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Dairy sector : Rwanda aims for leadership

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Dairy sector : Rwanda aims for leadership

In 2023, the Rwandan dairy sector churned out one billion liters of milk, yet it still trails behind the industry leader, Kenya. Rwanda’s dairy industry development project aims to target 53 % of Rwandan dairy households and generate 3,400 new job opportunities.

Kigali’s aspiration to excel among Eastern

Region PeersKigali is embarking on an ambitious journey to elevate production within Rwanda’s dairy sector, a strategic move poised to challenge the supremacy of its East African counterparts, Kenya and Tanzania. Under the Rwanda Dairy Development Project (RDDP), Kigali is poised to implement initiatives aimed at turbocharging milk production.

Rwanda’s annual milk production is already on an impressive upward trajectory, surging past one million tons in 2023, equivalent to approximately one billion liters. This remarkable leap from 2020, as disclosed by the Rwandan Ministry of Agriculture and Animal Resources, underscores the sector’s promising growth trajectory.

Committing to extensive and sustainable investments in the industry

The 100.37 million USD initiative, envisioned to unfold over six years, according to the International Fund for Agricultural Development (IFAD), holds paramount importance in propelling this expansion. This substantial investment marks the second phase of Rwanda’s aspirations for dairy sector development. Notably, the project aims to fortify the resilience of the nation’s dairy industry against the impacts of climate change.

Crucially, the project seeks to uplift the livelihoods of rural households, the primary custodians of dairy cattle. Ultimately, this ambitious endeavor is anticipated to:

  • Engage 80 % of dairy households
  • Elevate their incomes by 30 %
  • Generate over 3,400 new employment opportunities within Rwanda’s dairy sector.

Under the stewardship of IFAD, it is projected that 53 % of households engaged in Rwanda’s dairy sector will adopt environmentally sustainable and climate-resilient technologies and practices. Moreover, 45 % of households are expected to benefit from enhanced nutritional security through heightened production.

This subsequent phase builds upon the accomplishments of the initial Rwanda Dairy Sector Development Project (RDDP), with a total investment of 65.1 million USD. It reportedly yielded positive outcomes for the sector and its target demographic, rural farmers.

Confronting hurdles and adversities

As outlined by IFAD, prevailing challenges encompass subpar milk productivity levels from cows, predominantly stemming from inadequate access to quality water and a shortage of investments in the value chain. In response to these obstacles, the Rwandan Parliament has greenlit a financing agreement between Rwanda and IFAD, enabling Rwanda to secure three loans amounting to 20 million USD as the initial financing tranche.

Uzziel Ndagijimana, Rwandan Minister of Finance and Economic Planning, asserts, « Recognizing the cyclical nature of milk production and supply, characterized by ample yields during the rainy season and constrained supply during the dry season, this project endeavors to establish climate-resilient milk production systems to mitigate milk shortages during dry periods ».

With the support of IFAD, the project aims to catalyze the transformation of the dairy sector’s value chain into a more sustainable sub-sector.

Promoting ecology in the dairy value chain

« The greening of the dairy value chain and the reduction of its greenhouse gas emissions will help us approach or achieve carbon neutrality, in line with national commitments under the Nationally Determined Contribution and the Global Methane Pledge », stated the minister.

The RDDP-2 will be implemented over six years (2024-2029) and conducted in 27 districts, including 14 initial RDDP districts and 13 new districts to expand the process. It will target 45 % female beneficiaries and 25 % youth beneficiaries. Through the project, 164 milk processing facilities will be built, and another 95 milk collection centers will be equipped. Includes what IFAD calls a « digitized milk transaction management system ».

Increased dairy sector production in Rwanda

With this second phase, IFAD will support 85,000 individuals engaged in dairy entrepreneurship by providing access to financing. The project plans to introduce, test, and disseminate climate-resilient varieties and technologies and promote agroforestry systems, including planting fodder trees, legumes, and grasses in pastures and cultivated lands.

IFAD explains many benefits of this, including mitigating climate change through carbon sequestration in the soil. The organization will also deploy energy-efficient production technologies and reduce GHG emissions (greenhouse gases). In particular, adopting biogas and solar energy technologies, thus promoting capacity building in carbon accounting.

IFAD explains that the estimated value of 100.37 million USD, to be disbursed over six years, will be allocated to three components of the project:

  • Firstly, there will be increased productivity and resilience of smallholder dairy production systems, representing 41.3 % of the total project cost (41.44 million USD).
  • Secondly, dairy value chain efficiency will be enhanced through increased investments, better market access, and dairy product consumption, accounting for 48.2 % (or 48.41 million USD).
  • Finally, there will be policy support, project management, monitoring, evaluation, and knowledge management, representing 10.52 million USD (10.5 %).

Involvement of the Green Climate fund and other funders

The project also mobilizes funding from the regional Green Climate Fund, already operating in Rwanda under the « Pathways to Dairy Net Zero » project, estimated to cover 8.5 million USD (8.5 %) of the project. Among other funders, Equity Bank Rwanda will finance approximately 10 million USD (10 %) in loans to smallholder farmers and other entities throughout the dairy value chain.

Heifer International also confirms a contribution of 6 million USD in grants, representing 6 % of the project. Finally, the contribution from the Government of Rwanda is estimated at 17.64 million USD, covering 17.5 % of the total project cost.

A unique feature, IFAD, indicates that the expected beneficiaries will contribute an additional 9.52 million USD (9.5 %) to the project. Although it has not been specified how beneficiaries will contribute to this amount, this marks a significant contribution from Rwanda’s small-scale farmers.

IFAD also states that these contributions leave a funding gap of 8.16 million USD (8.1 %), which it has committed to fill from its resources or seek other co-founders.

Rwanda surpass Kenya and Tanzania in dairy production

Rwanda, recognized for its remarkable strides in economic and agricultural advancement, confronts a significant endeavor: surpassing Kenya as the leading dairy producer in East Africa. Kenya’s dairy sector stands as the paramount agricultural sub-sector in the nation, not only in revenue generation but also in job creation, contributing 4 % to the overall GDP.

This robust economic engine sustains livelihoods for over 1.5 million households engaged in various facets of the dairy value chain, encompassing farming, processing, and distribution. Kenya’s dairy industry boasts a formidable infrastructure, with approximately 6.1 million dairy cows producing around 3.7 million kilograms of milk annually. Highlights the efficiency and capacity of the sector 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, traders, and service providers working harmoniously to support a thriving dairy economy.

Meanwhile, in Tanzania, the dairy sector witnesses growth, with data indicating an increase in milk production from 3.4 billion liters in the 2021-22 fiscal year to 3.6 billion liters in the 2022-23 fiscal year. This upward trajectory reflects Tanzania’s endeavors to fortify its dairy industry and satisfy the escalating demand for milk within the nation. Despite Tanzania’s commendable progress, it still trails behind Kenya’s dairy sector. Implies that Rwanda’s aspiration to surpass Kenya will necessitate substantial endeavors and strategic investments in its dairy industry.

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