Aberton Okoth and Hussein Kadiro
Introduction
The dairy value chain comprises a series of events involving production, processing, distribution and retailing of milk and dairy products spanning from production on the farm to the final consumer. The dairy industry is recognized in Kenya’s Vision 2030 as one of the key economic drivers that will enhance job creation and employment, especially for the youth. The dairy value chain approach as stipulated in the Fourth Medium Term Plan (MTP IV) offers the dynamics needed to alleviate unemployment among the youth. The approach focuses on milk production, value addition, market access and attracting investors in the dairy industry. This blog discusses job creation in Kenya by enhancing the dairy value chain.
Status of the Dairy Value Chain
Driving jobs creation through milk production and processing
The dairy industry contributes 4.5 per cent to the national GDP (KNBS Economic Survey 2024). Milk production in Kenya is approximated at 4,500 million litres on average, having experienced a sharp increase by over 600 million litres in 2021. Processed milk is manufactured into other dairy products such as ghee and cheese. Specifically, milk production was 4,568 million litres in 2024, out of which processed milk accounted for
555.4 million litres of milk and cream, 999.6 tonnes of butter and ghee and 72.5 tonnes of cheese. A well-structured dairy value chain, therefore, has potential to create jobs for the youth, driving the economy, improving the livelihoods and providing income to Kenyans.
Figure 1: Milk production in litres (‘000000), 2019-2023
Source of Data: KNBS (2024), Economic Survey
Tracing job creation across dairy value chains
Production jobs: This is the first stage of the value chain where milk production is carried out. The quality of milk depends on factors such as the breed of animals, quality of feed and age of animals. Production stage creates most opportunities, as per the Kenya Dairy Board (KDB), with over 400,000 jobs in form of farmers, farm labourers and feed manufacturers being created. Smallholder farmers make the highest portion in the country accounting for high production.
Collection – chilling and transportation jobs: Milk is collected and bulked by farmers, self-help groups or cooperatives. Bulking centres act as a link between producers and processors and used in chilling milk to reduce losses occasioned by microbial growth. This stage in the value chain provides opportunities for drivers, collection managers and milk quality testers.
Processing and value addition: Processing adds value to the milk in form of pasteurization, and manufacturing dairy products such as yoghurt, butter, ghee, cheese and lactose powder. Packaging into plastic bottles, cartons and sachets of dairy products is conducted at this stage. According to Kenya Daily Board (KDB), approximately 80,000 jobs are created at this level with factory workers, quality and assurance officers, packaging staff and research and development for new products officers being employed.
Distribution and retailing: At this stage, dairy products are sold in the market. The distribution and retail stage of the value chain includes transportation to wholesalers, shops and supermarkets. Additionally, milk vendors provide substantial access to dairy products in rural and urban centres. The stage in the value chain creates opportunities for distributors, retailers and vendors.
Lastly, indirect opportunities have been created to boost the efficiency and productivity of the industry. The opportunities include veterinary officers who check on the health of dairy animals, dairy feed producers involved in feed and supplement production and equipment manufacturers who manufacture equipment used in the dairy farms.
Challenges in the Dairy Value Chain
Low milk productivity: Inadequate feeding resources, poor veterinary services, use of outdated farming practices and low access to quality dairy breeds by smallholder farmers lead to low yields which lead to low earnings.
Inadequate infrastructure: There is limited investment in milk cooling centres and processing plants, which is also coupled with poor road networks in rural places. This leads to high wastage.
Unpredictable milk prices: The middlemen and large processing companies dictate the prices, making it difficult for smallholder farmers to plan their production and maintain profitability.
Competition from imported dairy products: The increasing number of cheap imported dairy products particularly powdered milk is a problem for local dairy producers. These imports undermine local production by lowering prices and creating unfair competition.
Opportunities in the Dairy Value Chain
Dairy cooperatives. The forming of dairy cooperatives will enhance economies of scale, provide access to the market and financing. Cooperatives create more employment opportunities.
Value addition: Processing dairy products creates more opportunities in the sector. Processed dairy products such as ghee, ice cream and cheese create employment opportunities in the manufacturing sector.
Export markets: Enhanced dairy production and manufacturing lead to increased demand for the dairy products on the international market. Increased dairy multilateral trade creates more opportunities.
Conclusion and Recommendations
The dairy value chain not only increases returns through value addition but also creates employment at each level, significantly contributing to the economy. To enhance productivity, the following interventions are recommended.
Offer subsidies to farmers: The Government, through the Kenya Dairy Board to support farmers by offering subsidies to improve the dairy breeds, which will improve milk productivity in the country.
Milk cooling and storage facilities: The Ministry of Agriculture to develop cooling and storage facilities in rural areas to reduce spoilage. Furthermore, the Government to create incentives to milk processors to enhance production of milk and dairy products.
Establish cooperatives and farmer groups: The State Department for Livestock in collaboration with the State Department for Cooperatives to ensure that smallholder farmers are registered and their milk sold through cooperatives to enhance their bargaining power and improve prices.
Strengthen trade policies on dairy products. The Kenya Dairy Board to strengthen trade policies to protect local dairy producers from unfair competition by imposing taxes on imported dairy products and reducing local production costs, making the local products more competitive in both local and regional markets.
