Kenya
Box 4.2: Enhancing Agricultural Growth for Agribusiness: The Case of the Dairy Subsector
The subsector is however constrained by poor quality of production. Despite being a highly market-oriented sector, the vast majority of marketed milk is sold in raw or unpasteurized form, with raw milk accounting for 75 per cent of milk sales. Further gains in dairy production and marketing are constrained by a number of factors such as lack of quality feeds, poor breeding services, poor animal health leading to diseases, poor young stock management leading to inadequate nutrient uptake, and poor milk procurement, collection and cooling centres reflected in the inadequacy of such centres resulting in low quality of produce handling and inefficient transportation. To cope with increasing demand for milk and milk products, the Kenya dairy policy proposes measures to improve animal productivity and milk procurement as well as distribution systems. This also calls for an improvement in market information flows. Among the measures to increase dairy production for agribusiness are improvements in milk processing and packaging, increased and rapid expansion of rural access road networks, encouraging milk collection centres to install appropriate dairy equipment to be used in times of need, and the promotion of the development and use of proper packaging technologies in the country to reduce packaging costs. Milk quality and pricing is another area discouraging the production of milk in the country. Pricing, especially of milk, is not based on quality, hence discouraging the upgrading of milk quality by farmers. Prices are kept uniform regardless of the quality of the product, resulting in disincentives for upgrading the quality of the produce. Source: Leksmono C., J. Young, N. Hooton, H. Muriuki and D. Romney, 2006
The main strength of fruit and vegetable processing is its access to abundant locally-grown raw materials, though wastage rates are very high due to limited processing capacity. Wastage in the mango industry has been estimated at a quarter of total production (JICA and MoTI 2008). Small processing firms can undertake primary processing to reduce these losses and then sell in bulk to larger firms. Interviews with officials from government ministries revealed that there is no targeting of specific products for upgrading. From the interviews too, the absence of coordination across the several ministries dealing with agro-industry was evident, with official agencies at times operating at cross purposes. There are, however, initiatives to strengthen the sector. The MSME Competitiveness Project, a World Bank-sponsored project with the main objective of developing the capacity of MSMEs through strengthening institutions and providing services, is one such initiative (Box 4.1). It focuses on strengthening marketing through partnerships and linkages and provides grants for agro-based activities, like coffee, cotton and leather products, for the production and processing of these products. Box 4.2 gives a description of the dairy sector as an industry with potential for upgrading. Technological effort, innovation capacity, and human capabilities Increased investment in technology, skills development and innovation are prerequisites for accelerating agro-industrial development. This will be extremely difficult to accomplish, however, because the growth potential of agro-processing lies largely with small-scale processors, especially in the food industry, operating with outdated technologies, low-quality inputs, and high operational costs. According to discussions with the Ministry of Agriculture, the small scale processors are disadvantaged even in the domestic market since products must have a standardization mark from the KEBS/Kenya Bureau of Standards, which is very difficult for them to obtain. In order to strengthen the technological capacity of these small-scale processors who are key players in the sector, it is essential to monitor trade practices that undermine the competitiveness of domestic industry, especially to control import dumping and the sale of nearexpiry fruit juices in the local market.
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KENYA
The dairy sector is one of the main agro-industry subsectors with great potential in the country. It accounts for 14 per cent of the agricultural GDP and 3.5 per cent of the total GDP. Dairy production is one of the major activities in the livestock sector and a major source of livelihood for many smallholder farmers (Leksmono et al. 2006; KDB/Kenya Dairy Board 2007; Ngigi 2005). The dairy industry is based predominantly on smallholder production, which accounts for about 70 per cent of the total annual milk production in the country (KDB/Kenya Dairy Board 2007).
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