Kenya’s informal dairy markets are central to the livelihoods, food security and nutrition of the majority of its citizens, particularly the poor, women and children. Kenya’s informal dairy market is significant in size – 86 per cent of Kenya’s milk which is 5.2 billion litres is sold by unorganized, small-scale businesses in informal markets or consumed directly at home. The sector generates 70 per cent of the 40,000 jobs in dairy marketing and processing.
Kenya is not unique in the importance of its informal sector for the country’s economy and food provision. According to this report by the International Livestock Research Institute (ILRI), informal dairy markets also dominate in Uganda, Rwanda, not to mention India, the world’s largest dairy producer with 146.3 million tones accounting for 18.5% of world production.
During the 1990s the Kenyan dairy industry was progressively liberalized starting with milk price decontrol in 1992. This process led to the gradual collapse of the state-owned Kenya Co-operative Creameries (KCC) through the 1990s, effectively ending their 60-year monopoly on milk processing and marketing in the lucrative urban areas. This gap was quickly filled by a proliferation of unlicensed small-scale milk vendors and large-scale, licensed and regulated private sector milk processors. The small-scale milk vendors sold raw milk while the private dairy companies sold packaged, pasteurized or UHT milk and other dairy products. Although sale of raw milk in urban areas was illegal, high consumer demand meant that the small-scale milk vendors serving various parts of Nairobi and other urban areas soon numbered tens of thousands. It was virtually impossible for the Kenya Dairy Board (KDB) – the government-appointed body responsible for regulating the dairy industry – to control them, and the private dairy processors came to regard the small-scale milk vendors as unfair competition. The small-scale milk vendors provided a market outlet for the majority of smallholder dairy farmers. Most operated from fixed premises but some transported milk to urban centres by bicycle or public transport, usually in plastic containers. They mainly operated early in the morning in response to consumer demand, but also to avoid harassment by KDB inspectors.
The informal sector has thus for a long time claimed the lion’s share in dairy markets supporting hundreds of thousands of farmers in providing daily incomes, and at times credit facilities to the base of the pyramid customers.
This sub-sector however faces a myriad of challenges key among them milk hygiene, handling and safety. Most of the informal traders are semi-literate, and harbor limited skills to carry out basic milk testing procedures. Minimal investments in this sub-sectors have also limited their capacity to access better milk holding & transportation and basic milk processing equipment.
Raw milk sale banned
KDB recently banned the sale of raw milk. However, access to modern processing equipment for many milk traders has been a challenge as most are too centralized, leaving out many milk producing zones without processing facilities. The total installed capacity is still insufficient and can only process about 32% of all milk produced if utilized fully. The regulation requires all milk traders to conform to processing their produce before selling. While the regulation is good, the access to these facilities and high prices charged for toll services rendered prohibits traders to comply and have thus led to traders operating outside the normal business hours to avoid penalties from regulators. In the effort to formalize the sector, there is need to cultivate more investments especially towards decentralizing processing plants, encouraging cottage industry and guiding traders to play part as key investors in processing.
KMT working with Dairy Africa
KMT through Dairy Africa are exploring models of influencing, and supporting informal trader groups to invest in processing. A lot of this effort is targeted towards Dairy Traders Association branches which have registered Community Based Organizations. The first phase is a set of 3 pilots across the country that will work as centers for learning, adoption, and expansion. The pilots will gain from customized management. and capacity building packages offered through Dairy Africa.
Dairy Africa partners with KMT to offer equipment and support services through customized training and management of these processing plants. The company will also ensure proper linkages including finance, insurance, input supply, technical servicing and skills development are available to milk traders.
This model is expected to formalize the dairy industry and enhance milk hygiene, handling, and safety. The model also provides better leverage for traders to be investors in processing and also reduce the price per unit processed. The sustainability of this model will ensure trader conformity to set regulations and operate within the set standards while offering farmers a more stable market.
The intended outcome is reforming informal milk markets and developing; stable milk markets and profitable dairy enterprises, secure businesses in the informal milk trade by enhancing compliance, access to finance by milk traders from group security, creation of more jobs in the value chain, and providing safe milk though the informal markets to bottom of the pyramid consumers.