THE dairy industry in Zambia has for some time now been struggling to remain productive because of lack of meaningful investment, but its story can best be described as a shadow of the heyday in the era of the Dairy Produce Board of Zambia.

The Government is now undertaking various initiatives to redeem the livestock sector in general and the dairy industry in particular, and so are some development organisations that are focusing their attention on empowering the small-scale dairy producers.

A recent study by the World Bank commissioned to examine what it would take for Zambia’s cattle industry to achieve its potential has highlighted a number of opportunities and challenges for the dairy sector.

Challenges

Like some previous studies, this research shows that while potential for making it productive exists, the industry still faces challenges from low consumption levels to limited investments, which make it uncompetitive in relation to both the domestic market and regional and overseas markets.

For instance, Zambia has four times more grazing land for arable agricultural activities and suitable for livestock development, but the dairy industry productivity is low compared to other countries in the region.

The country produces 65,000 tonnes of dairy products compared to countries like South Africa that produces three million tonnes, Botswana 106,000 tonnes, Zimbabwe 250,000 tonnes, and Kenya 3,672,000 tonnes.

It has been found that high input costs undermine competitiveness of the dairy products. And in agreeing with other studies, the World Bank study cites high costs of feed, drugs, poor access to veterinary services, high fuel costs, difficulties in accessing finance, expensive power, poor transportation cost as the rail system does not function well, while road transport is three times more expensive than is the case in South Africa.

The survey prepared for the Job, Prosperity and Competitiveness Project and supported by the World Bank, African Development Bank, and Department for International Development of the United Kingdom, reveals that in terms of domestic market, the potential for growth is limited by low levels of consumption of beef and dairy products because of low incomes among the population.

Zambians consume the lowest quantity of dairy products among the major dairy producing countries in the region, estimated at 7.4 litres per capita. On the other hand, Botswana has a consumption rate of 82.3 litre per capita, South Africa with 54.1 litres per capita, Kenya with 75.8 litres per capita, and Zimbabwe at 17.1 litre per capita.

There is a small domestic market because of low incomes outside formal employment and because of the high prices of dairy products.

Beef Market

But indications are that it is growing, as the report shows that livestock products now constitute about 10 per cent of food expenditure. In essence, the market for beef is now growing by 5-7 per cent while that of dairy products is growing at 10 per cent per annum.

It is, however, heavily concentrated in Lusaka and other town because of higher urban incomes, changing lifestyles, and changing food consumption patterns.

Exports are negligible too, as studies reveal that this is as a result of the fact that the dairy products are not competitive because the producer prices are higher than those prevailing in the region. For instance, farm gate producers’ price per litre of milk in Zambia averaged $0.60 in 2009, while in South Africa it was $0.40, and in Kenya it was $0.30.

Because of the uncompetitiveness of the dairy products, Zambia finds it a challenge to export even to the neighbouring countries that heavily import these products, such as Botswana, South Africa, Tanzania and Malawi.

The opportunity is that at the price of $0.60 per litre, if the 65,000 tonnes of raw milk that Zambia produces is to be sold the country can earn S$39 million per year while Kenya, for instance, would earn $734 million from the production of 3,672,000 tonnes of milk.

But consultant of the World Bank study, Sunil Sinha says the cost of producing the milk has to come down if Zambia is to meaningfully benefit from the regional markets and beyond.

Mr Sinha says the international markets are huge and very competitive, with prices falling in real terms. This means that the country must work at reducing the input costs in the production of dairy products, to allow for exports at competitive prices.

Things can change for the better if more efforts were directed at growing a cadre of emergent farmers from the pool of traditional farmers.

Although competition is limited, the dairy industry has created better linkages of smallholder dairy farmers. One of the positive things is that supermarkets are expanding and provide a market for the dairy products.

Mr Sinha said the major processor, Parmalat plays a key role in organising the smallholder farmers through milk collection centres, which also help to trace diseases.

He said there was a cadre of emerging farmers holding 10 per cent of the market and the number of these farmers was increasing.

The industry is further being developed with the emergence of new producer dairies and cooperative dairies being established. But more importantly, there is a lot of interest from large foreign companies with surplus capacity.

However, he said, there was still need for investment in more supply chains in order to get more smallholder farmers linked to the markets.

An opportunity has been provided with the involvement of organisations that are providing support to smallholder dairy farmers, and know the extent of the challenges that have dogged the industry.

Heifer Zambia country director James Kasongo, whose organisation is doing that in five provinces, says the industry has been facing a number of challenges that include high transport costs, high interest rates on bank loans, inadequate power supply, shortage in supply necessitating imports, and poor quality control.

Mr Kasongo says other challenges include inadequate livestock research infrastructure, equipment and funds, and inadequate research-extension-farmer linkage, especially after the privatisation programme.

Nonetheless, Heifer Zambia has made a great impact in the five provinces that it is operating in, with support for capacity building activities for producer groups and facilitation of a livestock development fund.

He said the organisation had worked well with the Government and Land O’Lakes on a project to develop a milk collection point for Fisenge dairy farmers in Luanshya, which also included facilitation of market linkage to Parmalat.

He said Heifer Zambia had since 1988 assisted 40,00 households through the ‘Passing On The Gift’ brand, where households are given cows and pass them on to the next family when the animals give birth to heifers. It also distributed 5,000 goats in collaboration with Plan Zambia.

Heifer Zambia signed a Memorandum of Understanding (MoU) with the Government whereby the organisation uses the government extension officers in the field to educate farmers, and in turn it provides transport facilities for the officers.

Mr Kasongo said in order to develop the dairy industry around smallholder and emerging farmers, there was need to provide high quality dairy heifers and cows to organised producer groups.

Focus On Training

There is also need to focus on training and provision of technical support, such as facilitating the provision of vet drugs, dairy equipment and extension services.

“We also need to facilitate linkages between small-medium dairy farmers and service providers, and support for capacity building for producer groups,” he said.

Likando Mukumbuta is the chief executive officer of Zambia Agribusiness Technical Assistance Centre (ZATAC), and says his organisation has not only been providing dairy animals to farmers across the country but also been assisting in building the value chain.

According to him, the most sustainable support to dairy farmers is one tailored at enterprise development rather than aiming at income generation.

“We need to propel the farmers, and if we are to do that we need to look at not only provision of animals, but also other things like value addition, which should be focused at encouraging enterprise development,” he says.

ZATAC has proved that this model is more impacting in many sectors where it has applied it, where it has not only procured the prerequisites to the beneficiaries but extended support to training, warehousing, loaning them to access value addition technology, transport and market linking.

His organisation has spent around US$15 million in such support in various fields, of which $6 million has gone into support towards transport and technology for value addition and market access for such producers as dairy farmers.

Milk Buyers

In actualising the model, ZATAC has been able to provide for the farmers the animals they must have, but has also supported the development of enterprises to process that milk as well as helped to facilitate for buyers of the milk.

“You must invest in infrastructure if you want to be like South Africa, and Zambia has to develop an enterprise around the dairy farming community,” he says.

On its part, the Government is implementing initiatives, such as the establishment of disease free zones, strengthening veterinary and extension services, livestock centres, research and breeding and the introduction of new legislations.

It is also guaranteeing sustained political will while promoting government driven and Public Private Partnership driven measures to promote the development of the livestock sector in general.

Another Government initiative meant to address the challenge of limited financing to the sector is the involvement of the Citizens Economic Empowerment Commission, which is working on a strategy for assisting dairy farmers at Fisenge to increase their productivity.

The commission would be providing financing poised to assist them to stock appropriate cows to increase milk production, access required financing for processing and storage facilities, access necessary markets.

But in all, there is need to enhance these initiatives by both the Government and the organisations working to re-engineer productivity of the sector. For the long-term, there is need to emphasise on how to make the industry more competitive.

This can be achieved through measures like controlling diseases, strengthening research and establishment of breeding centres, improving feed production, spreading extension services, guarantee of lower transport and fuel costs, improving access to affordable finance, and making power available and cheaper in rural areas.

Opportunities

Since the emergent farmer has been identified as key to fostering growth and competitiveness of the industry, there is need to maximise opportunities and increase productivity for these farmers, increase off take for traditional farmers, as well as increase efficiency and value addition.

Further investments should be dedicated in supply chains, higher capacity utilisation, market development, business development services for producer and cooperative dairies, product diversification, and reducing non-tariff barriers.

The Government should continue to improve the policy and institutional environment to encourage effective public private partnerships.