Together with our partner in the Dairy work, Technoserve, we aim to increase smallholder dairy farmers’ income by 30 per cent for 275,000 households by December 2018.
Using Market Systems approach aimed at transforming markets to make them more inclusive and competitive, one of our interventions is to improve supply chain management strategies and structures. This is on the premise that most dairy enterprises do not function efficiently mainly because of the limited management capacity, inadequate financing, and systems that prevent a sustainable growth pathway.
This, coupled with the fact that government and donor subsidies have crowded out private sector commercial investments, motivated our Dairy Team to introduce management services to dairy enterprises to enhance business growth. This would also create opportunities for management consulting firms to develop packages that would lead to improved business performance.
We worked closely with potential management firms and introduced the business case for providing management services to Dairy enterprises. Among the firms is Leowa Associates Limited, a management consulting firm offering a wide range of consulting services in the East African region.
The firm has found the opportunity to provide management services to cooperatives largely untapped and unexploited. Leowa is replicating and scaling up their service offers having learnt from the pilot phase interventions in Gatundu South Dairy Farmers Cooperative Society. Some of the services offered include institutional capacity building, cooperative fund raising and technology based funds administration support, project management and information communication technology solutions.
Gatundu South Dairy Farmers’ Cooperative Society, a distressed cooperative, was supported to set up milk collection systems, farmer training, market linkage facilitation and establishment of financial management systems. The combination of services resulted in the society increasing daily milk collection to a high of 3,400 liters a day within two months of support. This was as a result of setting up an efficient milk transport system involving local motor bike operators. The youth involved were sensitized on the business opportunity to collect milk at a fee. They were also advised on how to modify the motor bike to enhance volumetric capacity for maximum returns. The motor bike riders earned a minimum of Kshs 300 per day from this as marginal revenue over and above their day time earnings. This is because milk collection is done very early in the morning and they are able to offer passenger services during the day.
The society was also supported to fund raise to cover its cash shortfall amid all the challenges of securing collateral. Other support provided was market link facilitation by negotiating with the processor to offer bulk prices resulting in the milk price increasing to a high Kshs 40 per liter a 33% increase. Quality issues arising from poor milk-handling practices have been reduced by 80%. Introduction of financial record keeping reduced ‘ghost’ milk collection significantly as it even deterred all. Membership increased from 340 to 410 and increase of 20.5% membership increase.
Leowa Associates has mobilized five cooperatives in Embu and is offering management services and a host of other services to all the groups. Pricing is based on a fixed fee and performance based fees. Leowa is also helping the groups to mobilize working capital, acquire milk cans and coolers where necessary.
“We have continued to expand our services and have been contracted to support management and record keeping for a medium scale agribusiness enterprise by the name Mbiri Mwiboini Farm in Kirinyaga County.”says Josephine Ngethe, Leowa’s lead consultant.
Leowa is also capitalizing on the existing -yet untapped- potential for the dairy businesses to offer services to farmers at a profit including provision of sufficient and quality inputs to their membership, working capital to facilitate advance payments among others. The fact that these dairy businesses have signed on for the services is a good sign that organizations will increasingly buy management services.