East Africa Dairy Development

Annual Review and Planning MeetingKigali-Serena Hotel

30.11.2011

Rwanda

Structure

Dairy sector in Rwanda-Situation analysis

EADD Strategy

Stage gate identified gaps

Plan to fill the gaps

OPB: 2012-2013

From left to right: PS MINAGRI, PM, MINICOM, Mayor Nyagatare, Savannah Dairies Manager

Dairy sector in Rwanda-Situation analysis

EADD Progress

Target number achieved to date: 23,615 families registered

Shareholders: 8084 members

(58% Male, 42% Female & Youth)

Country-level factors

• Insufficient investments by the Private sector in the Dairy Industry

• Markets for milk remains a challenge impacting the development of the Dairy value chain.

• Low levels utilization of the capacity of existing milk processing plants

• Poorly organized milk marketing system based on direct marketing

Summary of Current Operating Environment

Sector-level factors

• Animal production and the integration of livestock into smallholder farming will continue receiving focus from Government and donors.

• Increased production of milk paired with stagnant demand has created a difficult marketing situation for MCCs and processors which threatens the financial viability of these enterprises.

• GoR regulation limits efforts to grow market for dairy in Rwanda (Ban on plastics limits low-cost packaging options for processed milk, Reluctance to support a regulated traditional market limits marketing options for MCCs…)

• Rwanda’s largest dairy processor, Inyange Industries, has been under pressure from GoR to purchase milk yet unable to find sufficient market for its product, threatening the company’s financial future

Summary of Current Operating Environment

• By end of Sept, 2011, EADD MCCs supply had outstripped processor’s demand (~14,883L/day against 10,000 Liters collected twice a week by processor). Cumulatively, 11 bulking sites have collected and sold 4,063,043 liters against a 2011 AOP target of 7,018,555 liters.

• Studies show that almost 96%(~238,000ltrs) of marketed milk is sold through alternative market1.. Milk is distributed through 1,549 registered milk sellers and home delivery2

• In Rwanda, 19% of the population lives in urban areas. Milk demand is likely to increase with urbanization at a rate of ~4.4% annually3

Market situation

1TNS Rwanda dairy value chain study Oct 2008.), *2USAID Dairy Competitiveness project consumer survey OCT-Nov 2008), 3Rwanda-CIA fact book, people and society

Milk Quality Trends

The chart below shows the improvement in terms of Total Bacterial Count from 2008-2011.

Source: EADD Milk Quality report, Q3

Milk Quality trends 2011/RBS standards

Source: EADD milk Quality report, Q3

Milk Components Vs RBS standards

> RBS standard: Fat content

SNF “Solid Non-Fat”

Lactose

Slightly < RBS standards: Protein

content

Possible causes:

The type of breeds,

feeding systems…

Supply trends in 2009-2011

Bulking DFBA’s have so far sold 12,816,884 ltrs of milk between 2009-2011.

Highest milk volumes recorded in May 2011 (704,100 ltrs from 11 bulking DFBA)

Lowest milk volumes recorded in Sept 2009 ( 184,177 ltrs from 6 bulking DFBA’s)

Milk volume increases in May 2011 were realized following an increase in farm gate and

DFBA sales prices. A situation that created incentive for DFBA’s to collect more milk and

farmers to increase milk supply

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

A S

200,000

700,000

J

Ø 388,390

MFJDNOSAJJMAMFJD MANOSAJJMAMFJ J

Lite

rs

2009(6 bulking sites)3,709,414 Ltrs

2010(10 Bulking sites)

5,044,426 Ltrs

2011 (J-S)(11 Bulking sites)4,063,043 Ltrs

Actual Vol

NP trend 2009-2011

Bulking DFBA’s have so far amassed USD 217,843 between 2009-2011.

Highest Net profit was recorded in May 2010 (USD 21,799 from 10 bulking DFBA)

Lowest NP recorded in July 2011 (USD (5,198) from 11 bulking DFBA’s)

The Net loss in June 2011 and Q3 2011 was as a result of increased milk rejection and spoilage as well as reduced milk collection days by the processor among other issues. In Q3 milk was not collected for a total of 25 days and in excess of 11,000 liters was

rejected.

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

USD

J AN

-5,000

FJ

Ø 6,601

22,000

SAJO MMFJA D AJJJMAM S JMAMFJDNOS

2009(6 bulking sites)NP USD 68,970

2010(10 Bulking sites)NP USD 110,341

2011 J-S(11 Bulking sites)

NP USD 38532

On-going- What are we doing?

I. Alternative market routes survey to show the opportunity and need to embrace them.

II. Business opportunity seminar between milk traders and CP management.

III. Milk breakeven analysis for BRD.

IV. DFBA Feed plans.

V. Cost of Production Study (CoP) to try and advise milk pricing

VI. Dairy Consumer Market survey

Dairy sector investments

Donor Sector and estimated funding available.

Implementer Notes

USAID Rwanda Dairy Competitiveness Project 2 from 2012 to 2016 . Funding at US$ 15 million

Land O Lakes Working with EADD to strengthen the role of the Rwanda National Dairy Board and the Rwanda Milk sellers association.

IFAD Government Girinka “ One-Cow per poor family” programme. Funding TBD.

Ministry of Agriculture

Improvements in productivity and food security.

AfDB The US$ 35 million Livestock Infrastructure Support Programme (LISP).

Ministry of Agriculture

LISP is taking over the construction and equipping of CPs. Focused solely on hardware. EADD to partner on software e.gtraining, systems, market linkages, BDS, etc

TheNetherlands Government

Piloting Value chain support in the Northern Province. Funding TBD

SNV There has been no intersection with EADD to date due to geographical differences. Project in pilot.

RABOBANK Value Chain financing BPR Looking to sign MOUs with key stakeholders including EADD.

USAID Rwanda Milk Quality Initiative project ending in June 2012. Funding at US$ 600,000

Gahini Diocese Focusing on quality improvements through increased chilling capacities of select MCCs in Gatsibo and Nyagatare as well as milk transport issues.

Stage gate identified gaps

Combined stage gate results

0

10

20

30

40

50

60

70

80

Kirebe

Rwabiharamba

Murambi

GasiGahengeriMusha MuhaziNgarama Kibondo

0 34 35 36 37 38 39 40 41

Kiziguro

Prod Score

5142 43 44 45

Biz

Sco

re

46 47 48 49 50

IsanganoKigabiro

Rubona

Matimba

Nyagatare

Mworozi-Mbare

Source: Stage Gate Data, July 2011

• Limited value proposition to farmers & market

• financial health and capital structure of hubs

• Governance issues including compliance to set GOR laws and developing and implement accounting/finance policies, & HR Procurement policies,

• Limited BDS service provision

• Absence of contract with Processors and milk buyers,

• Limited BOD & staff engagement on milk marketing

• Lack of an effective and sustainable DFBA based extension system

Stage Gate - Identified gaps

4,063,0445,044,426

3,709,414

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Lite

rs

-59%

2011 AOP

11,606,063

9,902,512

2011 (J-S)20102009

Bulking site Projections

9,645,411

2013 AOP

16,443,056

5,343,506

7,831,879

2012 AOP 2012-2013 AOP

6,797,645

NON-Bulking site ProjectionsBulking site Actuals Total Projections 2012-2013

Jan 2012-June 201311 bulking sites are expected to collect and sell7,831,879 ltrs in 2012 and 5,343,506 ltrs for the half year 2013.

5 non bulking sites are expected to collect and sell 2,052,226 ltrs in 2012 and 1,493,575 ltrs in 2013 if the become operational.

2011Bulking DFBA’s targeted to bulk 9,902,5122 ltrs in 2011. As at end of Sept 2011 they had managed to bulk and sell 4,063,044 ltrs, a 41% achievement rating

AOP PROJECTIONS –MILK VOLUMES

-10,000

-5,000

0

5,000

10,000

15,000

20,000

Oct DecSepAugJul NovJun

Net

Pro

fit

USD

MayAprMarFebJan2012 AOP (B)

2011 (J-S)

Q1 Q2 Q3 Q4

Shifting focus from only formal to include the alternative market channels is hoped to create amore stable operating environment that allow the DFBA’s to plan operations better and be moreprofitable

•Milk reject and spoilage•Milk transport costs•Admin and Operatingcosts

Formalmarkets

Alternativemarkets+ +50% 50%

= SUSTAINABLE PROFITS

Double milk volumes and

target

Control

AOP PROJECTIONS –NET PROFIT

Country strategies

Country strategies

Market issues/Access to markets The project has made a decision to work with informal milk traders and formal milk

processors as a means to spur milk volume growth at the DFBA.

The project will continue to work with relevant GoR offices such as MINAGRI and RAB, to obtain total buy in of alternative routes to market as short to medium term milk market interventions.

With LISP MCCs set up programme, new sites will start doing business under the TM

model.

Strategic partnerships e.g. CP financing The GoR launched the Livestock infrastructure Support project in July 2011, under the

ministry of Agriculture. The project seeks to establish a total of 30 MCCs by June 2012. Of the 30 MCC’s , 6 DFBA’s under the EADD project have been considered as prospective beneficiaries of this project as such effectively taking over CP financing from EADD. The

project will focus on building “software” with the DFBA’s

Country strategies

• Input and services The project will be working with other stake holders to improve the quality of

service and product offering of various services provided at the Hub. At the moment the project is negotiating an MOU with the International Fertilizer Development Center (IFDC) who are developing a certification programme for the Agro dealeDocument a backup plan to react to a no LISP responsernetwork in Rwanda in collaboration with MINAGRI and Agmark. The project is also working with Cooper (R) Ltd who have been providing the DFBA’s inputs on credit reducing the working capital requirement to start an AgroVet shot at the CP premises.

• Dairy Policies The EADD will also work with other dairy stakeholders to conduct an outcome

map that will inform advocacy and lobbying activities aimed at having the alternative markets accepted and embraced in the short run.

Governance issues Will be working with the Rwanda Cooperative Agency on governance.

Plan to fill the gaps

5 CAHPs

2 AISPs

10 CAHPs

6 AISPs

6 FT/ToT

2 FT/ToT

MUDUGUDU

20 farmers

Smallest Training unit

CELL

•4 midugudu/cell selected

20 farmers/mudugudu

SECTOR7 cell

Extension Personnel

DFBA

DFBA Manager

DHES

LEVEL 1 LEVEL 2

LEVEL 3

4 7 3

Farmers

Farmers

Farmers

Farmers

Dairy C

ow

s

Dairy C

ow

s

Dairy C

ow

s

Dairy C

ow

s

40 cows 160 cows1120 cows

3360 cows

Farmers

80Farmers

20

Farmers

560

SemenComputerNitrogen (l)

AI accessories

Farmers

1680

Extension strategy

AOP strategy

HIGHLIGHTS OF RWABIHARAMBA AOP

26

Strategic Objective Key Result areas Some Indicators……..

Improve hub profitability and efficiency

Increase sales 75% sales to Savannah,25% sale to traders in Kigali

Diversify sources of revenue at the hub

Set up feed mill though USDF

Controlled hub expenses Purchase Milk truck though BPR

Improve governance and management

Coop governance systems established

Performance contract signed by the BOD

Major management policies implemented

Strategic plan reviewed and implemented

Improve CP management Introduce and incorporate IT based accounting.

Improve on-farmproductivity

Establish extension system DHES hired on cost-shared arrangement

SUMMARY OF PERFORMANCE & AOP 2012 AOP TARGETS

27

781,829

622,795

797,189704,943

0

200,000

400,000

600,000

800,000

2009 2010 2011 (J-S)

2012 AOP

Milk

Vo

lum

es

-20%

16,1819,780

31,289

16,003

0

10,000

20,000

30,000

40,000

2011 (J-S)

2010 2011 AOP

2009

-40%

Net

Pro

fit

USD

Milk Volumes 2009-2011

Net profit 2009-2011

7,858

Milk Vol Ltrs

Sales USD

Net Profit USD

0

379,678

1,136,015

1,140,0005,000

Rwabiharamba

2012 AOP TARGETS

Budget

• Project site expenditure (From CY2008 to June-CY2011),

• The results of the stage gate tool have been central in determining the activities and focus of operational year 2012-2013,

• In order to meet the objectives outlined above, EADD-Rwanda is seeking to spend US$ 129,522.90 for the six months NCE and a further US$ 822,273.09 for the twelve months CE.

Budget development

NCE+CE

Site

Budget

(USD)

2008- Target End

2010 2011 2011

Gahengeri Dairy Farmers Coop. (COOPAG) N.CP Stage1 9-Jan 3,071 335 3,406 64,008.10

DUFACO (Gasi) N.CP Stage1 9-Jan 1,222 535 1,757 64,008.10

Rubona Dairy Farmers Cooperative N.CP Stage1 10-Jan 2,499 200 2,699 66,146.81

Dukundamatungo Dairy Coop- CDA (Kigabiro) N.CP Stage2 10-Jan 520 200 720 55,298.81

Murambi Dairy Farmers Coop (Mudacos) N.CP Stage2 9-Jan 1,571 414 1,985 55,298.81

Kamirabose Dairy Farmers Coop (Muhazi) N.CP Stage 1 10-Jan 602 612 1,214 66,146.81

Musha Dairy Farmers Cooperative N.CP Stage 1 10-Jan 1,548 535 2,083 66,146.81

Kiziguro Dairy farmers Coop (Ndatemwa) N.CP Stage 1 10-Jan 994 1,200 2,194 66,146.81

Sub-Total 12,027 4,031 16,058 503,201.06

RWANDA: Detailed site and cluster targets and budgets (NCE-CE)

Cluster Dairy Enterprise or Site

Site Farmers Registered

Category Status*Date

Engaged

 Nyagatare

RW/Cluster budget: 2012-2013

Cluster budget (Ctn’d)

Kirebe-Kamate Zirakamwe Dairy Coop. P.CP Stage 2 8-May 903 2,925 55,298.81

Matimba Tworore Kijyambere (MATWOKI) P.CP Stage 2 8-May 877 660 1,563 53,160.10

Terimbere Mworozi (Mbare) P.CP Stage 2 8-May 427 200 1,077 53,160.10

Isangano Giramata Gacundezi(IGG) P.CP Stage 2 8-May 1,167 200 627 53,160.10

Kibondo Farmers Dairy Cooperative (KDF) N.CP Stage 1 8-May 998 535 1,702 66,146.81

Jyambere Mworozi Coop (Ngarama) N.CP Stage 1 9-Jan 916 535 1,533 66,146.81

Rwabiharamba Dairy Coop P.CP Stage 3 10-Jan 963 281 1,197 48,362.10

Nyagatare Dairy Marketing Coop Society P.CP Stage 2 8-May 2,725 200 1,163 53,160.10

Sub-total 8,976 2,249 11,787 448,594.93

Grand total 21,003 6,842 27,845 951,795.99

Rwamagana

Rwamagana cluster budget

The total operational budget of 951,795.99USD

(1) (2) (3) (4) (5) (6) (7)

Other Costs Country

National Cluster Sub-total**** Total

Level; Sub-total***

Heifer 201,174.20 147,710.77 118,500.98 467,385.96 848,814.00 1,316,199.96

TNS 176,736.00 128,546.00 305,282.00 850,507.00 1,155,789.00

ILRI* - - - - - -

ABS 56,180.71 37,511.78 93,692.49 262,386.73 356,079.22

ICRAF 49,508.38 35,927.17 85,435.54 43,911.52 129,347.06

Total 483,599.29 349,695.72 118,500.98 951,795.99 2,005,619.25 2,957,415.24

Farmer No** 12,877.00 10,738.00 23,615.00 27,845.00 27,845.00 27,845.00

Cost / Farmer* 37.56 32.57 5.02 34.18 72.03 106.21

*Not cluster allocated; **By 30 September 2011; *** Field supplies, training, tech. services; ****Salaries, fringe benefits, travel, office supplies, equipment (if any);

RWANDA budget January, 2012 to June, 2013 (18 months) cluster & partner budget summary (USD)

 Partner

Cluster

Rwamagana Nyagatare

Country and partner Budget