Home » Africa: Rwanda’s Dairy Sector Growth Surges, Challenging Dominance of Kenya and Tanzania as $100 Million Project Aims to Reach 53% of Dairy Households, Creating 3,400 New Jobs

Africa: Rwanda’s Dairy Sector Growth Surges, Challenging Dominance of Kenya and Tanzania as $100 Million Project Aims to Reach 53% of Dairy Households, Creating 3,400 New Jobs

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Rwanda's dairy

In Kigali, efforts are underway to boost production in Rwanda’s dairy sector, signaling a potential challenge to the dominance of East African neighbors, Kenya and Tanzania.

The Rwanda Dairy Development Project (RDDP) is spearheading initiatives to enhance milk output, indicating a strategic move to strengthen the country’s position in the regional dairy market.

According to theexchange.africa, Rwanda’s annual milk production is already on a steady growth trajectory, reaching more than one million tonnes in 2023, which translates to approximately one billion liters.

READ: Africa: Uganda to export powdered milk to Algeria as part of its export expansion project

This marks a considerable leap from 891,326 tonnes in 2020 and a little over 372,600 tonnes in 2010, according to data from the Rwanda Ministry of Agriculture and Animal Resources.

To sustain this growth, the $100.37 million project, a long-term vision expected to run for six years according to the International Fund for Agricultural Development (IFAD), will be crucial.

This significant investment marks the second phase of Rwanda’s dairy sector development ambitions. Among other objectives, the project aims to strengthen the country’s dairy sector’s resilience against climate change.

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The project will also increase the income of rural households, who are the main herders of dairy cattle. It is projected to reach 80 per cent of dairy households, increase their incomes by 30 per cent, and create over 3,400 new jobs in Rwanda’s dairy sector.

Under the guidance of IFAD, 53 per cent of households engaged in Rwanda’s dairy sector are expected to adopt environmentally sustainable, climate-resilient technologies and practices. Additionally, another 45 per cent of households are expected to have improved nutrition security as a result of improved production.

Climate change is affecting food and water availability across Africa, thereby affecting animal productivity, especially milk output by cows.

This second phase builds on the successes of the first $65.1 million Rwanda Dairy Development Project (RDDP), which reportedly had a positive impact on the sector and its target group, rural farmers.

According to IFAD, the challenges include sub-optimal milk productivity levels of cows due to limited access to quality forage and water, low capacity of producers and cooperatives across value chains, poor market information and infrastructure, and lack of investment across the value chain.

To meet and surpass these challenges, Rwanda’s parliament has approved a financing agreement between Rwanda and IFAD, allowing Rwanda to access three loans totaling €18.9 million, representing the first batch of funding.

Rwanda’s Minister of Finance and Economic Planning, Uzziel Ndagijimana, commented, “Recognizing the reality that milk production and supply fluctuate with relatively abundant produce during the rainy season, and limited supply during the dry season, this project aims to achieve dairy farming that is resilient to climate change such that there is no milk shortage because of the dry season.”

With help from IFAD, the project will help turn the dairy sector’s value chain into a greener sub-sector.

“Greening the dairy value chain and reducing its greenhouse gas emissions will help us approach or reach carbon neutrality, in line with national commitments in the National Determined Contribution and the Global Methane Pledge,” the Minister said.

The RDDP-2 will be implemented over a six-year period (2024-2029) and conducted across 27 districts, including 14 initial RDDP districts and 13 new districts to upscale the process.

“It will target 45 per cent female beneficiaries and 25 per cent youth beneficiaries,” the Minister said. Thanks to the project, 164 milk processing facilities will be constructed, and another 95 milk collection centers will be equipped with what IFAD calls a ‘digitalized milk transaction management system.”

Read also: Rwanda, Tanzania to lead EAC as 2024’s fastest growing economies

Rwanda’s dairy sector output on upward growth
With this second phase, IFAD will help support 85,000 people engaged in dairy entrepreneurship by giving them access to finance.

“The project plans to introduce, test, and disseminate climate-resilient fodder varieties and technologies and promote agroforestry systems, including the plantation of fodder trees, legumes, grass into grazing land and cropland,” reports IFAD.

IFAD explains that there are multiple benefits to be gained, including climate change mitigation through soil carbon sequestration.

“As well as climate change adaptation through improvements in soil fertility and increased capacity of farmers to meet production needs during dry periods and to respond to climate-induced pests and diseases,” it reports.

IFAD will also deploy energy-efficient and GHG (greenhouse gas) emission reduction technologies for production, including the adoption of biogas and solar technologies, promoting capacity building on carbon accounting.

IFAD further explains that the estimated value of $100.37 million, which will be disbursed over six years, will be allocated to three components of the project.

First, there is increased productivity and resilience of dairy smallholder production systems, which accounts for 41.3 per cent of the total project costs ($41.44 million).

Then, there is increasing dairy value chain efficiency, through scaled-up investments, improved market access, and consumption of dairy products, which represents 48.2 per cent (or $48.41 million), and finally, policy support, and project management, monitoring and evaluation, and knowledge management, which will account for $10.52 million (10.5 per cent).

READ: Africa: Cattle Breeders Association, MACBAN says Nigeria spends about $1.7 billion yearly on milk imports

The project will also leverage financing from the regional Green Climate Fund, which already operates in Rwanda under the “Pathways to Dairy Net Zero” project, estimated to cover $8.5 million (8.5 per cent) of the project.

Other financiers include Equity Bank Rwanda, which will finance approximately $10 million (10 per cent) in loans to smallholder farmers, and other entities along the dairy value chain.

Then there is Heifer International, which has also confirmed a contribution of $6 million in grants, representing 6 per cent of the project. Finally, the government of Rwanda will contribute an estimated $17.64 million, covering 17.5 per cent of the total project costs.

Uniquely, IFAD reports that the expected beneficiaries will also contribute another $9.52 million (9.5 per cent) to the project. While it was not detailed how the beneficiaries will contribute the said amount, all in all, it marks a significant contribution by the small-scale farmers of Rwanda.

IFAD also reports that the sum total of these contributions leaves a financing gap of $8.16 million (8.1 per cent), which it has pledged to cover through its own resources or seek other co-financiers.

Can Rwanda’s dairy sector output surpass Kenya and Tanzanias?
Rwanda, known for its impressive strides in economic development and agriculture, faces a significant challenge in dethroning Kenya as the leading milk producer in East Africa.

Kenya’s dairy sector stands as the largest agricultural sub-sector in the country, not only in terms of income generation but also in employment creation, contributing a notable 4 percent to the overall GDP.

The sector is a robust engine of economic activity, providing livelihoods to over 1.5 million households engaged in various aspects of the dairy value chain, from farming to processing and distribution.

Kenya’s dairy industry boasts an impressive infrastructure, with approximately 6.1 million dairy cows contributing to an annual production of about 3.7 million kilograms of milk. This highlights the sector’s efficiency and capacity to meet domestic demand and even export to neighboring countries.

The industry’s success is attributed to its well-established value chain, including farmers, collectors, processors, traders, and service providers, all working in harmony to sustain a thriving dairy economy.

Meanwhile, in Tanzania, the dairy sector is also experiencing growth, with data indicating an increase in milk production from 3.4 billion liters in the fiscal year 2021/22 to 3.6 billion liters in the 2022/23 fiscal year.

This upward trend reflects Tanzania’s efforts to enhance its dairy industry and meet the growing demand for milk within the country. While Tanzania’s progress is commendable, it still lags behind Kenya’s dairy sector, suggesting that Rwanda’s quest to surpass Kenya will require substantial efforts and strategic investments in its dairy industry.

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