Uganda’s dairy sector has grown in leaps and bounds over the years. Dairy farming is mainly practiced in the southwestern, central, and northeastern regions, where industries have been established to increase milk production and exportation. Central and western regions account for about 50 percent of national milk production.
By the end of 2011, total milk production stood between 1.6 billion to 1.8 billion litres, but by the end of 2020, it had almost doubled, with a total of 2.8 billion litres being produced, according to the Dairy Development Authority (DDA), which was short of the projected 3.3 billion litres by that year. Domestic demand is estimated at about 800 million litres per annum.
The rise is also attributed to the expansion of milk collection centres across the country. Currently, there are 483 milk collection centres with a total installed capacity of 1,938,522 litres. These centres are operated by dairy cooperatives, private individuals, companies, and processors.
These stakeholders have been able to thrive from the early 1990s when the sector witnessed impressive growth due to privatization. For example from 1993 to 2006, 15 medium to large scale processing plants were licensed.
Today, the major milk processing companies in Uganda include Brookside Dairy Limited, Jesa Farm Dairy, Pearl Dairy Farms Limited, Amos Dairies Uganda Limited, and Paramount Dairies Limited. Others are GBK Dairy Products Limited, Lakeside Dairy Limited, Rainbow Industries Limited, Kooky Enterprises Limited, Dairyman’s Cheese, and Vital Tomosi Dairy Limited.
As these companies have a large production capacity, the country has been able to export dairy products to a range of regional markets such as East African Community, COMESA countries, SADC, UAE, Syria, Japan, Oman, USA, Nepal and Bangladesh.
In terms of foreign exchange, Uganda earned $205m (Shs750b) from exporting dairy products in 2020. According to the dairy authority, the figure marks about an 80 per cent increase from $131.5m (Shs480b) earned in 2018. This is as a result of increased compliance of Uganda’s milk and milk products with both regional and international market standards. Exports include casein, whey proteins, UHT, milk, and powder, among others.
But as government seeks to expand the dairy sector’s exportation and market, it has to be watchful of threats such as continued importation of dairy products, drought, cattle diseases, and lack of financing. Industry players propose a reduction in imports. Some of the products being imported include buttermilk, infant formula, milk powder, assorted ice cream, cheese and dairy machinery/spare parts and are estimated at $6.8m.
“There is no need for importation of low cost dairy products from Europe, US and other parts into Uganda. These imports depress our market yet Ugandan companies aren’t reciprocally selling to the West,” Mr Odrek Rwabogo, a partner in Vital-Tomosi, the producers of Milkman yoghurt, said in an interview last year.
He said the importation puts local producers at a disadvantage because they have to compete with imports that benefit from subsides and built capacity of about 100 years.
“I pleaded with the leadership and public institutions of Uganda to limit these foreign products in order to trigger increasing productive capabilities of local players,” he said, adding that farmers, especially from the West, benefit from subsidies in the excess of $360b, which allows them to sell their products cheaply anywhere in the world. However, the DDA says it is working on import substitution.
In other instances, experts note that the earning potential of dairy exports could increase to $500 million annually if the country would control the high death rates in exotic cattle, attributable to tick-borne diseases, and resistance of the ticks to available acaricides.
Mr Frank Tumwebaze, the Agricultural minister, last year urged the DDA technical team to push for the industrialisation of the subsector to boost dairy processing to 2.5 billion litres per day within the next three years.
These projections are possible because the sector contributes significantly to the economic, nutritional, and employment opportunities in all segments of the value chain.
According to the DDA, there are several opportunities created in dairy farm mechanization, pastures improvement, skills enhancement, and vibrant farmers’ organizational structures. Other opportunities include increased collective purchase of coolers, milk road tankers, increasing processing capacity, as well as improved varieties of dairy products on the market.
The sector has sustained an estimated 100,000 plus jobs along the dairy value chain and is still creating more. The employment opportunities created provide a good platform for agro-industrialisation and thus improved quality of life for those engaged along the dairy value chain. The East Africa Dairy Development evaluation report (2018) from Heifer international places the average monthly net income of the farmers substantially at $2,128 in 2018.
In the five-year strategic plan III of the dairy sector for 2020/2021- 2025, Mr Bright Rwamirama, the Minister of State for Animal Industry, states that dairy is among the six commodities earmarked for boosting the total export value of processed agricultural commodities from $1b to $4b in the next five years.
This will be achieved through focusing on rolling out dairy cottages to invest in small scale value-addition, boosting milk production and productivity countrywide, strengthening quality assurance for exports and increasing local consumption of milk and milk products.
However, a lack of agriculture financing remains a hurdle to this implementation. The DDA notes that the dairy sector has not succeeded in attracting credit to support dairy development activities.
“Less than 10 percent of dairy farmers have access to the financing facilities from the government and the private commercial banks. Although dairy farmers through their SACCOs; the level of financing is still low. Financing in terms of loans, insurance and advice is still inadequate. This is due to both supply and demand inadequacies. Dairy farmers develop apathy and lack interest to obtain credit from commercial banks due to limited information available, lack of required collateral security and informal dairy farming management practices,” the strategic plan III states
It further adds that financial institutions lack attractive financial products for dairy farmers due to the speculative and volatile nature of agricultural enterprises.
This is evident with the current prolonged drought that has hit Ntoroko and Nakasongola districts since July and October last year respectively, resulting in reduction in milk production, forcing prices to triple.
In Ntoroko, for instance, a litre of milk now costs Shs3,000, up from Shs1,000 in October last year. In Nakasongola, a cow now costs between Shs200,000 and Shs350,000.
Regarding marketing milk products, the strategic plan states that marketed milk has increased from 70% in 2014 to 80.2% of the total production in 2018. Out of the marketed milk, 34% is processed while 66% is sold in raw form. Milk marketing has been a great source of income for the farmers and traders.
The value of marketed milk increased from $716 million in 2015 to over $850 million in 2018.
Conclusively, dairy production is still dominated by small-scale farmers, and a marginal percent of the milk output is processed yet the sector still has the potential to grow significantly. That is why analysts observe that the sector needs strategic support to help it improve milk quality and reduce variability in production by season.
