre 55.00 55.00 55.00 55.00 Total monthly wholesaling revenue 3,300,000 4,125,000 825,000 8,250,000 55.00 Gross net wholesale incomes (margin) 234,000 292,500 63,000 589,500 3.90

Net income per agent/wholesaler 11,700 11,700 12,600 11,790

Retail Proportion of milk retailed 50% 50% 50% 50% Volume of retailed milk per month 30,000 37,500 7,500 75,000 Number of retailers 68 85 17 170 Retailer purchase price per litre (Ksh) 55.00 55.00 55.00 55.00 55.00 Retailer direct expenses (Cess/packaging) 34,000 42,500 8,500 85,000 1.10 Total monthly expenses by retailers 1,684,000 2,105,000 421,000 4,210,000 56.10 Retail price per litre 80.00 80.00 80.00 80.00 Total monthly retailer revenue 2,400,000 3,000,000 600,000 6,000,000 Gross Net Monthly income (margin) 716,000 895,000 179,000 1,790,000 23.90 Gross net monthly income per retailer 10,529 10,529 10,529 10,529 Average daily milk volume per retailer -lt 15 15 15 15

* Volumes of milk may vary from estimations given from the source due to estimation which are based on averages Source: RMC/SNV Camel Milk VCA, Sept/Oct 2008

Estimates put the total number of camel milk retailers in Eastleigh at 170. Out of these, about 30 are door-to-door hawkers who take their milk to different parts of Eastleigh, largely targeting households. Out of these 30, a few (estimated to be about 5) also take their milk

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beyond Eastleigh to other estates in Nairobi particularly South B, South C and Embakasi. The rest of the traders (about 140) sell their milk in open air along the three streets – 7th, 12th and Jam streets. The environment under which they sell the milk can generally be characterized as unhygienic (if not hazardous) - open sewers, dust from cars, everything placed on the ground, milk-holding jerricans used as seats, 500ml cup used for measuring milk units retailed just left in the open and not re-washed or covered when not in use. Overall, an analysis of the value chain shows that it can generally be described as efficient in delivering raw milk (albeit of low quality) to consumers in this market segment. Margins are positive and, indeed, quite high at the retail segment but due to the small volumes handled per trader, overall profitability is quite low, in the region of Ksh 10,000 – 15,000 per month per trader (both wholesale as well as retail). Due to the low overall profits in camel milk trade, most traders are combining selling milk along with a myriad of other commodities – mostly foodstuffs (e.g. dates, fruits, vegetables). Figure 5: Wholesale and retail value chain for raw camel milk to Eastleigh

3.5.2 The high end pasteurized milk market The study team visited several supermarkets that included Nakumatt, Uchumi, Ukwala, Tuskys, and a host of mini markets in Eastleigh. On visiting, the Team found that camel milk retails as Vital Camel milk (Live vital!) and generally stored in a fridge next to the much bigger fridge storing other types of milk.

Table 3.11 Analysis of price of camel milk and others (for half a liter quantities)

Type of milk/Seller

VCML Delamere Daima Brookside Tuzo KCC

Yogurt Kshs 160 68 71 71 65 Normal Kshs 120 30 34 32 32 30 Quantity stocked in dozens

5-6 5-6 > 10 > 10 >10 >10

Fat quantity 3.3% 2.3% 3.0% 3.0% 3.3% 3.3% Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

Daima Yogurt was not available in the supermarkets visited and hence the blank amount in the table. Of interest to the team, therefore, was why such a differential in cost and what it

Milk transfer from buses

3%

Wholesaling 13%

Retailing 84%

Direct costs 5% Transportation 15% Labour 80%

Un-hygienic trading environment a big limitation to expansion of market beyond traditional camel milk consumers

Though margins high, profit low due to low volumes

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means to the purchasing power of the public. This matter will be revisited in detailed analysis later in the report. From Table 3.11 above, it is clear that camel yogurt is twice as expensive as the others (160/68 and 160/71). The picture is even more significant when we compare normal camel milk and others. It turns out to be four times the cost of cow milk (120/30, 120/34, 120/32). The high-end retailers were further analyzed in detail to reveal the volumes they sell per day (or per week), number of outlets, their view of demand, and the selling price of camel milk among other things.

Table 3.12 Analysis of various factors across high-end retailers (for half a liter)

Factor/Retailer Nakumatt Uchumi Ukwala Tuskys Mini markets Total Sales vol per day 30 10 10 10 24 No. of outlets 19 11 6 20 5 61 Type of customer Somalis and

health conscious

Somalis don't know Somalis Somalis

View of demand strong and likely to grow

average Average weak very strong

Purchasing price 84 84 94 94 94 Selling price kshs 120 120 120 120 120 Source: Source: RMC/SNV Camel Milk VCA, Sept/Oct.2008

The sales figure per day depends on the location of the outlet in question. Uchumi branch at Sarit Center, for example, sells an average of 20 units per day, the Uchumi Ngong Hyper sells 2- 3 per day and most units are approaching expiry day, and the Uchumi branch at Koinange street does not stock camel milk (they used to do it but stopped stocking due to lack of sustainable demand). On the hand other, the mini markets located at Eastleigh are doing better although in general the units sold per day are still few (some up to 50 units per week). The Team took an average of 20 units per day per retailer for purposes of gauging sales per day (and per week). Nakumatt has 19 outlets in the country (Ngong Junction, Prestige, Mega, Embakasi, Downtown, Lifestyle, Thika Road, Highridge, Ukay, Westgate, Karen, Kisumu City, Nyanza, Kisii, Eldoret, Nyali, Likoni, Village market, and New Nyali). Of these, only 13 stock camel milk (in Nairobi and Mombasa urban centres). The ones in milk-producing areas cannot compete with local milk production and the demand for camel milk is very weak. Nakumatt is a fast growing supermarket chain, and its customers have high purchasing power and they are also health conscious. It provides a good opportunity for future growth of camel milk sales. Uchumi supermarket has 11 outlets in the country (Ngong Hyper, Adams, City Square, Koinange, Nairobi West, Langata Hyper, Sarit Center, Westlands, Eldoret, Meru, and Nakuru). The customers of Uchumi include the middle income, high income, and low income group. Of these outlets only 7 stock camel milk (the ones that do not stock are Eldoret, Meru, Nakuru, and Koinange). Ukwala and Tuskys have stopped stocking camel milk due to low demand. However, the figures shown above were their average sales before they stopped selling the product. Ukwala has 6 branches in Nairobi, 5 of them concentrated in the City centre and 1 in Eastlands.

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Tuskys has 11 branches in Nairobi and 9 branches spread across the country (a total of 20). It is the fastest growing supermarket serving low- to middle-class customers and provides an opportunity to expand camel milk sales. The mini markets are many and varied in terms of size and location. However, the Team visited 5 (located in Eastleigh) that offer great scope for selling the product. Customers to the retailers mentioned above are Somalis and health-conscious clients. Whereas Nakumatt and mini markets estimate the demand to be strong, Uchumi projects it is as being average while both Ukwala and Tuskys paint a gloomy future demand. Purchasing price was said to be between Kshs 84 and 94 and the selling price was Kshs 120 across all the markets. Interviewees did not wish to have their names included in the report for fear of being accused of giving away confidential company information. However, they included managers, supervisors, and staff manning the milk sections of each chain. The retailers are making a margin of 27.6% to 42.9% ((120-94)/94*100% and (120-84)/84*100%)). This is a high margin that, again, will be discussed in detail later. It is part of what pushes the cost of camel milk to prices many times more than the cow milk. Current volumes of milk sold per day is estimated by multiplying the number of retailers branches selling (13+7+5) times the 20 units sold per day. This equals 500 half-liter packages or 250 liters per day (500/2). On a weekly basis, this would be 1,750 liters (250 *7). The potential, if all branches sold camel milk after strong marketing efforts, would be an average of 20 units per day times 61 branches equals 1,220 units per day or 8,540 units per week. This would be equivalent to 4,270 liters per week. And of course the supermarkets are growing, the potential mini markets are innumerable, and the marketing efforts would attract new customers or deepen usage by the current customers. In the course of the study, interviewees constantly talk about the health and medicinal value of camel milk. However, the Team members did not come across a major health outlet that frequently purchases camel milk for its patients or constituency it serves. 3.6. Input supply The main inputs used in camel production are veterinary drugs (antibiotics, trypanocides, antihelmintics, etc) acaricides, minerals such as common salt, syringes and injection needles. All these items are readily available in the six chemists stocking livestock inputs in the Town of Isiolo. The most important drug used is Tryquin for Trypanosomiasis. There are a few brands of antihelmintics but the pastoralists use the cheaper ones. Ivomectin the more effective one is hardly purchased. The chemists are well stocked and are manned by people who are experienced in both camel husbandry and treatment of diseases. Their knowledge, however, is hardly used as the pastoralists know the camel diseases and the drugs needed. Occasionally they consult the chemists but the chemists do not travel to the herds. The chemists report brisk business of selling antibiotics, trypanocides and antihelmintics indicating that the pastoralists recognize the value of the drugs. Isiolo is the only major town where veterinary drugs can be bought. Smaller towns did not stock drugs. Some camel owners complained about high prices.

3.7. Service providers Isiolo District has full departments of Livestock Development and veterinary services. The senior staff are very qualified. The less senior staff however are out of depth in camel

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matters. There is a need for retraining (short focused courses) on camel diseases and husbandry. The district has few other service providers. CAHWs have been trained in the past, but as usual once they finish the drugs in the kit, they never replenish the kits. There is a need for training pastoralists in clean milk production, camel husbandry etc. Vital Camel milk in conjunction with KARI also trained pastoralists in clean milk production but more is needed before the pastoralists can produce clean camel milk. 3.8 Summary analysis of the camel milk value chain Figures 6(a) and 6(b) show the entire value chains for camel milk into the Eastleigh market and that of pasteurized camel milk into the high end urban market. The raw milk value chain is fairly efficient and as a result, it can be regarded as profitable. Low productivity at the farmer level, lack of farmer organization, current cost structures and a generally low level of development of the chain have combined to make volumes handled to be fairly low to an extent that profitability is generally low. Under current production systems and cost structures at the farmer level, the most important actors in the chain - milk producers - are not making money. This must, therefore, be the starting point in development of the chain. On the other hand, the pasteurized milk value chain is currently loss making. This is largely as a result of the extremely low milk volumes handled and poor development of the market, partly aggravated by the high retail prices charged as a result of the inefficiencies of the chain associated with level of operation below the viability threshold. Figure 6(a): Value chain of raw milk camel milk from Isiolo to Eastleigh market

Production: Ksh 25 (31.3%)

Assembly Ksh 10 (12.5%)

Bulking &cold storage: Ksh 12.50 (15.6%)

Transport Ksh 2.50 (3.1%)

Wholesale Ksh 5 (6.3%)

Retailing: Ksh 25 (31.3%)

Heifer: 19% Herding: 63% Other: 18% In-hygienic operating not just threat to public health but also a major limiting factor to market expansion. Feq. Harassment by LAs

Low milk productivity as a result of animal husbandry practices, breeds & milking practices. Poor milk quality – milking/handling & animal health. Farmers not making money

Bus transportation less than 40% of real costs. Undermining emergence of specialized transportation for camel milk

Volumes constraining profitability in whole chain; temptations to adulterate milk to meet high demand

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Figure 6(b): Value chain of pasteurized camel milk to high end urban consumers

Production: Ksh 30 (12.5%)

Assembly Ksh 10 (4.2%)

Processing: Ksh 70 (29.2%)

Transport Ksh 80 (33.3%)

Retailing: Ksh 72 (30%)

Heifer: 19% Herding: 63% Other: 18%

Farmers in Laikipia showing good promise in adhering to quality standards in milk production; Productivity, however, still low limiting profitability of camel milk production enterprises

Low volumes of current production and demand by each outlet makes transportation extremely uneconomical

High retail price of Ksh 120 per ! litre and poor market development have made product very slow moving – sometimes expiring

From a retail price of Ksh 240, Processor appears to be making losses of Ksh 22 per litre f production. This is even without taking capital cost and expenses in marketing.

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4 POLICY, REGULATORY AND

INSTITUTIONAL FRAMEWORK

4.1 Overview Policy, regulatory and institutional factors are a key determinant of the business environment under which enterprises within a specific value chain operate which, in turn, determines the growth potential and overall competitiveness of the value chain. This section explores the policy, regulatory and institutional framework under which the camel milk value chain is currently operating. The purpose is to identify any stifling factors that need to be addressed (or taken into account) on the one hand, as well as supportive aspects that present opportunities for growth and vibrancy of the value chain. 4.2 Policy and regulatory environment The Government of Kenya (GoK) is involved in the camel milk sub sector. Its involvement, however, is through policies and activities of a diverse group of agencies working within the government structure. The main ministries involved include those in charge of livestock affairs (ministry of livestock development), the ministry of the Development of Northern areas (the habitat of camels), the Ministry of Trade and Ministry of Industrialization. These ministries’ and their agencies’ involvement are summarized in table 4.1. In addition, the consultants give what in their view the ministries should do more.

Table 4.1 Summary of government agencies involved in camel milk industry

Ministry/ Agency

Involvement so far What more can be done

Ministry of Livestock Development

• Developed a livestock policy that includes the promotion of camel milk production

• Through one of its parastatals (the Kenya Dairy Board), it developed a dairy bill that recognizes camel milk and sets the framework for inspection for quality.

• Through its ALLPRO programme, it has prioritized camel production. So far, a joint ALLPRO/ KCA/ ILRI/ KARI study of camel milk production and marketing has been completed. Camel extension guidelines have been developed. ALLPRO has funded advanced training for some camel scientists.

• MOLD is in the process of establishing a camel milk

• A camel policy, equivalent to the dairy bill for dairy cattle milk, is needed to spur development. MOLD should spearhead this.

• The dairy bill is still at the AG chambers. MOLD should persuade the AG to have the bill debated and enacted into law.

• Recommendations of the joint study that touch on camel milk quality should be addressed. Camel production extension work should be put on the fast burner.

• As veterinary doctors specialized in camel medicine are needed, MOLD should sponsor some (short as well as post graduate degrees).

• MOLD should use its connection with FAO to promote camel milk exports as it has done in Mauritania.

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processing plant in Garissa. • The Veterinary Department

controls camel diseases although it has a dire shortage of field staff experienced in camel medicine.

Ministry of regional Development

• ENNDA is developing more water resources in its mandated area.

• ENNDA jointly with Egerton University studied camel milk production under the zero grazing system

Ministry where KeBs falls

• KeBS has gathered data to guide it in formulating standards for camel milk.

• Currently, KeBS uses its code for hygiene and general standard for microbial quality to police camel milk quality.

• KeBS needs to complete the formulation of the standard so that KDB and KeBS can legally police camel milk quality.

• Commercial attaches in Kenyan embassies abroad should promote camel milk exports

Ministry of Local Government/Local authorities

• Licences camel milk sellers • Checks on licencing (harasses

camel milk sellers)

KARI • Researches on camel milk production, marketing, quality etc

• Participated in an ALLPRO joint study on camel milk production and marketing.

• Participated in a joint study (with Egerton University) on camel milk production

• Has participated in camel milk quality extension work in Kulamawe.

• Camel breeding should be incorporated in research.

• KARI also needs to train more specialized camel scientists (short and long courses)

• KARI needs to more participation in the camel milk value chain work as more economics is needed to elucidate some issues.

Ministry including ALRMP

• Restocking with camels • Improvement of water supply in

Arid Lands

• Should fund a camel population census.

Universities • Egerton University participated in a joint study with ENNDA and KARI on camel milk production

• University of Nairobi has studied camel milk quality

• More studies needed especially on camel diseases and management.

4.3 Institutional framework Institutional support influences the dynamics and viability of a value chain. The following are some of the key institutions that support the camel milk value chain.

4.3.1 Kenya Camel Association The Kenya Camel Association (KCA) was founded in 1995 following a well attended camel forum at Nanyuki. Essentially, its main role is to articulate and lobby on issues relating to camel development in the country and regionally. It was formally registered in 1997 and opened its first office at Nanyuki .The national office is currently in Nairobi

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courtesy of MOLFD (Ministry of Livestock and Fisheries Department)/ALLPRO (ASAL-Based Livestock and Rural Support Project). Objectives of KCA

To provide a forum for camel owners within the republic of Kenya through meetings, forum work shops, and seminars.

To improve and promote better usage and better animal husbandry of camel in general, improving productivity including addressing, identifying and highlighting camel problems and seeking solutions.

To improve the marketing of camels and camel products nationally and internationally.

To peruse and enhance awareness and understanding of camels through research and extension.

Activities Principally the convening of the Kenya camel forum, an annual gathering that

brings together camel owners and other stake holders to discuss and share information on issues pertaining to the camel.

Conduct workshops for camel owners on aspects of camel husbandry and health value edition to camel products.

Undertake collaborative research with partner institutions, information dissemination through forum publications and newsletters.

Facilitate in camel derbies Membership and area of operation KCA operates and has over 500 members in 17 semi-arid districts in Kenya, regionally and abroad. Main achievements 1 The Association has been convening the annual camel forum for the past 10 years. 2 Dissemination of information through proceedings, publications, and newsletters. 3. Two collaborative researches projects with KARI on small-scale value -adding and characterization with NVI-Sweden on camel calf diarrhea and KEMRI on camel milk and diabetes. Implementing partners Local partners Ministry of livestock development (MOLD) ASAL-Based Livestock and rural support project (ALLPRO) GTZ-PSDA Program. ILRI ALRMP 11 International partners Natural Resource International (NRI-UK)

The Association can play a critical role in enhancing the awareness of camel milk in fighting poverty and increasing household income. Its large membership, variety of stakeholders, and

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close collaboration with the Ministry of Livestock and Fisheries Development makes it appropriate to lead in lobbying for effective policies for camel milk.

4.3.2 Kenya Livestock Marketing Council Kenya Livestock Marketing Council (KLMC) was established in 2000 as a Private sector, non-profit-making service organization dedicated to the improvement and development of the livelihoods of livestock producing communities and contributes to the economic development of Kenya. Main Objectives

To advocate for the interests ad rights of the members on livestock matters in collaboration with other stake holders.

To promote livestock and livestock products marketing in the country and in particular in pastoral areas in order to enhance and improve the economic well being of livestock producing communities.

To enhance marketing information, dissemination and communication to producers and traders.

To solicit for funding including credit and offering group guarantees. Lobby for policy change to favor appropriate livestock development. Build capacities of users groups to sustainable manage livestock related

infrastructures and undertake community based diseases control measures. Specific Objectives

Expand KLMC activities to have national representation. Avail and disseminate livestock marketing information. Organize consultative forums between producers, traders, transporters, butchers,

and consumers to harmonize livestock products trade. Work closely with Department of veterinary Services for the Associations to

manage quarantine facilities sustainably. Outsourcing for markets, nationally regionally and internationally. Community mobilization and participation in development activities.

Organization and Governance The KLMC derives its strength and membership from the grass-root whereby producers, traders, users association and other interested stakeholders registered as members in all districts. Registered members in the District form the District Livestock marketing Association. The members elect District officials (two delegates) to represent them at the National Kenya Livestock Marketing Council Form. Nine persons among the delegates are elected to a National Directors forum. This elected Board of Directors together with the national secretariat manages the organizations affairs at national and regional levels. There are also 11 elected officials in every district that manages the day to day district activities. So far there are 2,915 registered corporate and individual members. The secretariat is run by a group of dedicated and competent techno crates with vast experience in pastoral issue. National Office Structure To enhance its operation in this vast region, KLMC has divided its operation 5 regional offices consisting of.

(a) Northern Region: Isiolo, Marsabit, Moyale, and samburu districts.

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(b) Northern Eastern Axis: Garissa, Marsabit, Mandera, Ijara, Wajir and Tana River. (c) Northern West Axis: Baringo, Turkana. (d) Southern Axis: Kajiado, Narok. (e) Nairobi terminal market: Kariobangi, Njiru and Dagoretti.

The KLMC, in partnership with the KCA, should continue to promote camel milk issues on the national stage. By advocating for rights and interests of its members, and sharing marketing opportunities in the camel milk, the KLMC can effectively mobilize community participation and increase efficiency and effectiveness in the camel milk chain.

4.3.3 Association of Pastoralists The Association of pastoralists exists to lobby and advocate on issues affecting their livestock and livestock products. For example, they have (together with other interested parties) lobbied to have camel recognized in the formulation of livestock policies. As a result, all annual censuses of animals include counting of camels. In turn, this has led to positive consideration of camel milk and other products derived from camel milk like cheese. The Association plays the important role of creating awareness, sensitization, and sharing challenges and potential solutions relevant to pastoralists. Funding to the Association has come from NGOs (for example, Oxfam). 4.3.4 Farm Africa Kenya

FARM-Africa aims to reduce poverty by enabling marginal African farmers and herders to make sustainable improvements to their well-being through more effective management of their renewable natural resources. It works in partnership with communities, governments, local organizations, international NGOs and the private sector to develop strong rural livelihoods sharing the results of its work with others to maximize its impact.

One of FARM-Africa Programmes is Northern Kenya Pastoralist Capacity Building Project. It works with poor African farmers, helping them to produce more food for their families in order to ensure future generations do not have to depend on handouts of aid.

Northern Kenya Pastoralist Capacity Building Project (NKPCBP) provides pastoralists the skills and opportunities to manage their resources and influence policy effectively. The NKPCBP aims to reduce the levels of poverty of pastoral communities in Northern Kenya and promote pastoralism as a viable livelihood.

FARM-Africa's partners include local NGOs, local community leaders and traditional

elders in northern Kenya. The project has made strong linkages with the Kenya Livestock Marketing Council (KLMC) in order to enable the KLMC to use their grassroots members and structures to provide a reliable and sustainable market information system to the pastoralists. Since Jan 2008, the Project has completed training on Advocacy & Networking for 30 pastoralists representatives, 34 community micro projects have been successfully approved by the Community Development Committees (CDC) and are being implemented now and a further 62 proposals are waiting to be reviewed by the relevant CDC. Three new community

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animal drug stores have been established, 25 shallow wells have been rehabilitated and protected, and the recent dry spell has resulted in the government calling for concerted efforts to be able to cope with any drought that might occur. 4.3.5 Food for the Hungry Food for the Hungry began its work in Kenya’s Marsabit district as an emergency response to the drought of 1976. Over the past 30 years, Food for the Hungry has focused on major initiatives such as food security, water and sanitation, health and nutrition, HIV/AIDS prevention, education, and child development. With more than 120 well-trained and experienced staff, Food of the Hungry/Kenya is equipped to expand its operations within and beyond its current coverage areas. Livestock Breeding and Marketing Livestock trading and income are poor in many Kenyan communities. The livestock development program helps facilitates economic growth in these communities by (a) establishing sustainable camel breeding and trading of camel milk, (b) promoting community-based veterinary service through training, (c) promoting livestock marketing by training livestock traders and building market infrastructures, (d) promoting fodder production and pasture recovery, community based early warning systems, and (e) improving local governance and conflict mitigation.

4.3.6 GTZ- Kenya Kenya is a priority partner country to German, and by implication a priority to Germans development institution (GTZ). GTZ Kenya has a programme that pursues the value-added-chain approach. Selected products for production and marketing are analyzed- from the use of farm equipment to production, processing and marketing – the respective actors, strengths and constraints are identified, and the ways in which the programme can intervene are determined. Interventions take place at several levels and with a large number of partner organizations: At the national level, the sector ministries involved are agriculture, livestock and fisheries, and co-operative development and marketing. Production, processing and marketing are to be left entirely to the private sector. At the same time, the modification of laws and export regulations for the products mentioned are supported. At an intermediate level, professional organizations and service providers are promoted and advised in order to improve the advisory and other services they offer to small and medium-sized enterprises. Farmers’ groups and individual farms are advised on how to add the greatest possible amount of value to their own enterprise. This is done through management and technical consulting, and internal and external networking, e.g. with buyers, processors and export companies. GTZ Kenya has worked closely with VCML, farmers and farmer associations to improve the income of camel herders. This has been through training given to individual farmers and farmers’ groups, traders, and transporters. Issues of production, quality and standards, and treating camel milk as a business have been shared with these groups of people. Being an NGO, GTZ Kenya has stayed away from directly participating in production, processing, and marketing; leaving these functions to the private sector.

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4.3.7 Business Services Market Development Programme (BSMDP) BSMDP was a Business Development Services (BDS) programme which started operations in Kenya in 2003 with funding from the British Government’s Department for International Development (DfID) and came to an end in April 2008. Through continuing funding by the Danish International Development Agency (DANIDA) the program is however still in operation but has now been consolidated along with other DANIDA-funded BDS programs under management by the Micro Enterprises Support Programme Trust (MESPT). In the period 2004 – 2006, the programme worked with the Vital Camel Milk Limited in support of various interventions geared at increasing availability of large volumes of quality milk to the plant from small-scale producers in Laikipia, Isiolo and other neighbouring districts. The relationship with VCML was initiated by VCML following advertisement by BSMDP of a challenge fund aimed at increasing the availability of business development services in growth oriented value chains with high impact on poverty. BSMDP’s support to the company was to the tune of Euro 250,000. This went towards training of farmers on issues of quality, building of a revolving fund for provision of quality milk containers (Aluminium); building of charcoal coolers for milk cooling in areas with no Electricity; development of local animal health services providers to advice farmers on camel husbandry matters; and other aspects aimed at building the capacity of VCML to source large volumes of quality milk from small scale producers. From discussions with the manager who was in charge of the BSMDP programme, the success of the project with VCML adversely affected by soft issues among the Directors of VCML as well as its relationship with the association of camel milk producers. Management of farmer organization for increased production of quality milk and interventions in product assembly are areas which BSMDP feels still require support. The project under which BSMDP funded VCML has already come to an end and this is no longer a core area of support under current funding. The project has however significant institutional memory and the current manager feels that, depending on nature of interventions required, it could still be an area they could consider. General Comment Institutions covered under 4.3.4 to 4.3.7 above are development agencies. Their contribution towards the value chain cannot be over-emphasized. They are critical in creating awareness, sensitizing communities, assisting in advocating and lobbying for appropriate policies and regulation, providing training, acting as guarantors for loan applications by businesses, and even granting seed capital to micro, small, and medium enterprises. Such assistance and hand-holding is a significant booster to value chains that would be otherwise be unattractive to many a businessman who would otherwise ignore such chains. However, the assistance could also be a hindrance to a healthy competition. Often, donors do not subject potential donees to a critical evaluation of the viability of their businesses. Poverty alleviation is the donors’ key focus and as long as a wide spectrum of persons (especially the marginalized) will benefit from the funding, many donors would disburse the funding. Such funding does create an unfair advantage to businesses receiving donor funding over those receiving funding from the market. There is also likelihood businesses receiving donor funding could continue to exist as long as the funding is available; only to die as soon as the funding is withdrawn.

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In summary, therefore, availability of donor is important but cannot be a significant factor in considering the medium to long-term viability of a value chain or that of its related businesses.

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5 THE CAMEL MILK SUB-SECTOR MAP 5.1 Overview This section discusses the organization of the camel milk sub-sector by building on information generated in the three previous sections. Although as discussed in Section 2.4, a considerable amount of camel milk produced is consumed by camel-keeping households and their herders, this section focuses only on marketed milk, tracing it from the producer to the market through the various channels. A key part of the section is the camel milk sub-sector map. This is a simplification of what is a complex reality but helps to identify all key players and the main leverage points for the sub-sector where targeted interventions could affect the entire value chain.

5.2 The Sub-sector map An analysis of information generated during the study shows that the camel milk sub-sector has three main channels (see Figure 7). Channel 1 is for raw milk from pastoralist camel milk producers direct or through intermediaries to rural households; Channel 2 is for raw milk from pastoralist camel milk producers to low-end urban consumers, largely comprising Somalis; and Channel 3 is for milk from quality conscious pastoralist camel milk producers and ranchers (most in Laikipia District) processed by the Vital Camel Milk Limited for high-end urban consumers in the local and international market. In addition to these three main channels, there is also minor channel for other camel milk products (processed fermented milk12, yoghurt, and cheese) processed by VCML for the high end urban market. This is an extremely small channel handling no more than 0.2% of marketed milk from Isiolo District and its environs and is therefore not given separate coverage. 5.2.1 Channel 1: Raw milk direct from farmer to rural consumers Camel milk producers, have always supplied milk for consumption by neighbours and local restaurants as the most efficient way to dispose of surpluses quickly and cost effectively for payment or other form of value exchange. This is very similar to all other smallholder producer systems in Kenya where the local market of households experiencing deficits and local shopping centres constitute the avenue for commercialization of the otherwise generally subsistence-oriented production systems. Due to long distances of camel herding zones from the residential (manyatta) areas and shopping centres, some traders are also involved in this channel, coming in largely in collecting milk from different producers and delivering it in bulk to large volume consumers such as restaurants or retailing in small units (as little as 250ml) to households as per their needs. Information from the key camel milk production clusters in Isiolo district suggests that this channel currently handles between 20 – 30% of marketed milk from these clusters. Prices paid by consumers depend on the region (milk-surplus/deficit area), but even more so the micro-locality of milk available in the immediate neighbourhood. The agreed price will depend on the balance of power between smallholder farmer and rural consumers, but will be limited by rural households’ relatively low purchasing power.

12 A differentiation here is made on fermented milk processed from fresh milk and naturally fermented milk which involves no deliberate processing efforts.

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Figure 7: Camel Milk Sub-sector Map (marketed milk from Isiolo and environs)

CH1 (25%) CH2 (70%) CH3 (<5%)

Small-scale pastoralist camel keepers

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Ranchers in Laikipia Districts

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Medium & large-scale camel keepers

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Milk receiving agents/ wholesalers in Eastleigh

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Small-scale pastoralist camel keepers in Laikipia (500)

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Bulking and cooling hubs in Isiolo town (7 hubs; 67 freezers; 8,000 lt capacity/day;

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Isiolo Traders (50)

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Eastleigh Mini markets (8)

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Supermarkets (4 chains)

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ML

KARI; ILRI; ENNDA; Egerton; KCA

Collection points e.g. Kulamawe (200 lit/day)

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Isiolo-based Agrovets (6)

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Information obtained during the study however suggests that prices in this channel are competitive – comparable to farm-gate prices paid by other channels. In Kulamawe, for instance, a 250ml unit was going for Ksh 5 (Ksh 20 per litre) which is the same amount paid to farmers by traders taking the milk to Isiolo town. The main consideration to the farmer is therefore not the price but whether this channel is able to take all the milk, all the time. In most cases, it is not. Furthermore, from the production cost analysis done in Section 3.2, even though the prices paid to farmers in this channel are comparable to prices paid under the other channels, this price is not sufficient for farmers to break-even under the current low levels of productivity and cost structures. The vibrancy of this channel depends on what happens to rural incomes, rural population and continued growth of milk supply in the particular areas – both of camel milk and other milk, particularly cow milk. An analysis of current trends in this market suggests that this is likely to be a growing channel given the increased acceptability of camel milk among non-traditional camel keepers and the general trend of reduced availability of cow milk, particularly during dry seasons. From the generally low growth rates in rural incomes and population, the prospects for significant growth are however limited. Although this channel will continue to be important, it does not present immediate market-based facilitation opportunities for meaningful expansion. As things are at the moment however, camel producers are generally losing money in this channel and an important development intervention must be increased productivity by farmers to enable them to, at least, break-even. Given that the channel is currently not able to absorb all the milk produced and is offering below break-even prices, farmers are likely to see no sense in investing in increased production (from productivity) even when there is no market for what they are currently producing and prices are low. Profitability for this channel is therefore tied to increased expansion of the other channels to mop-up current supply and absorb increased production from investments geared at improving productivity. 5.2.2 Channel 2: Raw milk through intermediaries to urban consumers This is the largest channel under which raw milk from both small and large-scale camel herders is handled by informal traders (almost 100% women) to urban consumers, largely comprising the Somali community in Nairobi’s burgeoning Eastleigh estate (and business hub). Most of the milk in this channel is supplied fresh to households and restaurants for making tea although a substantial amount is also consumed directly as fresh or fermented milk either as a refreshment, a health product by individuals with various ailments (diabetes, stomach complications, etc), or as food for young children. This channel is currently estimated to be handling about 70% of all marketed milk from the main camel milk production clusters in Isiolo District. For camel milk under this channel to reach the end consumer while still fresh per current preferences, it requires a cold chain. This is however not entirely the case. Milk from evening milking (normally done at around 6.00 pm) is combined with milk extracted in the morning (put in separate containers) and trekked to collection points in the rural areas from where it is transported through various means to Isiolo town, reaching there at between 12.00 pm – 6.00 pm depending on the source area. By this time, there is no transportation means to Nairobi and the milk must be stored in the town for onward forwarding to Nairobi the following day onboard Nairobi bound buses which depart at around 6.00 – 6.30 am. Of necessity, this milk must be put under cold storage once it arrives in Isiolo town to the time it leaves for Nairobi. As discussed in Section 3.4, an elaborate cold storage (and bulking) business has developed in Isiolo town for this purpose. At the moment, there are only about

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7 cooling hubs in Isiolo town through which all milk destined for the Nairobi urban market must go through. This is obviously one of the nodes of this channel and presents an excellent leverage point for interventions, particularly those related to quality. For distant milk production areas such as Kulamawe, milk is brought to collection points from where it is transported to Isiolo. These are also important nodes in the chain. Although no cooling is done at these collection points, there are strong indications that a cold storage capacity for these points would significantly increase milk volumes from distant production areas as it would allow producers to comfortably bring their milk to these points for overnight storage for transportation to Isiolo the following day. Past attempts at this were however not successful. In Kulamawe, for instance, VCML through BSMDP funding, supplied a 200 litre capacity charcoal cooler to the group of women traders in the area (Kulamawe milk suppliers self help group) in 2006. This has not been used, even a day. An analysis of the reasons behind this lack of use under the obviously overwhelming need for the facility points at issues related to farmer/trader organization and their interrelationship with the market (VCML in this case). On the whole, these milk collection points emerge as also important system nodes suitable as leverage points. Interventions must however be carefully designed to take cognizance of all inherent issues within the value chain. On the whole, an assessment of this channel shows that it is fairly efficient with fresh milk (from as far as 450 km from Nairobi), delivered to consumers in Nairobi in two days at fairly competitive prices of Ksh 80 per litre compared to farm-gate prices of Ksh 25 -30. Estimates show that this channel (currently handling about 4,000 liters per day) is meeting only 20-25% of current demand. It is therefore a channel that has significant potential for growth. An analysis shows that the main reasons for this large demand-supply gap are related to the low milk productivity at farmer level, logistical difficulties in milk assembly from farmers, and capacity constraints in transportation of milk from Isiolo town. Camel milk supplied under this channel can be generally characterized as of poor quality, delivered to consumers under largely unhygienic trading conditions which many observers (from outside the channel) could argue poses considerable health risks to consumers. It is undisputed that some of the milk in this channel is produced by unhealthy camels (mastitis disease, for instance), milking is done without adherence to good hygiene standards (washing of udder, hands, milking container); milk is transported in plastic jerricans which cannot provide high standards of cleanliness; and there are high chances of milk contamination during transportation due to the unsuitable means used to ferry the milk from producer to the market. It is also generally known that milk adulteration under this channel is common. Three issues however continue to favour supply of low quality milk in this channel. The first is the obvious excess demand for camel milk which makes traders and consumers tolerate low quality, particularly in cases where they can glaringly sense adulteration. The second relates to difficulties in testing milk quality. Outside a laboratory setup, there are no available easy and reliable instruments/mechanisms for testing for adulteration and other quality aspects of camel milk within the informal setup under which milk is traded. In the absence of this, players can only sense that the milk is of low quality but cannot prove it. The third issue is tied to a cultural belief among traditional camel milk consumers that camel milk has medicinal properties that make it unlikely to suffer health-related quality deterioration even when not properly handled. On the whole, this appears to be the main force fueling continued supply and tolerance with low quality. This is however an issue that must be dealt with if this channel is to be expected to expand significantly beyond the generally low-end consumers, even among the Somali community. Sooner rather than much later, it is also highly likely that

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the Dairy Board will enforce high quality standards once the Bill seeking to include camel milk under the law that governs food-safety standards in milk trade is passed into law. On the whole, this is the channel that presents the highest prospects for impact in the immediate to short-term (1 – 3 years). Interventions geared at streamlining the supply chain to improve efficiencies; increased productivity at the farmer level; and mechanisms for improved milk quality throughout the chain appear to be manageable within the short-term. In all these, mechanisms for ensuring the flow of higher volumes of milk must constitute the central pillar for profitability and impact in this channel. 5.2.3 Channel 3: Pasteurized milk to high-end urban health market The third channel represents pasteurized, high quality camel milk from quality conscious small and large-scale producers largely in Laikipia District processed by Vital Camel Milk Limited based in Nanyuki for high-end urban consumers in Kenya and internationally. Although this channel currently accounts for only about 5% of marketed camel milk from Isiolo and its environs, it represents the highest potential for growth and impact. Driven by the increased international recognition of camel milk as a natural health product in treatment of diabetes and a number of other ailments, the potential demand for camel milk for this market segment nationally and, even more so, internationally is estimated to be enormous, beyond Kenya’s current camel milk producible capacity of over 300 million litres. Analysis done in Section 3.5 however shows that this channel is currently operating far below the break-even threshold and is delivering milk to urban consumers at a price of Ksh 240 per litre - 3 times higher than prices in the informal market (Channel 2). This is a major limiting factor to expansion of this channel and must constitute the starting point in the search for appropriate mechanisms for growing this channel. Although this channel is currently the smallest and presents significant challenges in turning around the low profitability (actually, losses) in the channel, it presents the best prospects for Kenya to fully utilize the potential of the camel milk sub-sector. The potential market demand for camel milk under this channel is enormous. Authoritative estimates put the potential national demand for this market segment anywhere between 50,000 and 150,000 litres per day – approximately an annual demand of 18 – 55 million litres or 5 – 16% of national production. This market segment is however poorly developed and there is a significant mix between customers seeking camel milk for its health qualities with those valuing the milk from a food perspective (and substitute to cow milk). This market segment is therefore still significantly price sensitive and requires continued efforts for it to be developed to levels where it can be relied upon to take meaningful quantities of camel milk in relation to national production. At the international level, while there are no reliable estimates of demand under this market segment, rough guesstimates put the annual demand at over 300 million litres (FAO). Although this represents potential demand (which is not necessarily current demand), VCML has made significant efforts to penetrate this market and attests that current market demand far exceeds current supply and, by and large, the market can take as much camel milk as can be supplied provided it meets required quality standards and regulatory hurdles in some markets (such as the EU) are cleared. VCML has supplied milk to this market segment in South Africa, the USA (California) and even as far as Chile in Southern America. The current issue is therefore not whether there is sufficient demand, but rather, whether the supply can guarantee required quality standards, volumes and consistency.

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On the whole, this is the channel that holds the highest potential for driving growth of the camel milk industry in Kenya (and globally) and sufficient efforts must be put towards addressing issues in this channel. It provides significant scope not just for absorbing a large volumes of current production but also presents camel milk as a high value commodity whose returns should be sufficient to justify investment of the enormous resources (and efforts) required to overcome current supply constraints to meet volume and quality standards demanded by the market. It would also push camel milk production to the required good animal husbandry practices which are not only important for addressing demand in the other (less stringent) channels but which are also important for meeting food security needs of the pastoral community.

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6 SUB-SECTOR DYNAMICS

6.1 Overview This section moves towards conclusion of discussions on the camel milk value chain by exploring the various factors shaping the current state of the sub-sector and its likely trajectory in the coming years. It reviews the forces driving current developments and narrows down to emerging nodes in the value chain which can be targeted for leveraged interventions geared at increasing competitiveness of the sub-sector.

6.2 Driving Forces Driving forces refer to those factors that are at the root of sub-sector dynamics – the positive or negative changes taking place within the sub-sector which are responsible for contraction, stagnation or expansion of various channels. These factors often relate to market demand, technological change, and barriers to market entry, input supply, and profitability level of different markets or product niches, risks or policies. The study identified the following seven main driving forces in the camel milk sub-sector: 6.2.1 Cultural attachment of traditional camel keepers to camel milk Camels have been part of the cultures, practices and ways of life of the Somali, Rendile, Gabbra and Turkana communities for centuries and camel milk is deeply entrenched within their consumption preferences with strong underlying traditional beliefs. Particularly among the Somali, these beliefs place camel milk as a superior product that has high nutritional and medicinal values giving it a premium over other milks and encouraging its consumption. This cultural attachment of camel milk among traditional camel keepers especially the Somali is what is behind the growth of the raw camel milk channels, and seems set to continue holding ground into the foreseeable future. Continued growth of the Somali community in urban areas in Kenya and internationally partly fuelled by continuing out-migration of Somalis from Somalia seems set to continue providing a firm demand base for raw camel milk into urban areas. Given the relatively small proportion of the Somali community (and other traditional consumers of milk) in Kenya and internationally, it is however clear that the full potential of the camel milk sub-sector cannot be exploited by targeting this market segment only. These initiatives will need to build on the positive cultural/traditional factors that have deeply entrenched camel milk among the Somalis while carefully riding away from negative cultural entrappings (such as disregard for hygiene) that act as a put-off towards acceptance of camel milk by other communities. 6.2.2 Rapidly expanding health market The health market has been rapidly growing internationally with increasing number of people becoming conscious of the benefits of achieving good health through consumption of foods with known medicinal properties. Globally, this is generally the segment of the population with high disposable incomes and when this is coupled with the fact that foods entering this market can be considered as substitutes to medicine makes such foods become high value commodities. In recent years, camel milk has become recognized as a health food and in

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some parts of the world doctors are even prescribing camel milk to patients with various ailments (see Text Box 1). This is the major driving force in the emergence of a global industry for camel milk and a diversified range of other camel milk products. Whereas the unmet demand in this market is enormous and prices are good, it is a market that is highly sensitive to quality standards and consistency in supply. Unless these basic requirements are met, penetration into this market will be impossible and penalties for non compliance will be huge, even likely to lead to collapse of the channels supplying to the market. In Kenya, this is the market segment that holds the highest promise for the camel milk industry but it also poses tremendous challenges for development. This is however the force that the industry must ride on in expanding the market outlet for the product, both locally and to the international market. Research to authenticate the medicinal value of camel milk is a basic component on which this driving force is riding on and efforts must be made to tap into already ongoing research or participate in generating new information. 6.2.3 Effects of drought on increased acceptability of camels and camel milk The global climate change that has seen increased droughts in Kenya (and other parts of the world) have been a key element driving increased acceptability of camels among non traditional camel keepers. In Kenya, camels are now kept by the Maasai, Borana, Samburu, Pokot and are getting introduced among many other communities, including commercial ranches. Among traditional camel keepers, the decimation of other livestock during prolonged droughts has also proved the handiness and resilience of camels and is fuelling significant shifts in herd structures in favour of camels. This continuing spread of camels in Kenya and the availability of camel milk during drought periods when other milks are unavailable has led to a growing trend in acceptability of camel milk among non traditional consumers of the commodity. This trend appears set to continue, promising to fuel increased supply of camel milk as well as building the demand beyond traditional consumers. One important aspect of the spread of camel keeping among other communities is the emergence of a production base keen on adhering to quality and productivity issues. There is information to show that some of the communities that have adopted camel keeping lately have entered into it without some of the traditional hang-ups that have made it difficult for traditional camel keepers on issues of quality. Quality milk to VCML coming from the Maasai and Samburus in Lakipia is an example. This also applies to camel keeping among ranchers. The importance of this phenomenon is that it is setting a strong demonstrator effect that with good husbandry practices, it is possible to achieve required quality and productivity standards. This is a message that must be built on and passed on to all camel milk producers. 6.2.4 Involvement of wealthy traders in Isiolo in camel milk sub-sector Within Isiolo, the involvement of a small but significant number of wealthy traders into the camel milk sub-sector seems to be a significant driving force in the commercialization of the young industry. Estimated to number around 50, this group of mostly traditional camel keepers from the Somali community have seen the business opportunity of the camel milk industry and increased their participation in production (now accounting for 25% of the district camel herd) and are investing in areas that address some of the key constraints in the value chain - including milk transportation, cold storage and marketing13. This group of medium and large scale producers is concentrated in Isiolo town and hold significant

13 There is information that a significant number of the women involved in milk storage and cold storage in Isiolo town are related to the medium and large scale camel keepers.

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influence on the direction other producers take. One of these includes a growing trend towards maintaining lactating herd within easy reach of Isiolo town which has picked up among many camel milk producers. Information also suggests that it is because of the influence of this group that efforts towards building a firm camel milk supply base for VCML in Isiolo did not go well. The influence of this group in the past development of the sector and its current status has been a major driving force and seems likely to hold into the foreseeable future. 6.2.5 Facilitative infrastructural development The availability of electricity within Isiolo town and all weather tarmac road from Isiolo town (to Nairobi) appear to have been an important force that has shaped the current status of the sub-sector. The availability of these infrastructural facilities within Isiolo town have contributed to the growth of the town as an important hub while the lack of these faculties in other regions of the district have acted as a disincentive. With the already commenced construction of Isiolo-Marsabit road this seems likely to open up other parts of the District and beyond (Marsabit) and so would the spread of other infrastructural developments. 6.2.6 The entry of VCML Although the Vital Camel Milk Limited is currently not sourcing any milk from Isiolo district and is handling milk volumes that may appear to be insignificant to influence developments in the sub-sector, there is clear information that the entry of the company has greatly shaped the current status of the sub-sector. The areas of influence include in pricing (before entry, prices were much less); quality standards, and the penetration of camel milk to the high-end health segment, locally and internationally. 6.2.7 Availability of an acceptable milk payment system Transactions in milk sales have depended on a payment system built on trust where, with no written agreements, milk is put in a bus with instructions on who to collect it and payments are made in the same way. Although this system of payment has been abused on a few occasions, it has remained largely reliable, driving growth in transactions. With the introduction and growing acceptability of mobile phone money transfer technologies as well as increased presence of financial institutions (including Da’abshir), the continued availability of a supportive payment system seems set to support increased vibrancy in the sub-sector.

6.3 Points of Leverage A leverage point within the context of sub-sectors refers to a system node where a small number of one category of players interacts with a large number of other players in the sub-sector. These points therefore become easy entry points through which interventions that influence the entire value chain can be made. The study identified the following geographical and policy related potential leverage points: 6.3.1 Geographical The camel milk value chain has at least 10 geographical clusters. 6.3.1.1 Production clusters

(a) Central Division Central Division has the highest concentration of camel population in Isiolo and is currently estimated to be contributing to more than three quarters of the camel milk reaching Isiolo town. Although camels are extremely mobile, there are clearly identifiable

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milk production enclaves within the Division where interventions geared at streamlining the supply chain at production level can be focused on. Of clear significance is the massive Isiolo Holding ground with well established water, animal healthcare and pasture facilities capable of holding the entire district’s lactating herd for a whole year. This resource is however currently poorly exploited and most of the facilities are out of use. Its potential is however enormous and presents a clear point of leverage at the production level. (b) Kulamawe Cluster This is the second largest production cluster in Isiolo district, but its potential is greatly underutilized largely due to distance, disorganization of players (particularly producers) and lack of supportive facilities. This is the other production cluster (after Central Division) where well designed targeted interventions could lead the way to widespread adoption and replication across Isiolo and other camel milk producing parts of the country. Though not sufficiently explored during the study, one aspect of developing this cluster may be to explore the possibilities using the Maua-Meru (tarmac) route in delivery of milk from this cluster to the Nairobi Market once volumes increase. (c) Concentration of medium and large-scale producers in Isiolo town The concentration of medium and large scale producers within Isiolo town sets Isiolo town as an important point at which interactions with this category of producers can be made. Although this category of producers may not constitute a main part of the target group (of the poor) for development programs, it constitutes an important segment of producers with significant sway in the sub-sector, capable of influencing desired changes among many of the small scale producers who constitute the primary target group.

(d) Laikipia production clusters Although Laikipia district was not part of the areas of focus of the study, it has emerged that the district has a significant number of smallholder camel milk producers. Important production clusters include Rumuruti, Dol Dol, Kamanju areas. There is strong information that farmers in these areas have shown significant willingness and capacity to adopt good husbandry practices for high productivity and quality of camel milk. A number of farmers from these clusters are also currently supplying milk to VCML. These clusters therefore present an excellent leverage point outside the predominantly traditional camel milk production clusters of Isiolo District from which important comparative lessons can be drawn (e) Ranchers Just like the medium and large scale camel producers in Isiolo, Ranchers do not constitute the primary target group for pro-poor development initiatives. Within a value chain perspective, however, they could act as an important point of leverage for certain types of interventions. From our assessment, camel keeping Ranchers in Laikipia District have the potential of constituting important points for learning and breed improvement type of interventions.

6.3.1.2 Other important nodes

(a) Isiolo cooling hubs The Isiolo cooling hub comprising 7 identifiable points constitute an important system node. All milk destined for the Nairobi market must pass through these cooling hubs.

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These are potential interventions points for initiatives targeted at improved milk quality, handling and even packaging and processing. It is also an excellent intervention point for information related initiatives. (b) Kulamawe milk collection point Milk collection points are also important system nodes in the milk value chain. The Kulamawe collection point/centre is of particular importance given the already significant milk production capacity of the area, the existence of an already organized traders group and availability of a disused charcoal cooler with a 200 litre capacity. Besides Kulamawe as a production cluster, the collection point at Kulamawe also presents itself as an important system node for the sub-sector. . (c) Isiolo transporters Four buses are involved in milk transportation from Isiolo to Nairobi. These are easy to find and have organized management structures for any interactions. Initiatives targeted at discussing issues related to current transportation arrangements should therefore be easy to arrange.

(d) Eastleigh milk market All milk entering the national urban market in Kenya goes through Eastleigh. Within Eastleigh, milk is traded at three points – 7th street, 12th street and Jam street. For the raw milk market, this is the end-market system node from where leveraged interventions could be felt in the entire value chain.

(e) VCML VCML is a key player in the pasteurized camel milk channel and stands out as an important leverage point for leveraging efforts aimed at influencing this channel.

6.3.2 Policy and regulations At the policy and regulatory environment level, the study has identified four critical leverage points: 6.3.2.1 Entry of camel milk into the dairy industry regulation There is a draft Bill under the Dairy Board that seeks to include camel milk (along with buffalo, goat and sheep milk) under the law that regulates production and trade in dairy products. This law is expected to have far reaching effects on operations of the camel milk sub-sector. Currently, camel milk falls outside the regulatory arm of the Dairy Board and this is the main reason why certain minimum standards (especially on food safety) are not enforced. Once the draft Bill comes into law, players in the camel milk industry will have to adhere to the regulations. It is important that the Bill takes into account current circumstances of the industry and the new law is enacted in a form that is supportive to development of the sub-sector. Starting from the current preparations for regulation of the sub-sector, to the implementation of the regulations once the law comes into force, the Kenya Dairy Board is an important leverage point for the sub-sector. . 6.3.2.2 Policy recognition of camel sub-sector in development From estimates generated under this study, the camel milk sub-sector is a Ksh 8 billion industry whose potential in spearheading development and growth in incomes among arid and semi arid lands need to be given due policy recognition and supported accordingly. The

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Ministry of Livestock Development (MoLD) currently housing the Kenya Camel Association has already made the first steps in recognizing the importance of camels. More is however required and MoLD is the leverage point for this. KCA as the main advocacy body on issues of camel sector development is also an important institutional leverage point. 6.3.2.3 Quality standards The setting of appropriate quality standards acceptable internationally and their enforcement in the camel milk industry are essential if Kenya is to be expected to exploit its potential in this industry. The Kenya Bureau of Standards and an internationally accepted Competent Authority in quality inspections are therefore important regulatory leverage points for interventions targeted at increased acceptance of camel milk in the market, both locally and internationally. 6.3.2.4 Research Globally, the commercial camel milk sub-sector is a relatively new industry. A lot is still not known and research is required on issues related to production (breeds, healthcare, feeds); processing (products, technologies etc); and properties of the milk per market needs (treatment of diseases etc), among many other areas. ILRI, KARI and Egerton University appear to be the institutions spearheading research (sometimes working as a consortium) and therefore form an important leverage point for the sub-sector.

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7 KEY CONSTRAINTS AND

OPPORTUNITIES

7.1 Overview Estimates made in Section 2 unequivocably show that the camel milk sub-sector is big with current production level estimated to be worth Ksh 8 billion at the farmer level. The value chain analysis made in Section 3 has however clearly shown that only a small proportion of this potential is exploited and, indeed, the core players in the value chain, the farmers, are not making money. The reasons are many and varied and most have been highlighted in passing in earlier sections. This section concludes discussions of the camel milk value chain by focusing its attention on analysis of the key constraints holding back the full realization of the sub-sector’s potential, current opportunities within the value chain, and an analysis of the type of interventions that could increase growth and competitiveness of the value chain. 7.2 Major Constraints The constraints facing the camel milk sub-sector can be conventionally put into four broad categories based on the value chain functional area they are mainly manifested in – production; product assembly and distribution; processing and value addition; and marketing. From a value chain perspective where emphasis is put on the interconnectedness of actors in all segments of the value chain, it is however realized that issues at one segment of the value chain are manifested in other segments and are therefore issues of the entire value chain. To emphasize this value chain view of issues, we discuss the key constraints facing the camel milk value chain without necessary grouping them into the conventional functional areas mainly because of their cross-cutting nature. We however highlight which areas they are affecting and the pivot points from where they should be addressed. While there are many constraints facing the camel milk sub-sector, the key ones can broadly be said to be six. These are low milk productivity; low milk quality; poor organization of actors; inadequate support infrastructure; and poor market development. 7.2.1 Low milk productivity The analysis of the production value chain presented in Section 3.2 has shown that at prevailing cost structures, the current average level of milk production per camel among most producers is not sufficient for them to cover their costs and, indeed, the majority of them are (unknowingly) actually making losses. This low milk productivity combines with other factors in the supply chain to make the volume of milk marketed under all channels to be inadequate for other players in the value chain to make meaningful profits. Milk productivity is therefore seen as a central constraint that must be dealt with for the entire value chain to expand and become truly profitable at all levels. Just like in all other dairy animals, milk productivity in camels is a function of the genetic potential of the animal (breed), health and nutrition status, and milking practices. Our analysis shows that these are the issues contributing to low milk productivity in the camel milk sub-sector. While all these are important and each must be addressed if the full potential of the sub-sector is to be realized, an overall assessment shows that the bottom-line

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culprit is currently poor milking practices. The majority of camels in Isiolo district are of the Somali breed and although there has been significant in-breeding, there are strong indications that the current breed of camels are genetically capable of producing much higher volumes of milk than is currently happening. Nutrition and health care are important and assessment of current husbandry practices among camel keepers (large and small) shows that this also an area that is wanting. Even at current practices, however, the camels can produce much higher volumes of milk than they are currently doing. Most farmers are in general not extracting all the milk from their camels and this stands as the main reason for the low milk yield. The reason behind this is a combination of factors most of them touching on market access, prices and availability of labour for milking. To search for pastures and water, most camel herds are found significant distances from the market or milk collection routes and this makes it difficult for the herders to milk and trek the milk to the collection points in time. Ideal hand-milking of camels also requires two persons to do it simultaneously, and for the full milk potential of the camel to be attained, frequent milking in a day is required. This requires significant labour which is not available as the current deployment of herders among pastoralists is normally done with only herding in mind and is generally stretched given that labour is currently the highest cost in herding. Management of the lactating camel herd in a way that milking can be done to the full potential therefore seems to be the most immediate way through which higher milk productivity can be achieved. Discussions with key stakeholders in the camel milk sub-sector shows that most market oriented camel keepers have already realized this and a trend of keeping lactating camels near Isiolo town or near milk collection points has already began. This is what needs to be built on and nurtured. It will however, not be enough to keep the camels near markets, mechanisms for ensuring full-milking practices are entrenched must also be made just as it will be important to address health and nutrition issues in the immediate and short-term. In the medium and longer-term, development of high milk yielding breeds will also be important if the sub-sector’s potential is to be realized. This is the path that the cow milk dairy industry has taken, and although some stakeholders feel that it is not achievable or even desirable for the camel dairy, the trend has already began and some basic momentum seems to be building up. In some countries such as UAE and other parts of the Middle East, zero-grazing of camels is already becoming a normal practice and the difference in yields and incomes is clear. Ranchers in Nanyuki are already keeping camels on somewhat sedentary pasturing arrangements. This is to some extent also happening in Isiolo and the main problem becomes availability of pastures. The Ewasso Ng’iro North Development Authority has developed a Camel Centre where it is trying out the concept of supplementary feeding of camels (and to some extent, zero grazing)14. In our view, this is where things need to be picked from and advanced towards a direction where, at least, the need for supplementary feeding of lactating camels stationed near market points can be addressed. It is a direction which seems inevitable if the camel milk industry is to be expected to attain its potential of driving growth in household incomes not only among pastoral communities of Isiolo and other northern districts, but also among the many communities in the southern rangelands who are adopting camel keeping as a beacon of hope under the increasingly harsher climatic conditions.

14 The KARI Range Management Research Centre in Marsabit, and animal multiplication station Nasukuta, West Pokot may also be involved in research towards this direction.

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7.2.2 Low milk quality Poor milk quality cuts across the entire value chain, starting from production all the way to the time milk is sold to consumers in the raw milk channels. Information obtained during this study confirms findings of other studies which have identified seven main points in the value chain where camel milk quality is affected (see Table 7.1). From an analysis of the ways through which the quality of milk is affected points at the following six factors as the ones behind the poor quality of milk: poor husbandry practices; low adherence to quality standards (including deliberate adulteration) due to lack of enforcement of standards; unavailability of appropriate (dedicated) transportation means for milk; and low levels of awareness of the importance of quality standards in camel milk by suppliers (producers and traders) as well as consumers.

Table 7.1 Value chain points where camel milk quality is affected

Point in value chain Milk quality and hygiene factor Lactating camel • Unclean udder, subclinical mastitis, zoonotic infections with

lactogen transmission Milking • Unclean hands; poor personal hygiene and health status; unclean

(plastic) milking containers; unclean milking site; lack of clean water; poor practices in washing camel udder before milking;

Milk handling at farm level • Unclean (plastic) container; pooling of fresh (morning) and old (evening) milk

Milk assembly/collection • Unclean (plastic) container; pooling of milk from different producers; high environmental temperatures during intermediate storage; adding unclean water

Transportation • Delayed transport; prolonged exposure to high environmental temperatures; contamination through mixing with all manner of other luggage (livestock, charcoal etc)

Bulking point • Unclean (plastic) containers, pooling of milk from different traders/producers; power outages leading to deterioration of milk; milk adulteration (adding of unclean water).

Wholesale and retail trading • Exposure to high environmental temperatures; selling from open containers; adding of unclean water; unhygienic trading environment.

Consumer • Traditional consumption of raw milk; traditional belief that camel milk cannot be unclean; tolerance to low quality milk due to excess demand.

Source: Farah Z. et al; MoLD; RMC/SNV Camel Milk VCA, Sept/Oct, 2008

Milk quality is central to expansion of the current milk market and must therefore constitute an important element of efforts made towards better exploitation of the sub-sector’s potential. Successful interventions must however focus on the supply and demand side as well as policy and regulatory aspects related to setting of acceptable standards and their enforcement. 7.2.3 Poor organization of players All primary actors in the camel milk industry can be regarded small-scale operators from the volume of produce they are handling as individuals – be they producers or traders. For the value chain to be competitive and profitable, operators must act together particularly on all issues related to market access and penetration. The study revealed that producers and traders are, by and large, not organized and where some groupings exist, they are generally weak. Poor standards in animal husbandry and the costly product assembly process are largely attributable to poor organization of producers. This also applies to other segments of the value chain and, indeed, the entire chain as a whole. There have however been attempts in the past of bringing together players in the sub-sector for joint action and, indeed, this is perhaps

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what is responsible for some of the positive developments that have led to increased commercialization of the sub-sector. Our view is however that the sub-sector seems to be still operating without a coherent joint vision and strategy for development. This must constitute the starting point for any meaningful development of the sub-sector and our view is that the analyses made under this study provides a good basis for starting discussions geared at building consensus among players on the importance of working together for their common good. 7.2.4 Poor business orientation of producers Just like most other smallholder farmers in Kenya, camel milk producers in the pastoral system operate without the basic business orientation that is necessary to make camel milk a profitable enterprise. Although this varies from community to community, with the Somalis regarded as the most business oriented, in general, most farmers are operating without due consideration of all the costs they incur and how to make a positive return. This is an important mindset that must be coupled by effective business oriented management practices for the production activity to be profitable at the individual level and for the value chain as a whole. 7.2.5 Underdeveloped support infrastructure The entire camel milk value chain can be characterized as one with a poorly developed physical and institutional support infrastructure. Poor road network within the districts; lack of electricity (particularly in the interior collection points where cold storage is required); insufficient water supply for the animals as well as to support hygienic milking are some of the physical infrastructure constraints that clearly stand on the way and must be dealt with for the full potential of the camel milk sub-sector to be realized. While this is a general development problem that deserves attention, its gravity and urgency take a different angle when the size of the camel milk sub-sector is put on the same scale with other sub-sectors in Kenya which are accorded higher attention and specific efforts put towards dealing with impeding factors including infrastructural issues. Just like tea, coffee and horticulture are important in Central Kenya; Sugar and Fish important in Western; tourism and coconut important in Coast; (and so on), so is the camel milk sub-sector in the North and, therefore, efforts towards dealing with infrastructural impediments to exploitation of this economic potential must be fast-tracked as they are in the other sectors in the country. Besides physical infrastructure, an inadequate institutional infrastructure (both public and private sector), also stand out as key constraints to the development of the camel milk industry. Key missing or inadequately developed institutional infrastructure include: availability of quality extension services; business development services; financial services; transportation services and, very critical, security infrastructure. Some of these are areas that can only be effectively dealt by the government, but there are many where the private sector can fill the gaps. 7.2.6 Poor market development The market for camel milk is currently largely limited to consumers from traditional camel keeping communities. Although this market is not even adequately served by current supply, it is clear that substantial exploitation of the potential of the sub-sector cannot be achieved without expanding the market beyond this narrow segment of consumers. Estimates suggest that the potential local and international market is enormous particularly in the health segment. Efforts for developing this market are therefore required.

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7.3 Key Opportunities Information generated during the study reveals that the camel milk sub-sector has many opportunities for private and public sector interventions. We discuss five of the major ones here: 7.3.1 Large unmet demand and significant potential for market expansion Estimates suggest that the current demand in the urban market for raw milk (in Eastleigh) is at least four times higher than current supply. The current market can take up to 20,000 litres of raw milk per day even under current quality standards and cost structures. At current prices, this is a business worth Ksh 1.6 million per day – or Ksh 0.6 billion in a year. The potential for growing this business several times over in the medium term seems realistic. Overall, with proper market development strategies, camel milk from Kenya can effectively penetrate the international health market which would make camel milk a high value commodity with sufficiently high returns to players to justify the enormous investment resources required to get the sub-sector up and running. The private sector that enters into the market now and invests strategically, stands to reap significant returns, not just in the long-term but even in the short and medium term. This also applies to social investors interested in improved livelihoods of producers and other low income players in the value chain. Improvements in livelihoods can be achieved even in the short and medium terms and complete transformation be achieved in the longer term. 7.3.2 Enormous potential for increased supply The potential for achieving significant increases in supply of camel milk in the short term is enormous. Already, many farmers are merely not extracting the milk because of market accessibility and organizational issues. A long gestation period of getting large volumes of milk flowing in the value chain is therefore not required. A significant herd size of a fairly good genetic milk production potential already exists. Farmers are also already starting to organize their herd management practices to orient production towards market requirements, particularly in relation to keeping the lactating herd near market or milk collection points. With efforts towards building on this trend and better organization of producers, significant milk volumes can be achieved in the immediate to short-term. In the medium and longer term, it is also clear what is required to increase the volumes of milk supply and all indications show that this should be achievable. Even exploiting a modest 20% of the production potential would mean Ksh 2 billion annually to producers and more than Ksh 3 billion to other players in the value chain even at current farm-gate and retail prices in the local market. 7.3.3 Existence of clear system nodes As discussed in Section 6, the camel milk sub-sector has already evolved to a level where it has clear system nodes where targeted interventions can leverage growth in the whole value chain. These exist throughout the value chain. At production level, the two milk production clusters of Central Division and Kulamawe already present excellent intervention points on production issues. Other important system nodes include the Isiolo bulking and cooling hub and the Eastleigh market which are already handling at least 4 tonnes of milk on a daily basis. 7.3.4 Emerging trends in commercialization Although camel milk cannot yet be regarded as a ‘money minting’ enterprise, it has already proved itself to be a profitable business with significant potential for immense profitability. Some farmers have realized this and so have other players in the sub-sector. From this realization, traditional ways of doing things are already changing to take a business and

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market orientation. One of the notable trends at the production level is the increasing trend towards maintaining lactating herds near Isiolo town. This trend is however currently countered by the unavailability of sufficient pastures in the areas on a year round perspective. The Isiolo Holding Ground with a capacity of holding at least 11,000 camels at the worst of years, five boreholes and animal health facilities presents an excellent opportunity for making the desire to keep lactating herds near Isiolo town on a year-round basis a reality. The current management of this facility would however need to be significantly improved to make it reliable in provision of pastures, water, and health services. The increasing market orientation of producers, even in changing their traditional herding practices, is a good indicator that, so long as there are clear market incentives, producers and other players could change their ways of operation to respond to market needs. Increased productivity, supply consistency (especially timing) and adherence to quality standards are all areas that can be achieved with the right market incentives. 7.3.5 Forthcoming dairy sector law to regulate camel milk Although the inclusion of camel milk in the pending Bill on regulation of the dairy industry in Kenya can be seen as threat to the informal trade in camel milk, it can also be seen as a significant opportunity for the sub-sector to move towards adoption of the requisite production and milk handling standards which are essential for growth in the sub-sector. The first most likely area where the new law will affect is the unhygienic milk trading environment of Eastleigh and the obvious milk adulteration that takes place in the sub-sector. That this law is still at its drawing stages presents two important opportunities. The first is for the traders to start re-aligning themselves to the obviously higher food safety standards which will be expected of them. This is already happening in the cow milk dairy industry, even within Eastleigh where there are numerous dairies and milk bars with significant levels of cleanliness. This is also happening in other sub-sectors such as fruits (cluster near Nairobi Hospital; South B Kiosks etc). The other opportunity is for stakeholders in the camel milk industry to help in shaping the new law to ensure it is enacted in a form that is supportive to the growth of the sub-sector.

7.4 Potential Interventions From our discussions of the key constraints and opportunities in the camel milk sub-sector, we have highlighted various interventions for the private sector as well as development agencies including the government. In essence, the key constraints and opportunities define the broad areas for intervention. Using this broad framework for interventions we provide a summary listing of some of the key specific interventions that appear to be of high priority. 7.4.1 Possible interventions for increased milk productivity

(i) Farmer awareness and education on the business sense of increased productivity. This should be packaged within the framework of turning camel milk production into a profitable business which could cover productivity as one of the essential components along with others, such as herd structures.

(ii) Establishment of strong farmer organizations for joint action in market access to justify investments towards increased production.

(iii) Support for increased capacity of the Isiolo Holding Ground as a facility that can nurture and entrench current trend of producers to maintain lactating herds within easy reach of the market.

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(iv) Support for increased availability of camel milk business development service providers able to advise farmers not only on husbandry issues but also on business practices, market access and farmer organization.

7.4.2 Increased availability of quality camel milk

(i) Facilitate investment in better workspace for traders in the Eastleigh camel milk market. In liaison with the City Council, identify interested investors (private sector or otherwise) to develop clean and high quality structures for handling camel milk similar to the concept used in cow milk bars or the increasingly popular fruit kiosks (such as those near Nairobi Hospital). A popular model used is a private developer to invest in construction and lease to current operators.

(ii) Support market-based awareness campaigns to stimulate demand for quality camel milk among consumers.

(iii) Facilitate development of simple and easy to use testing equipment for camel milk quality.

(iv) Support information dissemination and awareness campaigns on the need for high quality standards in milk production and supply, and on ways of ensuring quality.

(v) Facilitate acquisition of appropriate milk handling containers among producers and other players in the value chain.

(vi) Facilitate increased availability and utilization of a cold chain for camel milk covering milk collection points, bulking centres and transportation.

(vii) Support mechanisms for setting of appropriate quality standards in camel milk and their enforcement – both by players (self regulation) as well as by authorities.

(viii) Facilitate investment in basic packaging of camel milk for ease in quality transportation and distribution to consumers.

(ix) Support entry of commercial providers of suitable camel milk transport services with sufficient capacity to handle available milk to the market.

7.4.3 Interventions for increased market development

(i) Facilitate development of a market development strategy for camel milk – domestic and international markets

(ii) Support increased supply of quality milk for the pasteurized milk channel to support private sector efforts for building a sustainable penetration to the international market

7.4.4 Sector organization

(i) Facilitate formulation of a joint vision and strategy for development of the camel milk sub-sector.

(ii) Support establishment and strengthening of stakeholder common interest groups at production, product assembly and trading levels.

(iii) Facilitate establishment and capacity development of a resource centre for information on camels. This is in recognition of the rapidly building body knowledge on issues related to camel both in Kenya and internationally generated from research and other empirical works which currently remain scattered and unorganized for effective utilization by stakeholders in the sector.

7.4.5 Increased visibility and recognition of the camel milk industry

(i) Support stakeholder engagement with government to lobby for increased recognition and support for the sub-sector.

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(ii) Support selective publicity to raise visibility of camel milk sub-sector among policy makers, development agencies and the general public.

(iii) Facilitate stakeholder support for increased resources for research and development on issues related to the camel industry in Kenya. This should include support for improved diffusion of research results into better practices in all segments of the camel milk value chain.

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randomized study; Journal of Camel Practice and Research 7: 27-36. ALRMP; PricewaterhouseCoopers (2005): Isiolo District Vision and Strategy: 2005 – 2015;

Nairobi, July 2007. Davies, J (2007): Total Economic Valuation of Kenyan Pastoralism; World Institute for

Sustainable Pastoralism; January 2007. Ebony Consulting International (2001): The Kenya Dairy Sub-Sector; A study for DfID;

Nairobi; September, 2001. Farah, Z and Fischer A. edt (2004): Milk and Meat from Camel; Handbook on products and

processing; Swiss Federal Institute of Technology; Zurich; 2004 GOK (2008): Sessional Paper No 2 of 2008 on National Livestock Policy, Government Press;

Nairobi; May, 2008 Hennessy M (2006): From desert to the dairy: Interview with Camel milk Entrepreneur

Nancy Abelderrahmane of Mauritania; http//www.policyinnovationsorg/ideas/ briefings /data/camelmilk interview.

Isiolo Holding Ground Users Association (2006): Strategic Plan for Isiolo Holding Ground:

2006 - 2011; Isiolo, 2006. Kenya Camel Association – KCA (2008): Proceedings of the Camel Health and Husbandry

Training Workshop Held at the Narok Farmers Training Centre; KCA; Nairobi; May 2008.

Kuria S.G. et al (2006): Study of marketing, processing and value adding of camel milk and

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Lacroix, C, et al (2004): Studies on development of camel milk products of high hygienic

quality and safety, increasing the income and reducing health risks in Kenya; Swiss Federal Institute of Technology, 2004.

Mathews C. (2006): The next thing: Camel Milk; Food and Agricultural Organization; Rome;

April 2006. Mati, B.M, et al (2006): Assessing Water Availability under Pastoral Livestock Systems in

Drought Prone Isiolo District, Kenya; Working Paper 106, International Water Management Institute, Colombo, Sri Lanka; 2005.

Masbayi, M.L (2006): Vital Camel Milk Company Limited (VCML) and Kenya Camel

Association (KCA); Unpublished Consultancy Report made to the Business Services

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Market Development Project (BSMDP) on the relationship VCML and KCA in undertaking BSMDP Camel Milk Project; June 2006.

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Association Workshop held at the Chalet Hotel, Nanyuki, December 16, 2004. Ministry of Livestock Development – Isiolo District (2008): Isiolo District MoLD Annual

report, 2007; Isiolo, 2008. Muthee, A.M. (2006): Kenya Livestock Sector Study: An analysis of pastoralist livestock

products market value chains and potential external markets for live animals and meat; AU-IBAR NEPDP; Nairobi, August 2006.

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Unpublished report made to Arid Lands Resource Management Project, Nairobi; March 2006

Wernery, U (2003): New Observations in Camels and their Milk; Central Veterinary

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Appendices Appendix 1: List of persons and institutions interviewed Appendix 2: Study methodology and instruments Appendix 3: Study Terms of Reference

Appendix 1 List of persons/institutions interviewed during the study

Name Institution Persons Interviewed Contact Address

A. Government bodies and other development organizations

1. Adan Ibrahim – Head- Isiolo 2. Ann Nyangwetta - Deputy 0725 576924

3. Daniel Mugi- Senior Livestock Officer, also in-charge of Isiolo Holding Ground

0724 517691

4. Frederick Aloo – Nrb Hqts

Ministry of Livestock Development

5. James Kariuki – DLMO - Isiolo Arid lands Resource Management Project

1. Mohamed Abbas

1

ALLPRO Project 1. James Tendwa – Nat. Project Cordinator

KLMC - Nairobi 1. Abdi Kadir – Prog. officer 0723 555145 2. DLMC - Isiolo 1. Ali Bido, Chairman 0723 263869

1. Abey Kalif 3. KCA - Nrb 2. Josephine Wandaho 1. Charles Naimoi 0722 795254 4. Netherlands Development

Organisation - SNV 2. Thomas Were 0720 334362 5 Ewaso Nyiro Development

Authority – Isiolo Office 1. Sheik Omar 0721 708963

6. GTZ - Nrb 1. Reimund Hoffman 7. Kenya Bureau of Standards

(KEBS) 1. Kabue

8. Business Services Market Development program – now under MESPT

1. Wanjiku Guchu – Kimano Manager, First Assurance Plaza, Weslands, nairobi

3746354/ 3746764

9. Food for the Hungry - Marsabit

1. Guyo Tuke 0729 215698

10. University of Nairobi 1. Gitao C. G 11. Egerton University 1. Peter Lumuga 12. Farm Africa - Marsabit 1. Mr. Boru 13. Kenya Dairy Board - Nrb B. Processors

1. Holger Marbach - Director 0720 926841 1 Vital Camel Milk Limited, Nanyuki 2. John Oguk – Operations Man. 0728 606831

C. Producers 1. Hassan Abdi Ali - Isiolo 0722 485573

2. Abdi Lahaman - Isiolo 0720 444764 3.Haji Abdi Aziz - Isiolo 0721 835693 4. Adano Mohammed - Kulamawe 0723 630473 5. Abdulilahi Boru - Kulamawe 6. Wario Kula – Kampi Garba 7. Hoko Ali - Shab 8. Adiro Abdillahi - Gambella 9. Hussein Haji - Isiolo

1 Producers

10. Abdirahman Abdille - Isiolo 1. Abdi Mohammed - Gombolio 2. Adeu Ali - Gombolio 3. Muhammed Hussein - Shab 4. Andrian Sheikh - Gambella 5. Shadrack Mung’athia - Gambella

2. Herders/ Milkers

6. Maingi Mwithira - Gambella

2

D. Service providers

1.Suleiman Osman- Adhi Chemicals Shop – Isiolo

0723 442104

2. James Karani - Isiolo 0728 738227

1. Inputs suppliers - Agrovets

3. Stella Muthoni – Elite Chemist - Isiolo 0726 028848

1. Shakur Abdi – Isiolo Bus Star Isiolo

2. Omar Abdi Nur – Northern Horse Isiolo 3. Abdi Kim – Isiolo Coach Isiolo

Transporters –( Isiolo to Nairobi) 4. Zacharia Kinyua – Bus Ways/ Bus Car Isiolo Garissa –( Bangale) – to Nairobi

1.E – Coach Bus Co. Garissa

Kulamawe to Isiolo 1. Ali Buda Guyo – Lorry Transporter Isiolo

Isiolo Central Division - to Isiolo

1. Haji Abdi Aziz – Land Cruiser 2. Abdullahi Jere – Land Rover 3. Julius Kamathi – Bicycle Trransporter

Isiolo; 0721835693

From Farmers to Kulamawe 1. Hawa Racho – Donkey Transporter Kulamawe From Cooling Hubs to Bus Stage – (Isiolo)

1. Abdi Hussein – Wheelbarrow Transporter

Isiolo

2.

From Eastleigh Isiolo Bus Stage to Jam Street

1. Omar – Hand Cart Transporter Nairobi – Eastleigh Market

E. Traders

1. Kulamawe Milk Suppliers Women Group

Kulamawe – 0723 813794

2. Muhammed Ali -Farmer Kashuru

1. Producer to Isiolo Market

3. Halima Gaballe - Trader Kashuru 2. Isiolo to Nairobi Market

1. ANOLEY – Women Group 2. Abdi Lahaman 3.Hussein Haji 4. Kamila Dayow 5. Haji Abdi Aziz

Isiolo – 0724 673341 Isiolo - 7720444764 Isiolo Isiolo 0721 835693

3. Third Level - Nairobi Traders

1. Halima Dube – Jam Street 2. Sahara Sharrif – Jam Street 3. Khadija Hassan – 7TH Street 4. Amina Yussuf – 12th Street 5. Farihio Mohammed – 12th Street –( Namanga Milk)

0725 747918 0724 449754 0724 681668 0721 362355 Nrb – Eastleigh

10. Dairies – in Isiolo - ( with freezers). Open Air Market Dairies – ( Kiosks)

1. Doris Kathambi – Afya Milk Shop – ( cow milk only) 2. Liban Hotel/ Milk Supply Shop ( CAMEL AND COW MILK) 1. Asha Hussein –( Sells Camel and Cow milk)

0722 641045 Isiolo 0723 807639

4. Distributor – VCML Milk 1. Kmau Wanjohi – VCML EASTLEIGH DEPOT

0721 564252

F. Consumers

1. Alice Njoki - Allah Karim Hotel – 12TH Street

Nrb

2. Mohammed Hussein - Ainu Shamsi Hotel – 1st Avenue

Nrb

1. Consumers - Restaurants 3. Karani Hotel – Eastleigh Nrb

1. Lucky Harsi – 12th Street 0726 829153

2. Nimo Hassan – Jam Street 0734 603278

2. Household/ Individual Consumers

3. Hamed Keynan Nrb

3

Appendix 2 Study Methodology & Instruments

1. Key players/actors in the sub-sector targeted for interview/discussions 1.1 Direct actors 1.1.1 Input suppliers

- Drugs – Agro-vets?; salts - What other inputs – any feed supplements/pastures; milking etc; water

1.1.2 Producers (how many production clusters on the ground) - Small scale pastoralists – small herds - Large scale pastoralists – large herds - Ranchers - Chris Field; others - Producer groups (e.g. SNV/DLMC groups in Kulamawe) - Is there a producer association? – KLMC/DLMC?

1.1.3 Product assembly (bulking) - Who does bulking at the local/village level – association or traders/agents? - Is there a point of bulking – cooling storage/overnight storage?

1.1.4 Transporters - Transporters to bulking points - Transporters to distribution points (to Isiolo & Nanyuki) - Transporters to end market (to Nairobi?)

1.1.5 Processors - Vital Camel Milk Limited - Ewaso Nyiro North Development Authority initiative - Are there others? (KCA members?)

1.1.6 Distributors/wholesalers - Who does wholesaling/ distributions – Isiolo; Nairobi

1.1.7 Retailers - Rural markets (in Isiolo) – to households; restaurants; institutions - Urban market – Nairobi; Isiolo; any other to focus on?

o Raw milk to urban households (Eastleigh) – women hawkers o Supermarkets – Nakumatt; which others? o Health market outlets – what are these? o Any institutional markets? o Industrial?

1.1.8 Exporters – what export markets do we have? Who are the exporters – same as the processor? 1.1.9 Consumers

- Urban market – Fresh/raw milk consumers; Sour milk consumers; High end consumers; Health consumers? – do we talk to these directly or we assess through proxies (the retailers who have direct conduct with the consumers?)

1.2 Other players 1.2.1 Policy/Regulators

- Ministry of Livestock - Ministry Level; District level – Isiolo/Nanyuki?; Division level - how many Divisions do we go to? – Head of Range management; Director of Livestock Production; Director of Veterinary Services (KCA?); ALLPRO (ADB financed project – Mr. Tendwa)

- Who else? – Provincial administration (courtesy) 1.2.2 Service providers

- Veterinary services – private vets? Community animal health workers - Extension services – animal husbandry (government; KCA; VCML) - Any others? - Any association?

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1.2.3 Development agencies - Ministry of North Eastern Province – World Bank financed project – ALRMP - Ewaso Nyiro Development Authority? - SNV - GTZ - BSMDP/MESPT - USAID (ELMT) – CARE? - Farm Africa - Food for the Hungry - Who else is important?

1.2.4 Research & development - ILRI - Camels - KARI - Head Quarters – camels - KEBS - KEPHIS?

1.2.5 Lobby groups/sector associations? - Kenya Camel Association – KCA – Hill Plaza - KLMC - Association of Pastoralists - Who else?

2. Interview Guide for various players

Actors/players/ function

Information Source Who

1.1 Total number of producers – National; Isiolo; Clusters/Divisions within Isiolo District; by herd scale (small, large, ranchers); gender

Sec: - GOK; SNV?

1.2 Total number of camels in Isiolo District – by herd scale; location/ cluster; are there variations in breeds? - of these, how many are female, how many lactating

GOK

1.3 Estimated milk production – by category of producers & clusters - Estimate from lactating camels; average production; triangulate

with secondary sources

- Secondary - Primary

1.4 The production chain: - How do farmers acquire their camels; how much does it cost? - Who does what & how much does it cost – grazing; watering;

milking; disease control; treatment etc - What inputs are used – how much do they cost? - On average how much does it cost to keep a female camel?

-FGD with producers; - Triangulate from lit; key informants

1.5 How much milk does a camel produce? - range - What influences production? - What is required to ensure optimal production? - What efforts are being made to increase production (individual,

group, govt. others) - What is average production per farmer – by category - Seasonal variations – breakdown the year

- FGDs - key informants - literature

1. Production/ producers

1.6 How is the quality of milk produced? - What influences milk quality? - What proportion is husbandry & what is handling? - What is required to improve quality? - What efforts are being made?

FGDs

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1.7 What happens to the milk that is produced? - proportion consumed at home - proportion sold

o Where, by who, for how much? Identify all channels Get farm-gate prices for different channels Who are the players in each channel?

- Are these proportions by choice or forced by market circumstances?

- Is any milk wasted? What contributes to this? - What can be done to improve situation? - What efforts are taking place? - What is the average volume of milk sold per farmer – by

category - What average earnings – by category - Seasonal variations

FGDs

1.8 What specific costs do farmers incur in producing milk - Specific costs related to production – explicit & implicit - What is the value added? (each component of production chain)

1.9 Overall, what are the key constraints facing farmers? – production; marketing; others.

- What can be done to address them? - What initiatives are taking place? By who? What results?

FGDs

1.10 What opportunities exist in area for enhancing camel milk production? - To what extent are these opportunities exploited? - What is holding back utilization of opportunities? - What needs to be done?

- FGDs - Key informants

1.11 Farmer organization - Any farmer organizations? – for what? - Membership - Strength/issues

- FGDs

1.12 Support institutions working with farmers - -FGDs - Key informants

2.1 What is the estimated number of traders at different levels for each of the channels? How many categories can they be put in?

- Producers to local points of bulking - Local bulking points to Isiolo - Isiolo to Nairobi distribution point - Nairobi distribution point to consumers – retail outlets

- FGDs - Key informants

2.2 What is the estimated volume of milk handled by each category of traders/

FGDs

2.3 What specific roles/functions do these traders play - Any grading? - Bulking? - Transportation? - Cold storage? - Processing?

FGDs

2.4 What is the value added by traders? - Purchase price – per category of traders - Selling price - What costs do they incur? (break down transport chain) - What margins (average per litre)

FGDs

2. Traders

2.5 How do traders interact with farmers? - Direct to individuals farmers - Through farmer organizations - Agents

FGDs

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2.6 What are the requirements of the market supplied by the various categories of readers?

- Quality; volume; timing; consistency; pricing; packaging etc - To what extent are traders currently meeting these market

requirements? - What are the problem areas?

o Production – productivity; milking; handling etc o Handling o Storage o Transportation o Etc

FGDs

2.7 What are the views of traders on production/marketing issues facing farmers?

- Productivity? – volumes? - Quality? - Pricing? - Organization?

FGDs

2.8 Overall, what are the key constraints/challenges facing the camel milk value chain – in the views of traders? – at what level/

- How should these be addressed? - What are the traders doing anything to address these? - What other initiatives are taking place?

FGDs

2.9 What opportunities exist for building the camel milk value chain? - To what extent are these opportunities exploited? - What is holding back utilization of opportunities? - What needs to be done?

FGDs

3.1 How is the transport function for camel milk organized? - Are there specific transporters for camel milk or this function is

more played by traders? - How many transporters – per channel - What are the transportation means - What volumes are handled by each type of transporter

- Key informants - FGDs

3.2 Identify the full transport chain – per channel - farmer to bulking point - bulking point – to Isiolo - Isiolo – Nanyuki – Nairobi - Nairobi – consumers - What is the value added at each segment of the chain - Overall transportation cost

FGDs

3.3 What are the key constraints faced in transportation - How can these be addressed? - What initiatives are taking place?

FGDs

3. Transporters

3.4 What opportunities exist & how can these be exploited? FGDs 4.1 Historical background – why started; what vision; installed capacity;

what progress to date; future plans MD/ Directors

4.2 Organization of operations: - Sourcing of supply – suppliers; volumes; prices - Production – inputs; workforce; costs; volumes - Marketing - markets, supply organization, volumes, prices

-MD -Operations Manager

4.3 What is the value added by the processing plant? – what functions - specific segments of the chain; - Costs incurred under each - Input prices - Output prices - Value added

Operations

4. Processors: VCML

4.4 How is the market demand for camel milk? - what segmentation - what requirements for each market segment - What segments are the focus of the company?

-MD -Marketing manager

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4.5 What are the key requirements for the company to operate a profitable business in these market segments?

- Volumes; - Quality - Consistency in supply - Production organization - Market organization

-MD -Finance -Operations

4.6 What constraints/challenges has the company faced in meeting these requirements?

- Supply – production at farmer level; bulking, transportation - Production - Market penetration - Other areas

- All

4.7 What needs to be done address these constraints? - efforts in the past - current efforts - additional initiatives

- All

4.8 What opportunities exist for expanding & increasing the competitiveness of the camel milk value chain?

- what is limiting the sub-sector from exploiting these opportunities

- what needs to be done & by who?

- All

4.9 Key players & the roles each must play MD

5.1 What are the different market segments for Kenya’s camel milk? - Rural - households; institutions: raw vs sour - Urban market (Nairobi; which others?):

o High end – fresh o Low end - fresh o Health

- Export – which countries

- Literature - Key informants

5.2 What is the estimated demand in these markets? - what volumes - what prices

- Sec & prim information

5.3 What are the requirements of these markets - Volumes; - Quality - Consistency in supply - Prices - Timing - Etc

- Sec & prim information – Nakumatt; VCML; hawkers; etc

5.4 To what extent is demand in these markets met currently - who supplies the markets (& how); from where? - with what volumes, quality, prices - what are the gaps? - What is required to address these gaps

- various

5. Market

5.5 What opportunities does the market (various segments) offer for expansion of the camel milk value chain?

- What needs to be done? By who? - Past & ongoing initiatives? - Further work required

6.1 What segmentation of consumers – Somalis; non Somalis Sec & prim 6.2 Main attraction to camel milk - Consumers

6. Market – Consumers

6.3 Current consumption patterns - volumes; - frequency

Consumers

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6.4 Preferences - Timing - Quality - Packaging - Volumes - Prices

Consumers

6.5 To what extent satisfied with current supply Consumers 6.6 If not fully satisfied with current supply – what is required Consumers

1.1 How many are the key institutions supporting development of the camel milk value chain in Kenya - & specifically Isiolo?

- Key informants

1.2 Background of institution’s involvement in chain: - How/why/for how long? - Specific areas of focus

Each inst visited

1.3 Obtain further background information on sector which the institution may have e.g. number of camels; players; traders; market segments; demand; prices; etc

1.4 What issues are constraining the sub-sector/value chain? - Production - Distribution - Processing - Marketing

“ “

1.5 Institution’s involvement in addressing these issues - who else is doing what? - What further initiatives are required?

“

7. Development agencies

1.6 What opportunities exist for further development of the sub-sector/ value chain?

- what needs to be done to exploit these? - What initiatives are ongoing? - What further initiatives are required?

“

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2. Work Programme: September 15 – November 3, 2008 Date Activity Where Who

Pre Study activities: wk

• Study commissioning – contractual issues with SNV • Mobilization of study team – contracts, agreement on roles

Nairobi PK

• Literature review Nairobi All

Sept 15 - 19

• Design of study methodology & instruments Nairobi All

Sept 19 • Share study instruments and detailed work programme with SNV Nairobi PK

Data Collection & Collation

• Meeting with SNV Nairobi: Thomas Were – morning - General briefing on programme/ any clarifications on TOR/

planning - Courtesy call to SNV HQ officer responsible (if possible)

Nairobi All Monday Sept 22

• Secondary data collection of - production issues; Marketing; institutions Nairobi DK; MM

Tue - Friday Sept 23 -26

• Meetings with the following - KCA - VCML Nairobi based Director - BSMDP/MESPT - GTZ - USAID/ELMT - Food for the Hungry – Kenya - Farm Africa - GOK - Ministry of Livestock – Range; Production; Vet Services - ILRI - KARI - KEPHIS - KEBS

Nairobi All

Sunday – Set 28 2.00 pm – Travel to Nanyuki All Monday Sept 29

• Meeting with SNV – Northern - Briefing current programme operations & need for VCA - Interviews to clarify issues & obtain information - Logistical issues (including planning; DSA etc)

Nanyuki All

Tuesday Sept 30

• VCML - MD - Operations - Marketing

Nanyuki All

Wednesday Oct 1

• Interviews with any producers within Nanyuki - Large scale herders/Ranchers

• Traders/transporters/consumers within Nanyuki - Chain actors within Nanyuki – particularly those related to

VCML

Nanyuki MM/DK

Thur - Fri Oct 2 – 3

• Bulking/cooling point in Isiolo • Government – Ministry of Livestock • Any producers – large herders • Holding ground • Producer Association – DLMC? • Traders in Isiolo & any of their Association • Service providers & any of their Association • Transporters • Input suppliers • Some Consumers • Development agencies – Ewaso Nyiro Dev’t Authority, etc

Isiolo town MM/DK

Sat - Mon Oct 4/6

Visit to Cluster 1 – to be identified by SNV (Kulamawe?) • Government – Ministry of Livestock • Interviews with producers & their groups – at least 2 FGDs; • Traders/transporters – bulking point • Service providers – incl. extension services

Isiolo MM/DK

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Tue/Wed Oct 7/8

Visit to Cluster 2 – to be identified by SNV • Government – Ministry of Livestock • Interviews with producers & their groups – at least 2 FGDs; • Traders/transporters – bulking point • Service providers – incl. extension services

Isiolo MM/DK

Thur/Fri Oct 9/10

Visit to Cluster 3 – to be identified by SNV • Government – Ministry of Livestock • Interviews with producers & their groups – at least 2 FGDs; • Traders/transporters – bulking point • Service providers – incl. extension services

Isiolo MM/DK

Market related data collection in Nairobi Sept 29 – Oct 10

• Nakumatt • Other Supermarkets • Health market outlets • Eastleight market outlets – including hawkers

o Pasteurized market o Raw milk

• Export market • Interviews with consumers in the different market segments • Interviews with any agencies not interviewed during first week

Nairobi PK

Data analysis & Report preparation Sat – Mon 11 - 13

• Saturday: DK/MM travel to from Isiolo; PK travel from Nairobi – to Nanyuki

• Collation of information obtained from the field • Preparation of Aide Memoire (Debrief)

Nanyuki All

Tuesday Oct 14

• Debriefing with SNV (per Aide Memoire) – Morning • Travel back to Nairobi – Afternoon

Nanyuki All

Wed – Fri Oct 15 – 17

• Team finalizes report Nairobi All

Mon Oct 20

• Draft Report Submitted to SNV Nairobi PK

• Comments from SNV on draft report received Nairobi PK Oct 24

• Could also have validation workshop during this time Nanyuki All

Oct 27 – 31 • Incorporation of SNV comments into Final Report Nairobi All

Nov 3 • Final Report submitted to SNV Nairobi PK

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Appendix 3 Study Terms of Reference

SNV Study to explore the potential of Camel Milk to access sustainable formal markets

1.0 Introduction 1.1 Information about SNV

The Netherlands Development Organization (SNV) is an international not-for-profit development organization which provides capacity development services to nearly 2,500 local organizations in over 33 countries worldwide to support them with the fight against poverty. SNV is dedicated to a society where all people enjoy the freedom to pursue their own sustainable development. SNV advisors contribute to this by strengthening the capacity of local organizations. The focus of SNV on these organizations is underpinned by the fact that they play a key role in reducing poverty in a sustainable manner and in improving the lives of the poor. Therefore, SNV aims to:” support local actors to strengthen their performance to effectively realize poverty reduction and good governance”. SNV operates in nine countries in the East and Southern Africa (ESA) region including: Ethiopia, Kenya, Sudan, Uganda, Tanzania, Rwanda, Zambia, Zimbabwe and Mozambique.

1.2 SNV Kenya

SNV Kenya focuses most of its capacity building support to the Arid and semi-arid areas of Kenya. Specifically, SNV currently operates in three portfolio offices namely: South Rift, Located in Nairobi but serving the districts of Kajiado, Narok and Transmara; North Rift located in Eldoret, serving the Districts of Keiyo – Marakwet, Pokot, Turkana and Northern Kenya located in Nanyuki, serving the districts of Samburu, Marsabit, Laikipia, Isiolo and Moyale.

In its contribution towards development efforts and overall poverty reduction, SNV Kenya embraces specific country level poverty reduction goals, targets and governance policies and has chosen to place all its work in two broad impact areas namely:

Access to basic services -Education, water and sanitation, and Economic Development - along two value chains of the Livestock and Tourism sectors This TOR has been developed to further understand the market dynamics in the Camel Milk sub-sector within Livestock value chain, with a focus on exploring the milks potential to access sustainable formal markets.

2.0 Camel Milk

2.1 Overview

East Africa is home to 60 per cent of the world's camel population. In Kenya, the Camels comprise about 10% of all the livestock which amount to about 1 million animals. It’s estimated that 2.5 million out of the 3.3 million people in the ASAL areas (equivalent to 10% of Kenyan population) are directly involved in Camel keeping.

The popularity of camel products in Kenya, Somalia, Sudan and Ethiopia has rapidly increased in recent years, with milk not just consumed by pastoralists but being increasingly sold in urban areas in local and international markets because of its nutritional and health values. The milk is believed to offer a preventive cushion over peptic ulcers and provides an alternative for those allergic to cow milk; besides, it is three times richer than cows’ milk in Vitamin C. It is rich in iron, non saturated

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fatty acids and Vitamin B. The milk also has anti-bacterial components that suppress bacteria and pathogens from inducing disease, and could be the solution to increased incidences of diabetes in Kenya.

2.2 Rational of the Value Chain Study

Informal sources mention that the Kenya market alone requires 10,000 litres per day, and only 2,000 litres access markets, leaving a gap of 8,000 litres per day. According to a BSMDP report, Isiolo town and its environs has a daily production capacity of more than 6,000 litres of camel milk of which only 1,000 litres is able to access the informal markets including Eastliegh. This quantity only account for less than 15% of the milk produced implying that 85% goes to waste resulting into massive losses by the producers.

At the moment, Vital Camel Milk Ltd (VCML) is the sole company processing Camel milk in Kenya. The fact that there is a Camel milk processing plant in Nanyuki which is less than 100Kms from Isiolo town and operates under capacity i.e. handles 800 litres only out of its potential of 10,000 litres calls for an better understanding of the functionality of the value chain. However, there exist alternative marketing channels, and one wonders why the facilities of VCML plant are not fully used and what alternative marketing mechanism are used instead.

Available statistics indicate that most consumers in the formal markets are ready to offer premium prices for the product. An example is Nakumatt Supermarket, which stocks half a litre of Fresh camel milk retails at Kshs 99.00 compare to an average of 1 litre at source for Kshs 30-35. The milk is also sold in the Health food Shops that are growing in number within the City of Nairobi. It’s therefore essential to understand the dynamics and performance of this particular value chain in order develop interventions that would absorb the milk that is currently going to waste.

3.0 Objectives of the Assignment

The focus of the study is to analyze and document the Camel Milk Value Chain that originates from Isiolo District. The study identifies leverage points along the chain that can make the chain sustainable and competitive in the formal market. The study also gathers sufficient information that would be desirable to a strategic private sector investor whilst remaining cognizant of the sectors potential role in addressing poverty reduction. The value chain development approach shall be used to carry out this assignment. 4.0 Terms of Reference The specific terms of reference for this assignment include;

9) To assess the current status of Camel milk production and marketing in the District, including:

• number of Producers, • Herd sizes, • Volumes of milk produced and traded • Possible value of traded milk , • Seasonal patterns of milk production and marketing • Organisational mechanism amongst producers (in collecting, processing, transporting,

quality control of camel milk up to the selling point) • Existing use of input supply for production • Growth potential (both at supply side (production level) as well as potential (unmet)

market demand)

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• Existing local and end markets and marketing mechanism, including retailers, processors, etc

• Consumer preferences at local and end market • Existing interventions to promote both production, and marketing etc.

10) To identify the actors, their roles and current functions, and interrelationships along the

value chain (including governance aspects) (from the producers within the district to the destination market, including the different services providers along the chain) and document the graphical presentation of the Sub sector.

11) To map out the key drivers of the camel milk value chain and document the graphical

presentation of the Sub sector.

12) To identify and analyze the constraints (efficiency and effectiveness) along the value chain with emphasis to existing market delivery channels whilst highlighting opportunities for strengthening its access to markets. The constraints should be presented along key aspects such as technology, market access, organization management, policy/regulation, finance, input supply, infrastructure amongst other

13) To identify and discuss market based solutions that would enhance the performance and economic viability of the desirable camel milk value chain..

14) To identify existing and potential service providers along the value chain.

15) To identify and analyse the significance of micro, small and medium enterprises, and lead firms involved in camel milk and the current and potential role of women in the chain.

16) Provide input for a one day validation workshop on the study. 5.0 Reporting requirements The study is expected to be performed within 25 working days commencing early August 2008 using the value chain development approach. The consultant will be expected to submit a draft report by the end of week 5. The report should include raw data together with all key illustrations such as pictures and diagrams. The final report will be submitted within two weeks after receiving comments from the validation workshop and SNV. Final payments will be effected once SNV have received final report and sign it off.

6.0 Time frame

This work should take place within a period not exceeding 35 working days, expected to commence early August 2008.

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7.0 Roles and Responsibilities

7.1 Consultant Prepare the methodology and develop appropriate tools Carry out the field study ( both Isiolo District and Nairobi) Prepare input for a validation workshop Preparation of the final report that addresses the terms of reference.

7.2 SNV/Northern Kenya Portfolio One advisor to partly accompany the consultant to the field

Transport and field up-keep allowance

Organize and facilitate for one day validation workshop.

8.0 Eligibility

Potential consultants are invited to submit their bid documents by 28th July 2008 to the physical address below: The Technical proposal (not exceeding 12 pages), should include but not limited to the following:

• comments on these terms of reference • a detailed work plan including the sequencing of the events/activities; • demonstrate a good understanding of value chain analysis methodology and livestock industry

with a bias to the dairy sub-sector • key personnel together with their qualifications and experience; • an individual or company profile; and • An estimated cost based on the above.

Portfolio Coordinator SNV – Northern Kenya Portfolio Haile Sellasie Rd, off Nanyuki – Nyeri Rd P O Box 1191 – 10400 Nanyuki TEL: (+254) 020 3545528 / 020 8007493 Fax: (+254) 020 8007494 Cell Office: (+254) 0722 509384