USAID DAIRY COMPETITIVENESS PROJECT QUARTERLY ...

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QUARTERLY REPORT

October 2008 - December 2008

USAID CA# 696-A-00-08-00016-00

Submitted to

Fina Kayisanabo CTO USAID/Rwanda

Submitted by

Land O’Lakes, Inc. P.O. Box 64281

St. Paul, MN 55164-0281

January 2009

© Copyright 2009 by Land O’Lakes, Inc. All rights reserved.

USAID DAIRY SECTOR COMPETITIVENESS PROJECT

USAID CA# 696-A-00-08-00016-00

QUARTERLY REPORT

OCTOBER 1 – DECEMBER 31, 2008

Name of Project: USAID Dairy Sector Competitiveness Project

Regions: Nyagatare and Nyabisindu areas

Dates of project: November 15, 2007 – November 14, 2012

Total estimated federal funding: $ 4,999,995

Contact in Regional Office: Joe Carvalho Land O'Lakes/Kenya phone: +254-20-3748685 fax: +254-20-3745056 e-mail: [email protected] Contact in Rwanda: Roger Steinkamp Kigali, Rwanda Phone: +250 0533 6048 e-mail: [email protected] Contact in the U.S.: Edna Ogwangi

Land O'Lakes/Shoreview, MN phone: 651-494-5131 fax: 651-494-5144 e-mail: [email protected]

USAID Dairy Competitiveness Project CA# 696-A-00-08-00016-00

Quarterly Report October-December 2008 3

TABLE OF CONTENTS

1. PROJECT OVERVIEW ...................................................................................... 1 2. EXECUTIVE SUMMARY .................................................................................. 2 3. NARRATIVE ........................................................................................................ 4

3.1 General Project Environment …………………………………………………….............4 3.2 Strategic Objective 1:

Dairy sector stakeholders directing improved sector competitiveness…………………5

3.3 Strategic Objective 2: Rwandan Milk and Dairy Products Competitive in East African Market……….…. 8

3.4 Strategic Objective 3: PLWHAs, OVCs and CHHs engaged in dairy related IGAs………………………..….12

3.5 Strategic Objective 4: Dairy Producers in Nyagatare region aware of HIV/AIDs prevention practices...…21

3.6 Summary Tables from work plan ……………………………………………………….. 22 4. UPCOMING ACTIVITIES ............................................................................... 28

Attachment A: Acronyms ……………………………………………………………. 29

Attachment B: Kiosk Consumer Survey Summary ......................................………...32 Attachment C: Recommendations on Milk Quality…………………………..……. 29

Attachment D: Milk Pricing Incentives and Processing ....…………………..……. 38

Attachment E: Potential Use of Milk by Processors ..........…………………..……. 54

Attachment F: potential dairy IGA for PLWHA Assn …………….…………….... 57

Attachment G: Zero Grazing Summary for 3-cow herd ..……………………...…. 61

Attachment H: Evaluation of IGA potential in cow dairying .……………………. 63


Quarterly Report October-December 2008 1 Land O’Lakes, Inc

1. PROJECT OVERVIEW The Land O’Lakes consortium is committed to successful project implementation and achievement of its strategic goal to expand dairy sector-related economic opportunities and improve well-being in rural areas by increasing the competitiveness of the Rwanda dairy sector. To achieve this goal, Land O’Lakes shall target increasing the efficient and profitable flow of quality milk and dairy products and related inputs and services through the dairy value chain and will integrate people living with HIV\AIDs (PLWHA) and orphans and vulnerable children (OVC) into dairy-related income-generating activities. As a result, the Rwandan dairy industry will be better able to compete in local and export markets, and vulnerable populations will have increased access to economic opportunities. Land O’Lakes has carefully chosen an array of partners and collaborators to assist in this program. Proposed sub recipients are:

CHF International, a U.S.-based organization, having worked in more than 100 countries worldwide to be a catalyst for long-lasting positive change in low- and moderate- income communities around the world, is currently implementing the Community HIV/AIDS Mobilization Program (CHAMP) in Rwanda, a four-year, 40-million dollar USAID/PEPFAR-funded program focused on HIV/AIDS prevention.

J.E. Austin Associates, Inc., a U.S.-based consulting firm, has been recognized as an industry leader in private sector development, value chains and competitiveness in sub-Saharan Africa, including Rwanda.

ABS-TCM Ltd, a U.S. technical services firm, has been recognized as an organization that provides private, market-linked dairy genetics services, delivery systems and dairy-oriented BDS strategies that have been developed by ABS TCM in Kenya (and WWS in Uganda and Kenya) and are highly appropriate to and promising for the Rwandan dairy sector. Land O’Lakes’ strategy for promoting growth and reducing poverty in Rwanda is to utilize a market-driven, value-chain, low-subsidy approach to dairy sector development, placing greater emphasis on the development of local partners (private, public and NGO) to provide technical services, build the capacity of local BDS providers and consultants, and strengthen/expand markets for productivity-enhancing inputs and services. The sustainability of the UDC program will come through the development of these local partners to the point where they can continue to provide key services and inputs required to further increase dairy sector competitiveness, reduce poverty and improve the well-being of communities and vulnerable groups. Sustainability will also be enhanced through the development of sustainable businesses and business linkages all along the value chain. By the end of the project, the services of Land O’Lakes and consortium partners will no longer be required as dairy farmers, cooperatives, dairy processors and commercial input and service providers assisted by the project will be engaged in profitable enterprises and can access and afford business, financial and technical services from local providers. The Dairy Industry Competitiveness Task Force, made up of public and private sector stakeholders, shall continue to as a vehicle and forum for policy dialogue and advocacy.



2. EXECUTIVE SUMMARY

The USAID Dairy Competitiveness project has moved beyond talking about milk quality and IGAs to moving down the road map toward improving the milk supply and developing IGAs within PLWHA associations. This, in turn, has inspired Ministries to undertake new studies to help formulate new policies. This summary only touches on the main points. The narrative and attachments describe the progress in greater detail.

Milk quality and pricing issues reviewed and recommendations made to ameliorate the milk supply. Three veterans of the dairy industry assessed and laid out a road map to improve the milk supply. The veteran, former head of Minnesota’s Dairy Division, laid out a path with critical control points, affordable tests and potential personnel from the sectors to carry out plant and farm inspections. This will involve a major shift of the current inspection paradigm. The major obstacle is lack of personnel to carry out inspections on the thousands of small businesses and farms. The path will involves RBS, RARDA and local sector inspectors and veterinarians. Discussions will be started in January. The other two veterans from Land O’Lakes (a former vice president and a plant manager) tackled the related issues of milk pricing and processing potential. They helped advance the argument for differentiating milk price based on quality factors. Most commercial processors and some kiosk owners are now convinced but need an independent lab capable of furnishing unbiased, reliable test results. All agree the basis for differentiation of milk prices hinges on establishing a national laboratory. And the secret to product development hinges on an improved milk supply. To this end, the project is working with NGOs to find funding and training programs for lab operators. To date, an alliance of NGOs and private sector companies have applied for a half million dollars in funding from the DGA program matched by private and government investment. HIDA (capacity building agency of the government) is offering to finance two young people to the states for interning in US labs. The project is assisting them to find hosts. Once milk can be tested regularly, dairies will be able to develop streams of different quality milk and convert it to the most appropriate products. The current milk supply precludes export because of COMESA standards. Dairy operators have shifted from their initial disbelief to believing they can improve their current products by improving the milk supply.

The Competitiveness Task Force (CTF) moves to the next level. Working groups established within the CTF have been engaged in discussions on milk quality. As the project has shared data collected on milk throughout the dairy chain, some farmers participated in a trial to prove quality milk could be produced on rustic farms. The results came back with <300,000 CFU/ml if total bacteria. Now processors are talking about it, whereas a few months ago they largely dismissed these basic quality standards. The CTF found a new ally in the Minister of Finance who was contacted by the CEO of Tri-star holding company soliciting his support for a “National Dairy Initiative” using the CTF started by Land O’Lakes as the foundation. The ultimate goal will be to develop a National Dairy Board. The CTF held its last meeting of 2008 focusing on getting information out on a host of studies conducted over the past year and some that are in progress. This again, generated a lot of discussion and the project is in the process of collecting their final reports and archiving them on a CD or web for all to share.



Work with PLWHA associations. All three partners (CHF, ABSTCM and Land O’Lakes) have been active with PLWHA associations this past quarter. Land O’Lakes brought in two specialists, one in agribusiness management and the other in coop development, to work with the CHF and ABSTCM teams. They developed a prototype dairy IGA consisting of a 3-cow dairy that would cash flow. They did this while meeting with each of the 20 PLWHA associations with subsequent farm visits. Five associations were identified as having the greatest potential to develop IGAs with another five for the second phase. They laid out a series of steps to follow to launch the IGAs. CHF/CHAMP has hired Cooperative Support Officers (CFOs) and is developing their capacity to offer support to PLWHA associations as they transition from associations to coops. Several workshops were held this quarter and the CFOs are in place. They participated along with the ABSTCM team in the Land O’Lakes IGA assessment. ABSTCM launched a series of workshops for trainers from PLWHA associations, sectors and districts on a host of topics ranging from cattle management to record keeping. Several workshops were also conducted at the association level. The top order of business for next quarter will be for all partners to focus on helping PLWHAs set up IGAs.

Kiosk Consumer survey completed. Over 1800 consumers were surveyed in kiosks throughout the three districts of Kigali City to develop a profile of people that account for 90% of milk sales in Kigali. The three main products are raw, boiled and fermented milk. It describes a varied and vibrant market that is able to efficiently distribute milk within 24 hours of milk to consumers. It has opened the door to larger discussions on how best to regulate this sector and help it grow rather than regulate it out of existence.



3. NARRATIVE

3.1. General Project Environment The project environment continues to evolve. Surveys and studies have captured the imagination of both the government and industry stakeholders. Experts brought in by Land O’Lakes confirmed that improving the milk supply is the key to developing the industry and conversely, without it, little can be done in terms of exports or new products. The 48 hour milk market (milk kiosks) is starting to be recognized as the most significant part of the value chain, accounting for over 90% of sales. This carries many consequences for regulatory agencies that up to now had basically closed them upon inspection rather than develop appropriate inspection procedures. This sector provides safe, low-cost dairy products to a sector of population that cannot afford processed products. The Eastern Dairy Plant in Nyagatare has finally opened its doors and taken a few tentative steps in processing fresh pasteurized milk. However, concern is growing among processors that they may be dealing with shallow market because of price. What is becoming clear is that this is not a simple question of developing a new market but accurately reading the market that actually exists. Processors and to a lesser degree kiosk owners are becoming concerned with the quality of their milk supply. They are becoming willing to invest in and use a national lab, and once that is started, to develop a new milk pricing scheme based on quality and components. The RBS and RARDA are starting rethink their inspection procedures to accommodate realistic and affordable on farm and kiosk inspections. The project is in the center of these discussions that were initiated as result of new data generated by the project. The project is also finding traction in the PLWHA associations after giving up the upper reaches of the dairy chain to EADD in Nyagatare and Gatsibo. As this situation continues to evolve, the project should be on the lookout for expanding the program to other milk sheds. Gicumbi has consistently participated in the task force and is one of the largest milk sheds in Rwanda, after Nyagatare and Gisenyi, according to a recent CAPMER study. A concept paper was submitted to USAID to increase activities subsequent spending over a 3 ½ year period as opposed to five. If that is accepted, it should reflect this new environment in its IRs and activities. The SOs would stay constant.



3.2. Strategic Objective 1: Dairy sector stakeholders directing improved sector competitiveness Studies and consultancies: UDCP has changed the perception of the dairy industry through the series of surveys it conducted. In addition, a host of value chain studies have been conducted by CAPMER, MINAGRI, and EADD. To date, the project has surveyed: 745 milk samples taken throughout the dairy value chain 1549 milk vendors (informal market) 1200 farmers in Nyagatare and Gatsibo districts 1837 consumers in milk kiosks The data gathered is being shared with other institutions conducting studies and has found its way into the national dialogue on industry issues. The milk kiosk consumer survey in the “informal milk market” was conducted by Dr. Lucie Steinkamp this quarter. Excerpts from the 52 page report are included in Attachment B. Milk kiosks are fairly new in Rwanda: they developed after the war, with the reconstitution and development of the dairy herds starting mid to end 1990's. These kiosks fulfill two functions:

• provide a fast daily distribution of the milk coming from farms and milk collection centers in the surroundings of Kigali and up country comprising over 90% of the milk supply of the capital city;

• serve milk in individual servings at lunchtime (especially for the fermented milk) and along the business day to the workers in Kigali.

Forty three kiosks were selected from the UDCP database in the three districts of Kigali City. In general, most kiosks sell boiled milk and fermented milk, often consumed on the spot, but not all sell raw milk. Some of the more interesting observations include:

• The milk kiosk plays a critical role in milk distribution to households in Kigali o 90% of take-out sales of milk are less than 8 liters presumably for households o Women tend to be the buyers of small quantities whereas men buy in larger quantities,

presumably for resale. o Prices ranged from 130 – 350 RWF/liter, indicating significant price differentiation

taking place presumably on quality (organoleptic). • Milk bars (kiosks selling boiled and fermented milk in individual portions of .5 liters) represent

a value added product. A sophisticated system of distribution is in place. • Only 12% of kiosk customers buy packaged, pasteurized milk from supermarkets that sells at

double the price. • 79% of kiosk customers do not own a refrigerator and purchase fresh milk daily. • Lack of money is the most frequently cited reason for not purchasing milk at certain times of the

month, not availability. • Income level (disposable income) appears to be the most significant factor determining whether

customers purchase processed dairy products such as cheese, butter, powder milk, set yogurt or ice cream.

This survey has major implications on the domestic market, breaking some of the popular myths of the dairy market in Rwanda. First, 90% of the milk flows through this market. Processed products will have a very difficult time competing since fixed costs double the price of the product and place it out of range of most consumers. Closing the kiosks in order to force more milk through processing plants is commonly proposed. This will not necessarily make the milk supply safer and more importantly, place



milk out of range of the majority of most consumers. The processed products market will more likely grow more as a function of the economy and expendable income than a function of new products and advertising. Second, the “informal sector” should be given the respect that is due. Kiosk owners appear to be rather independent and vary greatly in business objectives. Some own farms, and the kiosk is an outlet for their own milk. Others are wholesalers. Some have milk bars. And so on. The one common fate they will all certainly face is pressure for inspection. If they organize, they can be part of the process. There is little capacity to inspect the kiosks at the moment. However, sectors have personnel that follow the businesses. With a bit of training, they could become an arm of either RBS or RARDA. Finally, attention should be given to improve hygiene and practices in the kiosks, and to improve their products. This will be the focus of the project over the coming months. Milk Quality Monitoring Consultancy In the wake of new information on milk quality and observations on the inconsistency of inspection generated by the project, Dr. William Coleman, former head of Dairy Division for the State of Minnesota (14 years) was brought in to confirm findings and make recommendations for future action to improve the milk supply. This included the state inspection service. He was instrumental in the development of enforceable and affordable standards in Minnesota. Excerpts from his report are included in Attachment C. Dr. Coleman literally walked through the value chain and defined what each stakeholder could do at each stage to maintain milk quality. He identified the following critical control points and tests along the dairy value and chain and suggests who should be responsible.

Critical control points for raw milk quality testing Location Test(s) Agency Farm Temperature (bulk tank), water quality RARDA/Sector Vets Transporter Temperature RARDA/RBS Collection Center Segregation or rejection screening tests

(Resazurin, alcohol, lactometer, starch, temp, antibiotics, sediment, somatic cell count)

RARDA oversight/ MCC conducting tests

Receiving plants (processors)

Verification of screening tests as needed (as in MCC) Sampling for payment (bacteria, somatic cell and components)

RBS oversight/ Plants screen/ Independent lab for testing

Shops and vendors Routine screening sampling and payment (temp, lactometer, etc. as needed by vendor)

RBS oversight/ sector inspector for sampling/ independent lab for testing

He stated that the precursor and foundation of an effective inspection regime is an independent, high volume laboratory at least capable of testing for bacteria, somatic cells and components. As cited above, the current screening tests may capture reject level milk, but is not adequate to improve the quality to levels needed for manufacturing practice.



One potential practice that could be employed in areas where it is virtually impossible to deliver milk in a timely manner to a point of sale or cooling center is the use of lactoperoxidase to preserve raw milk. When treated within 2 hours of milking, this system can hold bacteria in check for 8-12 hours, depending on the temperature. The two disadvantages are encouraging minimal hygienic practices on the farm and exclusion of treated milk from international trade. Some thought should be given before adapting this method wholesale. These recommendations are being discussed with RBS and RARDA to develop a workable inspection system. Dividing the inspection between agencies and bringing in sector level people is a new concept that may require some time since three ministries are involved. This is a good road map for the milk quality initiative of the project.



3.3. Strategic Objective 2: Rwandan Milk and Dairy Products Competitive in East African Market

Land O’Lakes brought in two consultants as team to work on milk pricing and potential competitive advantage brought about by an improved milk supply. In the case of the Rwanda, improved milk quality is not just a question of offering better products on the market but goes to the fundamental question of whether it is feasible to use the milk for manufacturing. Paul Christ, retired Vice President of Land O’Lakes, was in charge of milk pricing policy and a dairy economist for over 30 years. Dave Peters, a 20 year veteran in plant management, developed a pricing scheme in the Land O’Lakes plant in Poland that improved milk quality on small farms in a rustic environment. In the short time they were here, they were able to propose some solutions for milk pricing and potential uses for the existing milk supply. Perhaps most importantly, they advanced the argument for price differentiation among key industry officials. Excerpts of their reports and presentations are found in Attachments D and E. Three fundamental observations formed the base for their recommendations.

The quality of milk in Rwanda will not improve unless there are incentives to do so. At present, the only incentive to sell quality milk is the fear of rejection. Even this is not adequate, as a milk seller can find alternative outlets for bad milk.

Incentives for improving the quality of milk can take the form of reward or punishment. Reward could take the form of a price premium for quality milk and public recognition of good quality performance. Punishment could take the form of a price discount for lower quality milk or prohibition from selling milk in the market.

The practice of paying for milk by volume (Rwf per liter) only reflects part of the economic value of milk. It does not reflect variation in the nutritional content of milk from different sources, nor does it reflect the potential difference in yields of manufactured dairy products.

The following recommendations were made related to developing a milk pricing system. (Greater detail in Attachment D)

Establish an independent central laboratory to perform quality and composition tests on milk from all sources in Rwanda. (forming the basis for pricing milk)

Set up a milk sampling system for determining milk quality and composition at each level where a financial transaction takes place, or milk from one source is commingled with milk from other sources.

Organize one or more dairy industry associations. Possible associations include commercial milk processors, milk collection centers and/or dairy farmer cooperators and dairy kiosk operators.

Adopt a milk classification system that differentiates milk by quality. Reject substandard milk. Pay a premium for high quality milk and impose a penalty of poor quality milk. Adopt a milk quality recognition program. Stop paying for milk by volume, and start paying for milk solids.

After a walk-about of the value chain, the following key observations were made at the farm and MCC level. (More details in Attachment D and E).

It is possible to collect and transport milk from small farmers and have milk < 300,000 bacteria Clean potable water is a must (or water boiled or treated with chlorine). Containers with tight fitting lids are a must. Bulk tanks must be used as designed. Collection stations must be properly designed. Most farmers are too far from the plant or collection station to participate in a collection and

distribution system based on 2 hr delivery and 2 hr cooling.



A lactoperoxidase system of milk preservation should be at least considered for a single processor with milk from small farmers.

After visiting existing dairy plants and milk vendors and reviewing existing documents the following observations were made on the milk market (Attachment D):

The estimated 2008 production of 170 million L is divided between the rural market (76%) and the urban market (24%). The rural market is home consumption and sales to village neighbors, while urban markets are primarily retail consumers and home consumption in the cities. Kigali is the largest city with 1 million residents and consumes over half of the urban-marketed milk and most of the imported products. The rest goes to the other large cities.

The average per capita consumption of dairy products in Rwanda was estimated in 2007 at 15.9 L/yr

per person. The urban market was higher at 21.0 L / yr per person versus 14.6 L in the rural areas. Milk consumption is nearly always higher in cities where upper and middle class citizens have access to more variety and safer dairy products.

Of the current 120,000 L per day that is coming to the urban markets, only 6000 L goes through the

three processing plants. The balance of 114,000 L is processed at milk kiosks using kitchen-type boiling and pasteurizing techniques. 62% is then cooled in on-premise bulk cooling tanks to 4C and sold either by the glass in the retail area, or sold for home consumption to walkup buyers with their own containers or 1.0L plastic bags. The milk is almost always boiled again at home; and then consumed right away by children, or made into cheese or yogurt.

The milk kiosks are well entrenched in the urban market and provide a generally safe and regular

supply of pasteurized milk into urban homes at a very reasonable price – less than half the cost of milk in half liter gable-top cartons from the processing plants. Secondly, they provide 500 ml of fermented milk or pasteurized milk by the glass that is consumed on premise, primarily for breakfast and lunch at 250 RWF. The peak consumption is between 11 AM and 2 PM when thousands of workers (office and retail clerks, taxi drivers, construction workers, etc.) buy the milk plus a doughnut for 350 RWF. This is a healthy and reasonably priced breakfast or lunch.

Over 1500 kiosks exist in Kigali alone. Many are in need of better equipment, clean water and

refrigerated storage. At least 20% need to improve or face closure in order to guarantee food safety to the public. However, this is simply a matter of licensing, training and regular inspection.

In no way should the government close all of these kiosks to force the milk through the plants. The

milk quality is so poor that the product would not run through the plate HTST equipment without constant plugging. The shelf life would be no more than 2-3 days with much of the product being returned from retailers for spoilage. It is better to have this milk boiled at the kiosks and consumed the same day (or in the worst case the next day). Even safer than pasteurized milk is the fermented milk that has a low pH to combat the growth of any bacteria that may contaminate the product after boiling. As the milk quality improves and people have more spendable income, they will gradually purchase more products produced in the processing plants because of longer shelf lives and more convenient packaging.

Once the milk supply starts to improve, there will be a period where milk should be sorted by

processors and made into a variety of dairy products. First class milk (<300,000 /ml) should be used for UHT milk, premium yogurt and cheeses. Second class milk will be used for most everyday products – cream, butter, milk bars, hard cheeses (like Gouda and Edam), and pasteurized milk and



yogurts. Finally, 3rd class milk could be used for pizza cheeses, fresh cheese as an ingredient for processed cheese and fermented milk products.

It is suggested that one central plant could be used to make cheese and deal with all whey related

issues. All the dairy plants that can sort milk could jointly own it. The cheese could then be returned to the processor shareholders to be marketed under a number of brand names in the urban market or for export. Inyange is considering closing the old plant when the new plant opened. The plant has the basic processing equipment already and refrigerated storage areas for ripening. Only cheese vats and brining equipment need to be added to make cheese.

The following slide illustrates how milk could be utilized according to quality.

[1] Dairy Sector Competitiveness

Program

2 million ml – 10 million/ml< 1 million/ml

Sort milk by quality

<300,000/ml

UHT milk

Yogurt

Specialty cheeses

Edam

Gouda

Pizza Topping

Fermented milk

Milk bars

Yogurt

Past. milks

Hard cheeses Processedcheese

The three veteran consultants confirmed that improving the quality of the milk supply is a prerequisite for further development of processed products. Although the solutions are relatively simple, they all agreed it is an enormous undertaking to change habits that have taken root. The project has been active dialoguing with manufacturers and kiosk owners to develop a new pricing system and it is bearing fruit. The CEO of Tri-Star (the holding company behind the largest dairy in Rwanda) has become convinced this is a national priority and has taken the issue to the Minister of Finance who, in turn, has as agreed to lend his good offices to support a “National Dairy Initiative” based on the Competitive Task Force founded by the project. In addition, the USAID mission lent its support to developing a national dairy testing lab through the DGA program. The project is working with NGOs to apply for $500,000 to establish the lab. In the process private and government funds are being leveraged in approximately equal amount for the lab.



The project now has a relatively well defined road map for developing the industry. The work plan needs to be revisited in light of this information and adjustments made. The Competitiveness Task Force (CTF) The final meeting of the CTF focused on ferreting out studies conducted in the dairy value chain this past year. Most studies were behind schedule, but the final agenda included the following:

Activity Responsible/Presenter Main conclusions from Dairy Competitiveness Working Groups Meetings

Mrs. Consolée MUKAMURIGO

Preliminary results of Dairy sector related Studies conducted by CAPMER (domestic market, transportation, collection centers, potential for additional pasteurization units, UHT milk processing)

Mr. John NDIKUWERA (CAPMER)

Key findings of studies conducted by Land O’Lakes

Roger Steinkamp, Paul Christ, Dave Peters and Lucie Steinkamp

Key findings of study conducted by Send a Cow Rwanda (viability of one cow dairies)

Brian Legg

Key findings of study conducted by OTF Rwanda (export potential)

OTF Presenter

Key findings presentation of study conducted by the Eastern African Dairy Development Project in Rwanda (value chain overview)

Emmanuel MUNYANDINDA and NDAVI Muia

Presentation of the 4th ESADA Conference held in Nairobi(August 6-8 /08)

Gloriose (MINAGRI/PADEBEL)

As the final reports become available, UDC is planning to collect them and disseminate a CD with stakeholders. In addition, reports can be uploaded to the websites and/or linked to host organizations if they are already up. At the end of the meeting, volunteers were solicited to form a working group to establish the National Dairy Board, the current rendition of the National Dairy Initiative. With the Ministry of Finance backing the initiative, there is a greater chance of significant involvement of MINAGRI and MINICOM. In addition kiosk owners and milk haulers are now considered key players due to discussions held with the project.



Strategic Objective 3: PLWHAs, OVCs and CHHs engaged in dairy related IGAs Gene Kunst and Ariong Abbey were brought in this quarter to enhance efforts to get dairy related IGAs identified and started among the 20 most viable PLWHA associations previously identified. Gene comes from agribusiness management program at Riverland Community College with experience in several countries dealing with business start-ups and management. Ariong, a Ugandan, brings his knowledge of and experience in cooperative development in many countries beside Uganda. CHF continued building capacity of Cooperative Support Officers, recently hired and placed at the district level. And ABS launched a broad based training program in cattle management, inviting volunteers from all 20 PLWHA associations and, in many cases, sectors and/or districts. Dairy related IGAs: (Attachments F-H) The two consultants in collaboration with CHF and ABS field staff visited each of the 20 PLWHA associations meeting with members and visiting individual farms. CHF/CHAMP introduced the Land O’Lakes consultants to the local authorities in Gatsibo and Nyagatare to explain the purpose of the consultants work. During the course of interviews, the following picture emerged on the minimum requirement for a bankable IGA based on milk cows.

The Model Dairy Unit• 3 cows in a zero graze facility• 2 cross bred cows & 1 exotic cow • Facility will cost 385,800• Cows will cost 2,000,000• Equipment 70,000• Operating Costs

– Breeding 5,000– Vaccination 1,200– Insects and worming 1,000– Total 7,200

Total Investment 2,469,200 RF

Repayment Capacity?

• Milk Income– 7,700 liters of milk @ 140/L = 1,078,000/ year

• Milk income = 2,953/day• Commitments to loan= 2,344/day

– (2,000,000 @16% for 36 months)• Commitments to annual costs = 20/day• What is reasonable?

– I would like to see 2,930/day of income

Attachment G compares the typical traditional breed with “improved” breeds vs. the 3 cow model developed. In addition, they noted the following:

• Critical needs for a dairy to generate income were identified as Infrastructure, Water, Knowledge, Leadership, Innovation, Access to money and Cattle breeds with the capacity to milk >10 L/day.

• 3 cows zero graze model dairy unit with requiring RWF 2.7m/= investment • 16% average membership in associations ready for the model identified • Need for cost effective appropriate technologies

By the end of their consultancies they outlined the following next steps (details in Attachment F):

1. Organize and conduct educational sessions aimed at making the association membership appreciate and understand the 3 cow model unit at the association level. Concurrently, on farm statistical data should be collected from members who are already engaged in livestock/dairy activities relating to number of cattle, ages, breeds, State of Kraal, milk production etc. This



information will be crucial at the financing stage to determine who qualifies and to what extent. CHAMP/CHF should be positioned to conduct the initial sessions and ABS to provide close support in obtaining on farm data.

2. Form a “sectoral committee” of all members engaged in livestock/dairy activities from within the

association(s). This committee will be the nucleus to form a cooperative in line with the Government directive on cooperatives. Other members who are not yet engaged in this activity and even those outside the association should be free to register into the cooperative. The cooperative will thus emerge from within the association.

Training in basic cooperative development principles, values and benefits, democratic governance, transparent management of shareholder resources and farm record keeping should be conducted. CHAMP/CHF district level cooperative development officers and/or sub-contracted Community Service Organizations will deliver this training.

3. The implementing partners should follow up with the relevant financial institutions/schemes. The

following financial alternatives were identified;

Of the two financial institutions considered, Banque Populaire Du Rwanda S.A. (BPR) was identified as the most suitable in terms of flexibility, reach and loan conditions. Their Security guarantee funds scheme was found to be particularly appropriate. The loan interest at 13% is perhaps the best bargain and its guarantee funds attract up to 7% interest. The development organization enters into an MOU with the Bank. The Bank separately loans the client finances and recovers it. The advantage is that repaid funds will be available to other clients.

There are existing guarantee facilities for various schemes in some financial institutions. It would be helpful to explore them and zero down on those found appropriate for funding.

The individual and group guarantee loans options should also be discussed with the Bank with a view to getting those target clients with tangible collateral to access these facilities

There are some farmers who are keeping substantial herds of traditional Ankole cattle. Some of them are interested in converting part of their herds to cross breeds and/or exotic cattle. It would therefore be prudent to identify these farmers and also encourage others start up the zero grazing units. Conversion is currently four (4) Ankole cows to one (1) cross bred heifer.

Where possible and funds permitting, some grants maybe given.

4. Presently, animal management is very poor at farm level. Dairy cattle management should therefore be a top priority... The approach and methodology of training on these skills should be community oriented and as practical as possible. Training sessions should be conducted at association venues and one model pilot demonstration farm established (by improving a fairly good existing one) in each association. ABS and/or CSO’s will provide technical training ...

5. A mini-milk collection centre (MCC) with a cooling capacity of up to 500 liters would ideally be

set up to absorb the increased milk production from the cooperative. However, funding not permitting, the cooperative will require a very reliable transport system to collect and haul milk from farms and sprint it fresh to the nearest UDAMACO MCC. Land O’Lakes should conduct an investment costs, cost-benefit and break-even analysis for these two scenarios- the MCC and transport system.



6. ABS should identify and build the capacity of struggling small shop owners within the locality to stock and sell input supplies such as veterinary drugs, salt licks, sprayers etc. in instances where they are in short supply or are too distant to the target clients.

The UDC partners will meet as soon as everyone returns to follow-on with these activities.

Capacity building:

Cooperative Support Officers (CSOs) Basic cooperative development: (CHF/CHAMP) The 2 CSOs hired by CHAMP in the previous quarter to support the 20 PLWHA associations targeted in the 2 districts participated in two Training of Trainers workshops The curriculum is based on adult experiential learning and will aid the support officers to build the capacity of the 20 associations to function as vibrant institutions that will promote enterprise development for their members; The main objectives of this training were:

• To orient the CSOs in CHAMP strategies and objectives, particularly the Economic Opportunities Strategy.

• To build the capacity of the CSOs to be able to effectively facilitate the process of cooperative transformation and development.

The curriculum consisted of the following modules;

1. Organisation development 2. Introduction to business planning 3. Governance and Bye Laws 4. The Importance of group roles and responsibilities 5. Financial Management 6. Goal setting 7. Communications 8. Operational Planning

It is expected that in the next quarter the CSOs will roll out the training process for the 20 Association in Nyagatare and Gatsibo.

Finance and market literacy training (CHF/CHAMP) The objectives of the training were:

To build the capacity of CSOs to train and mentor CHAMP supported cooperatives to identify and effectively respond to viable market opportunities.

Introduce participants to basics finance To enhance the understanding of trainees on conditions and eligibility criteria for cooperatives to

access to credit. Sharing of experiences among Cooperatives Support Officers.

The Modules of this curriculum include

1. Marketing Basics 2. Enterprise Spirit 3. Participatory tools for enterprise selection and Planning 4. Market Opportunity Identification



5. Enterprise Selection 6. Enterprise Planning and Development 7. Financial Management

Sixteen CSOs participated in both trainings including two CSOs from Gatsibo and Nyagatare districts. The CSOs will begin building the capacity of the 20 associations to identify and develop market linkages for dairy related Income generating activities. Training of Trainers Cattle Management Course (ABSTCM) In collaboration with CHF/CHAMP, ABSTCM organized two, three-day training courses for 55 trainers in November. They included 26 trainers from 13 associations in Nyagatare district, 15 trainers from 7 associations in Gatsibo district and 14 representatives from 7 sectors, in which the 20 associations are located, in Nyagatare and Gatsibo districts were trained Training materials were prepared and the notes translated into Kinyarwanda. These notes are still being edited and will be bound into a training manual. The topics covered included

breed selection, feeding for improved milk production, legume and pasture development and role in NRM, milking hygiene and milk quality, animal handling and handling facilities, disease control, reproductive management including heat detection, milk marketing, records, use of manure for biogas.

In addition, practicals on body condition scoring and dairy characteristics were conducted at Umutara Polytechnic University dairy. The participants then visited the ISAR legume and pasture plots where they were exposed to the range of legume and pasture varieties available and how they can be established and managed. Other practicals included determining dosage rates; administering antibiotics, anthelmintics and acaricides; and restraining cattle. This was possible through the MOU that ABSTCM has with ISAR. When the Gatsibo group was trained, the Director of the ISAR Nyagatare Station attended the session and assured the participants that his Station would be willing to assist them in a variety of ways including sourcing materials for pasture development. The Gatsibo group visited the UDAMACO dairy plant and the biogas unit in Rwempasha. The Nyagatare group could not visit these places because on the day of the intended visit there was a political demonstration in Nyagatare; as a consequence, all shops and institutions had to be closed. The CDLS (District HIV and AIDS Coordination Organization) director opened and closed the training course for Nyagatare on behalf of the Nyagatare District Office while the RRP+ president for Gatsibo opened and closed the training course for the Gatsibo group on behalf of the Gatsibo District Office. The CHF CSO addressed the Nyagatare participants. Training was largely conducted and facilitated by the ABS team; other resource persons were from ISAR, Umutara University, ABS EADDP, UDAMACO (for Gatsibo group only), and RRP+. The UDAMACO manager spoke on milk marketing, the role of UDAMACO, and how interested farmers could join UDAMACO. He encouraged the participants to join the primary cooperatives of UDAMACO across the two districts of Nyagatare and Gatsibo.



At the end of the training, each participant was given 1 kg each of the legumes Mucuna pruriens (Mucuna) and Lablab purpureus (Lablab) seed. From subsequent visits, we observed that some of the participants have already planted the seeds. Follow-on courses are being planned for March 2009.

Visit to ISAR legume and grass plots with trainers from PLWHA associations in Nyagatare district.

Training on loading a syringe and calculation of dose rates

Practical on restraining cattle using the halter method

Milk technique and milk hygiene training with PLWHA associations

in Gatsibo and representatives from Sector offices in Gatsibo and Nyagatare districts



Training at Association level One day training sessions were held at the association/community (clusters of associations) level on cattle management at Abamaranashavu Association in Rwempasha in collaboration with CHF/CHAMP. Similar courses were conducted at 2 other associations in Nyagatare district. The topics covered were more specific to the areas of interest of each association or clusters of associations. However, across associations, feeding of cattle, disease control, reproductive management and record keeping were covered. Theory was covered in the morning and in the afternoon practicals on, among other topics, administration of antibiotics, anthelmintics and acaricides were demonstrated. Each participant was given a handful of each of Mucuna and Lablab legumes.

Other activities conducted in the field:

Farm visits for pregnancy diagnosis and general improvement of cattle management (ABSTCM) The ABSTCM team visited 9 herds in 5 associations (5 Sectors), Abatonibimana (Rukomo Sector), Abamaranashavu (Rwimiyaga), Ihumure (Musheri), Inziranziza (Rwimiyaga), Rengerubuzima (Matimba), and Dukundane (Karangazi) for pregnancy diagnosis and assessment of reproductive and other problems. During 2 of the visits, we teamed-up with Umutara Veterinary Faculty members and students. These associations have been linked to the Umutara University Veterinary Faculty ambulatory service. The herds were assessed for pregnancy, body condition, disease control, milk production, calving interval, breeding method and dominant breeds. The data will continue being collected until all the associations are visited and as many herds as possible are visited. The emerging pattern is that most of herds do not keep records, for example, most did not know the exact dates when their cows had last calved. However, most could remember the month of calving. All the herds visited had Friesians and Friesian crosses. They use bulls for breeding while 1 herd had tried synchronization of oestrus and AI on 1 cow but the cow did not conceive. Pregnancy rate across the herds examined was less than 30% with close to 30% of these pregnant cows having been bought pregnant. The calving interval in pregnant cows was about 600 days. Few of the farmers and their herdsmen knew the correct signs of heat and interval between observed heats of 5 months were not uncommon. In general, most of the herds had cows with a body condition score of less than 3 (1-5 scale) and there were cases of cows in late pregnancy with a body condition score of less than 3 which would predispose them to peri-parturient disorders including retained placenta and metritis. Some cows were still not pregnant more than a year after calving. All the

Training at Abamaranashavu Association, Rwimiyaga



herds did not have a disease control or herd health program. Most of the herds do not have restraining facilities; this has limited our herd visits to those with restraining or cattle handling facilities. It was apparent that the farmers managed their herds as they managed the indigenous Ankole cattle. The milk production for the Friesian and Friesian crosses ranged from 4 to 10 liters per day. It is clear that if milk production has to increase the farmers should improve the pregnancy rates in their herds and improve the general herd management, for example, feeding, disease control, record keeping and heat detection. The training program that has been initiated would help but there is need to link the farmers to an extension service. However, some farmers were using local veterinary workers but this service was not readily available, for example in Musheli and Matimba. Promotion of pregnancy diagnosis would assist farmers to be aware of the pregnancy status of their cows. Most of the farmers were disappointed to learn that a cow they thought was pregnant was not. The assumption was that once the cow had been bred she would then be pregnant. Failure to detect heat would also worsen the problem as the farmer would presume the cow pregnant when she does not show heat.

Assembling an ultrasonic scanner for use in pregnancy diagnosis

Pregnancy diagnosis of cattle of a member in Musheri



Field trials on use of the feed additives Bovine One and First Arrival (ABSTCM) Farmers that have been recording milk production have been given Bovine One for testing. They had been left to record milk production for the response to Bovine One to be detected. Bovine One is a microbial and enzyme mixture that has the potential to increase milk production. The First Arrival that is claimed to increase growth rate and the health of calves has not yet been tested because of the difficulty of getting a batch of suitable calves that can allow for unbiased comparisons.

Biogas generator trials (ABSTCM)

ABSTCM held a meeting with Mr. Gerard Hendriksen, Technical Advisor, of the Biogas development program of the Rwanda Ministry of Infrastructure (MINFRA) concerning possible collaboration in biogas work. The MINFRA biogas program is installing the masonry permanent type of biogas units (6 m3 capacity) at a cost of around Rwf 450 000 (USD 800) to the beneficiary but a subsidy of Rwf 200 000 is paid by the MINIFRA. The MINFRA biogas program has agreed to extend their program to Nyagatare and Gatsibo through our program provided there are at least 10 interested clients to ensure economies of scale. The program has also offered to train 2 or 3 of service providers or members from our associations in the construction of the masonry type of biogas units. The ABSTCM team visited Kibungo where MINIFRA has a contractor who has been installing the masonry type biogas units. The units are made from local stones and other materials; only cement has to be imported. The units are capable of producing enough gas for cooking and lighting. MINIFRA is also demonstrating the Chinese fiberglass biogas generators but the generators may not be competitive at a landing cost of Rwf 850 000. MINIFRA also led us to the Kentank biogas unit which was said to have been tested in Kenya. It turned out that the biogas tank had not been tested. As a result, the ABSTCM Nairobi Office began testing the tanks. Our team was also given a Kentank biogas unit from Aquasan, Rwanda, to test. After installing the tank, gas production was very good but the tank cracked within 24 hours of fully loading the digester. The ABSTCM team in Nairobi also noted a similar weakness on the tanks they tested. The manufacturer is redesigning the tank to correct this weakness and others; ABSTCM has been promised a donation of the redesigned tanks for re-testing. Aquasan also has water harvesting tanks and equipment and is interested in supplying these tanks and equipment at negotiated rates. This is likely to be a good offer for members that are interested in collecting potable water. Aquasan can also provide advice on technologies for the production of potable water. This would help association members in their endeavor to produce clean milk.

The demonstration biogas units that were reported to have been producing low gas output eventually produced very high gas output; erstwhile, they were unable to produce high gas output because of a high carbon to nitrogen ratio. The ideal ratio ranges from 20:1 to 30:1. The ratio for the dung from cattle in the project area was estimated to be 40:1 to 50:1. The ratio of nitrogen was increased through the addition of urea, initially, 2 kg for the 2 m3 canvas type digester. The urea was mixed with 8 kg of corn meal to provide easily fermentable carbohydrates. Subsequently and after the visits to Kibungo, it was noted that the urea could be replaced by cattle urine. The urine can be mixed with dung at a ratio of 1:1 (w/w). This option is feasible if a farmer has a zero grazing unit with a furrow and receptacle for the collection of urine. The different biogas models have been publicized to all the PLWHA members at training courses and meetings. There is interest but some members claim that the cost of installing biogas is too high for them.



Develop and promote opportunities for cooperatives to competitively link into markets. (CHF/CHAMP) In line with market linkages, CHF/CHAMP staffs with the Land O’Lakes consultants opened discussions with UDAMACO to assess the potential for market linkage between UDAMACO and CHAMP supported cooperatives. UDAMACO has a certain number of MCCs mostly in Nyagatare but few in Gastibo district and is willing to integrate CHAMP supported cooperatives in their milk selling system.

Identify financial institutions to provide finance support to CHAMP assisted cooperatives CHF/CHAMP organized meetings with Finance institutions (Banque Populaire de Nyagatare and Duterimbere MFI) to explore the existing finance opportunities, conditions and eligibility criteria to access to those opportunities. Both banks showed interest to work with assoc/cooperative members to provide loans for purchase of animals and other related dairy equipment. Together with CHF Microfinance technical support staff from Nairobi, CHF/CHAMP evaluated the Guarantee Fund (GF) proposal and additional information collected by Aquadev, both in terms of fit with the CHAMP-assisted cooperatives’ needs and Aquadev’s role in supporting the GF. To continue assessing the potential of integrating CHAMP assisted cooperatives into existing finance program, CHF/CHAMP held discussion with different finance providers such as Banque Rwandaise de Development(BRD), National Bank(BNR), Rural Sector Support Project(RSSP). A number of existing facilities to aid small scale resource producer’s especially agricultural producers exist in most of these institutions. CHF/CHAMP will work with the cooperatives to ensure that they meet the eligibility criteria in terms of their organizational and managerial capacity.

Other issues and events... Collaboration with EADDP partners including TNS, ABSTCM and ICRAF. The anticipated collaboration has been difficult to achieve because of divergent interests of our project and those of the EADDP. However, ABSTCM in EADDP conducted the training on milk hygiene and quality training in the courses on cattle management offered to trainers from PLWHA associations in Nyagatare and Gatsibo. A meeting was held with ICRAF to explore market opportunities for PLWHA associations producing legume tree seedlings as an income generating activity. ICRAF has left the sourcing of markets to the farmers. TNS presented its study at the CTF meeting. The ABSTCM team attended a meeting on harmonization of AI services, RARDA, ERAGIC and EADDP representatives were present. AI services will be available to all farmers at the same rates across institutions (projects, private, government etc.) – our association members can also benefit from this service. Linkages have been established with the AI Department at RARDA. ABSTCM has arranged for RARDA officers to visit Kenya for study tours and attendance of courses on genetic improvement of cattle. The RARDA director of the AI program has agreed to assist members in our associations through provision of AI services and training in collaboration with our team. ABSTCM team participated in the launch of the Oestrus Synchronization and AI program of EADDP. RARDA is providing the synchronization drugs that could also benefit the members in our associations who can afford to pay for AI services. The AI service will include the cost of the first and repeat inseminations, pregnancy diagnosis and uplifting of calving records for the creation of a national data base at RARDA. The total cost for these services has been set at Rwf 5000 (USD 9).



3.4. Strategic Objective 4: Dairy Producers in Nyagatare region aware of HIV/AIDs prevention practices In the last quarter, the BCC unit organized a national level training of trainers for 22 people (5 of which intervene in Ngagatare and Gatsibo), on HIV/AIDS prevention, VCT and PMTCT.

Rwanda Dairy Competitiveness Project CA# 696-A-00-08-00016-00

Quarterly Report April-June 2008 22 Land O’Lakes, Inc

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3.5. Summary tables The following tables summarize progress to date on the work plan.

Strategic Objective 1: Dairy sector stakeholders directing improved sector competitiveness

Intermediate Result 1.1: CTF addresses critical competitiveness issues indicated in the Competitiveness StudyIR Objective Activity Indicator Verification Schedule Current Status

1.1.1.1. Milk quality audit conducted at farmer, bulking point, processor/retail levels. (mini grant). RBS, RARDA, UDAMACO, associations, milk haulers as key partners analyze results

1 annual milk quality audit carried out in collaboration with RBS, RARDA and local government

Report on Milk quality audit describing total bacteria counts, somatic cell counts and composition at three points in the value chain

1518 milk vendors surveyed in the City of Kigali 745 milk samples analyzed along the dairy value chain 1200 farmers surveyed in Gatsibo and Nyagatare

1.1.1.2. Milk market survey to estimate potential and current demand of processed and raw milk in Rwanda. Including consumer preferences and purchasing power, by demographics (mini grant)

1 – domestic market survey Domestic market report CAPMER and EADD conducted studies 1800 consumers surveyed in kiosks

1.1.1.3. Best practices for maintaining milk quality from cow to consumer assessed and tested for improving and maintaining milk quality. (mini grant(s))

1 best practice study completed for farmers, MCCs, milk haulers, processors and retailers

List of recommended practices for each group

Farmer working group volunteers tested milk at the farm level using basic hygienic practices to prove it could be done. (Results from farm survey indicated the problem started on the farms.) EADD will be producing a quality milk manual for farmers.

1.1.1. Key studies conducted with active participation of stakeholders directly concerned with the study and in concert with the EADD project and GOR agencies.

1.1.1.4. Regional import/export dairy market study conducted to determine comparative competitive advantages in the region. (mini grant)

1 completed regional market study Regional dairy market report

June 08/ September 09

CAPMER will include this as part of their study. Milk survey results indicate current milk supply does not meet COMESA standards, precluding export

Intermediate Result 1.2: CTF proposes policy reform 1.2.1. CTF or subgroups

advocate policy reforms to key decision makers

1.2.1.1. CTF forms working group(s) to formulate policy recommendations on key issues identified in studies dairy industry

2 policy areas endorsed by key stakeholders affected by the policy

Report/white papers presented August 08 + Transfer of ownership of the task force is underway. The idea spread to three ministries and several organizations. The Minister of Finance is now coordinating the national dairy initiative that should lead to a national dairy board.



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IR Objective Activity Indicator Verification Schedule Current Status

Intermediate Result 1.3: RARDA and/or RBS takes leadership role in support to dairy sector

1.3.1.1. RARDA participates in annual milk audit collecting and analyzing samples for bacteria, somatic cell, and components in collaboration with stakeholders.

Milk audit conducted on 250 samples from retailers, MCCs, and farms

Records and summary of audit results

July 08

.

1.3.1. RBS and/or RARDA develops quality testing framework in concert with CTF to monitor milk quality from the farm through MCCs, processing plants and retail outlets.

1.3.1.2. Continuous monitoring regime set up for retailers, processors and MCCs on a cost effective basis.

Regular testing of milk supply for clients (frequency TBD by clients )

Price list for tests established with list of clients

August 08 +

Expert in milk monitoring and enforcement made recommendations in November. Neither RARDA nor RBS has the human resources to adequately inspect the entire dairy chain. Discussions are underway to resolve this problem by involving sector level people in the inspection process.

1.3.2.1. Assess and address competencies of inspectors and/or plant technicians to conduct retail, processor, MCC and farm inspections.

Assessment of competencies and training needed.

Progress Reports July + 08

1.3.2.2. Study tour(s)/training course conducted in-house or at regional testing facilities.

2 workshops and/or study tours conducted

Certificates of completion of training

July – August 08

1.3.2. Increase capacity of the inspection, lab and standard department of RBS and/or RARDA

1.3.2.3. Conduct supplemental training of inspectors as needed to monitor milk supplies.

Numbers (TBD) of inspectors trained to carry out inspection regime

Workshop reports August + 08

Once a system is agreed upon, RBS and/or RARDA can develop a program for District/sector level inspectors.

Intermediate Result 1.4: Increased investment in the dairy sector

1.4.1. Increased investment in the dairy value chain in Rwanda

1.4.1.1. CTF identifies critical areas for investment in equipment and capital

Phase One - $1 million Report on investment in the dairy sector

Continuous through first two years

New funding is being sought for a national laboratory in combination with a DGA grant.



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Strategic Objective 2: Rwandan Milk and Dairy Products Competitive in East African Market

Intermediate Result 2.1: Increase the volume of milk marketed from pilot MCCs that meets COMESA raw milk standards IR Objective Activity Indicator Verification Schedule Current Status

2.1.1. Improve the quality of milk delivered to MCCs and dairy plants/retailers in collaboration with EADD

2.1.1.1. Conduct study to identify and test best practices that have measurable impact on milk quality including bacteria and somatic cell counts

20% improvement in bacteria counts and SCC of milk delivered to MCC toward meeting COMESA standards

Test results from RBS or MCC September 08 +

Results of milk quality indicated substandard milk being used. That explains the quality issue commonly found in products. Three experts were brought in to develop a road map that includes appropriate tests, control points, and pricing schemes to encourage production of quality milk.

2.1.2. Increase milk sales from 2 pilot MCC centers by volume

2.1.2.1. Collaborate with milk haulers and dairy plants to increase sales through existing MCCs in collaboration with UDAMACO, and EADD especially during peak production season (November – May)

Increase daily sales of milk from MCCs to include all saleable milk produced (no saleable milk turned away at the centers)

MCC sales records July – May 09 Agreement reached with EADD and UDAMACO on two sites. One MCC has already started conversion to washable milk cans.

2.1.3.1. One processor and/or retailers agrees to price milk based on quality tests that lead to meeting COMESA standards

1 processor and group of retailers agree to offer price differentials based on quality measures

Price list and standards for payment

December 08

2.1.3.2. 2 pilot MCCs and/or groups of milk suppliers pilot quality driven incentive payments

2 pilot MCCs/supplier groups identified and baseline established

2.1.3. 2 Pilot MCCs and/or milk supplier groups adopt milk pricing that rewards milk meeting COMESA standards (in close collaboration with EADD and UDAMACO)

2.1.3.3. Set of improvements to make to improve milk quality in collaboration with UDAMACO and EADD

20% average improvement in each test not meeting COMESA standards over the baseline established in an annual milk audit

Test results procurement records from processor Also the annual milk audit

September 08 – June 09

Processors all recognize the problem and appear ready to attempt a new pricing structure once affordable testing is available. MCCs will most likely follow the lead of their clients but are unlikely to change their structure unilaterally.

Intermediate Result 2.2: Determine optimum utilization of processing capacities in cooperating plants 2.2.1. Determine constraints

to increased utilization of current plant capacity unique to each plant or product

2.2.1.1. At least two dairy plants develop a production schedule based on a local and/or regional market survey for products in which they have a competitive advantage

2 plants operating at optimum production levels as determined by the study

Production/sales records September + 08

Issues introduced to plant managers. There is a growing concern not only for a quality milk supply but also there is some evidence of a shallow domestic market. Evidence is mounting that the market for processed products commonly produced in the west are a niche market. More emphasis should be given to support of the traditional market.

Intermediate Result 2.3: Increase in volume and/or value of processed dairy products sold2.3.1.1. Describe customer profiles,

demographics and preferences for processed dairy products

2.3.1. Determine the potential domestic market for processed dairy products.

2.2.1.1. Assess market potential for each product based on competitive advantage and consumer profiles and preferences, combined with demographics. (consultant/mini-grant)

5% increase in total volume and value of processed dairy products according to market potential processing capacity indicated by the study.

Sales records July – September 09

Data emerging from the Kigali survey indicates a vibrant distribution system in what was once considered “informal” Kiosk owners are being approached to form a coop or association.



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Intermediate Result 2.4: New dairy products test marketed

IR Objective Activity Indicator Verification Schedule Current Status 2.4.1.1. Conduct feasibility study for UHT,

powder milk, cheese and other dairy products for production for the local and/or regional markets. (mini-grant(s) to local institution or processor for new product feasibility study)

Feasibility study completed 1 new product introduced to the Rwandan and/or regional market within a year

- Study

- Gross sales on domestic and/or export markets

CAPMER Study to be completed in December 08 New product(s) introduced in

2.4.1. Minimum of one new Rwandan produced dairy product entering the market

2.4.1.2. Recommendations made on potential for new product(s) to management of respective firms.

CAPMER initiated study initiated to provide insights into new products. UDC will add recommendations matching products to milk quality. PROMACO in Nairobi is interested in setting up an outlet in Kigali, providing new cultures and equipment. UDC is facilitating and encouraging the move.



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Strategic Objective 3: PLWHAs, OVCs and CHHs engaged in dairy related income generating activities

Intermediate Result 3.1: Increase in volume of milk sold by producer association with 20% or more PLWHA membership IR Objective Activity Indicator Verification Schedule Current Status

3.1.1. Increase in number of associations or PLWHA/ OVCs/CHHs delivering milk to MCCs or direct to retailers or processors.

3.1.1.1. Improve capacity to produce quality milk on the farm in collaboration with EADD

20% increase in liters of milk sold by PLWHA associations to MCCs or retailers over baseline

Reports at the milk collection centers + records from associations

April 09 Experts set out a road map for 5 + 5 associations that have potential for developing viable dairy IGAs.

Intermediate Result 3.2: Increase in household incomes for PLWHAs, CHHs from dairy-related income generating activities 3.2.1.1. Inventory resources of current PLWHA

associations and potential for providing product and/or services. Identify local leaders and deficiencies of current service providers.

62 PLWHA associations leaders that have been interviewed to identify current services

Baseline questionnaires + report June Completed

3.2.1. Increase involvement of PLWHA, OVC, their caregivers and associations in the dairy industry 3.2.1.2. Identify specific areas of intervention

and elaborate a work plan based on baseline findings.

1 work plan elaborated Work plan June 08 District coop development coordinators hired by CHAMP that will work closely with assns/coops Consultants evaluated the potential for IGAs in the 20 associations and ranked them according to potential. Model dairy IGA developed to kick off the program.

3.2.1.3. Determine issues confronting female headed households, PLWHA and OVCs participating in the dairy industry.

160 female headed household, PLWHAs and OVC participating in dairy related activities and associations/ cooperatives

Reports disaggregated by gender April 09

3.2.2.1. Assess which MFIs can handle funds for animals or other economic activities in associations

2 local MFIs identified to collaborate with associations

Reports June 08 Completed

3.2.2.2. Build a credit process to channel the money for cows and activities through MFIs and link to associations

160 dairy IGA (projects) funded by local 2 local MFIs

Report of activities and/or MoUs signed

April 09 Products under negotiation with MFIs, Bank Populaire and Duterimbere new models formulated by consultants

3.2.2. Increase in number of PLWHA/OVC associations or members receiving financing, BDS and/or marketing assistance services in collaboration/ coordination with EADD activities in Nyagatare/Gatsibo zone.

3.2.2.3. link associations with EADD workshop and/or provide supplemental training in BDS or marketing

20 PLWHA/OVC associations participating in workshops sponsored either by EADD or UDC

Association survey June – September 09

Agreement reached with EADD to include association members in their activities when feasible.

3.2.3.1. Mobilize women to participate in dairy production through community meetings

8 community meetings held to raise women awareness for dairy projects

Reports July 08

3.2.3. Increased number of women participating in dairy sector activities

3.2.3.2. develop action plan to address issues by associations

12 Work Plans developed by women to related to dairy activities

Work plans August 08

In meetings held with associations the majority of participants were women headed households.

Intermediate Result 3.3: PLWHAs utilizing new dairy production technologies 3.3.1. Provide tech support to

farmers to improve animal husbandry in association with EADD

3.3.1.1. Collaborate with EADD to encourage participation in workshops on proven animal husbandry techniques

8 workshops provided Workshop report plus material (brochures, curricula, etc.),

Sept 08 ABS conducted over 6 workshops with other scheduled on cattle management, AI, record keeping, animal health practices, etc.

3.3.2 best NRM practices identified and prioritized in association with EADD and disseminated through workshops

3.3.2.1. workshops conducted in collaboration with EADD to PLWHA/OVC associations and UDAMACO cooperatives

10 groups/associations applying one or more of these practices (zero grazing, tree planting, IPM, biogas, etc.)

reports May 09 2 biogas demonstration units set up on PLWHA farms, plus other models being tested. Other themes are being planned with target associations.



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Intermediate Result 3.4: PLWHAs and OVCs acquire dairy-related employment

3.4.1. Increased revenues among families of PLWHA/OVC as a result of dairy related activities.

3.4.2.1. ID economic opportunities related to dairy in the Nyagatare/Gatsibo area in collaboration with EADD.

160 association members generating income from dairy related activities

Association reports/survey April 09 Process started with community meetings and will continue as IGA plan is implemented.

Strategic Objective 4: Dairy Producers in Nyagatare region aware of HIV/AIDs prevention practices

Intermediate Result 4.1: MCCs implement member-producer education programIR Objective Activity Indicator Verification Schedule Current Status

4.1.1. Information disseminated on HIV/AIDS 4.1.1.1. IEC materials (brochures, leaflets,

etc.) distributed to community members in promotion of HIV/AIDS prevention

17 MCCs participate in promoting HIV/AIDS related messages

Reports June – September 08

CHAMP distributed awareness raising material focusing on the key messages of AB and beyond AB to 17 Milk Collection Centers under UDAMACO. In all these messages targeted at least 3000 people. BCC organized a national level training of trainers for 22 people (5 of which intervene in Nyagatare and Gatsibo), on HIV/AIDS prevention, VCT and PMTCT

Intermediate Result 4.2: MCC member-farmers aware of key prevention practices 4.2.1. Distribute educational

materials to the community using MCC members and/or PLWHA association members. Also placement of radio announcements reaching the population

4.2.1.1. Raise awareness of community members on HIV/AIDS prevention, care and treatment, using RPO’s Community Health Workers, with special focus on HIV prevention among women and teenagers working through MCCs and associations

3000 community members receive information

IEC materials distributed KAP surveys among MCC members

June – September 08

(see above)



4. UPCOMING ACTIVITIES

Activity Projected Timeline Follow on for national dairy initiative January + Develop inspection program with RBS/RARDA January - February Assist NGOs find funding and training for national lab Continuous Promote/start dairy IGAs in 5 high potential PLWHA associations Continuous Follow-on workshops in cattle management and related subjects Continuous Monitor feeding trials of direct fed microbials and enzymes for dairy diets (Bovine One) to explore potential for improvement of milk production.

Continuous

Visit herds for pregnancy diagnosis and documentation of production and management levels. Continuous

Interpersonal Communication and small group discussion on cooperative development and IEC material distribution to members of associations and cooperatives of Gatsibo and Nyagatare.

January – March 2009

Provide consistent and ongoing regular support and mentoring to 20 selected cooperatives/associations to ensure that they function effectively.

Continuous

Finalize credit process for MFIs to provide financing to Cooperatives January - February


Quarterly Report July-September 2008 29 Land O’Lakes, Inc

Attachment A LIST OF ACRONYMS

ADF U.S Africa Development Foundation AfDB African Development Bank AI Artificial Insemination AIDS Acquired Immunodeficiency Syndrome CAPMER Centre d’Appui aux Petites et Moyennes Entreprises au Rwanda CSO Cooperative Support Officer CITT Center of Innovation and Technology Transfer at KIST COMESA Common Market of East and Southern Africa EAC East African Community EDPRS Economic Development Poverty Reduction Strategy EICV Enquête Intégrée sur les Conditions de Vie des ménages GOR Government of Rwanda GTZ German Technical Cooperation HIV Human Immunodeficiency Virus ICT Information Communication Technologies IFAD International Fund for Agriculture Development IGA Income Generating Activity ISAR Institut des Sciences Agronomiques du Rwanda ISAE Institut des Sciences Agricoles et d’Elevage KIST Kigali Institute of Science and Technology LN2 Liquid Nitrogen MCC Milk Collection Center(s) MINAGRI Ministry of Agriculture and Animal Resources MINECOFIN Ministry of Finance and Economic Planning MINICOM Ministry of Commerce, Industry, Tourism, Cooperative Development and

Investment Promotion MOH Ministry of Health NGO Non-governmental Organization OTF On The Frontier Group, a US Consulting Firm PADEBL Projet d’Appui du Développement de l’Elevage Bovin Laitier PEPFAR Presidential Emergency Plan For Aids Relief PLWAs People Living With AIDS PMP Performance Management Plan PRODEV Local consulting firm PRSP Poverty Reduction Strategy Plan PVO Private Voluntary Organization RARDA Rwanda Animal Resources Development Agency RDHS Rwanda Demographic and Health Survey RDISSB Regional Dairy Input Supply and Services Business RDSC Rwanda Dairy Sector Competitiveness project RSSP Rural Sector Support Project RWF Rwandan Francs SARL Société par Actions à Responsabilité Limitée SDR Special Drawing Rights SNV Netherland Development Organization SPAT Strategic Plan for Agricultural Transformation SPREAD Sustaining Partnerships to enhance Rural Enterprise and Agribusiness

Development project SOPAB Société de Productions des Aliments pour Bétail UHT Ultra High Temperature milk UK United Kingdom USAID United States Agency for International Development



Attachment B Kiosk Consumer Survey Summary

By Dr. Lucie Steinkamp INTRODUCTION In the spring of 2008, the USAID Dairy Competitiveness Project (UDCP) “2008 Milk Audit” inventoried 1549 milk kiosks in Kigali City. To find out what happens to the milk after delivery to the kiosk, a consumer survey was designed and carried out in the three districts of Kigali City. It reached 1837 customers during the month of October, the beginning of the high season for milk production and sales. This survey is a snap shot of a certain day in the life of a milk kiosk in Kigali City. The Methodology The Methodology section sets up the framework of the survey: the location of the milk kiosks and how they were selected; it describes the questionnaire (aimed at collecting household rather than individual information) and the tools used to process the result of 1837 interviews performed in 43 establishments. The Customer profile We learn who is buying/consuming milk at the kiosk, whether the person is employed and the relative level of income/support to their household. Milk bought and/or drunk at the kiosk Kiosks sell three types of milk: raw, boiled or fermented. Raw milk is not drunk on the spot but taken home. Fermented and boiled milk easily replaces a meal, but boiled milk (warm) is more easily drunk at any time of the day. The survey indicates who is buying what, at what price, what is consumed at the kiosk, what is taken home, how the milk is conserved, how the household level of income affects the milk purchases. Use of the milk at home This gets at the questions, “Is the raw milk boiled at home? Who is drinking it and when? Is it transformed at home, and if so what is made?” Purchase of other dairy products Finally, the survey goes beyond the milk bought at the kiosk and finds out if the kiosk consumers are buying other dairy products (cheese, powder milk, butter, set yogurt and ice cream), domestic or imported. CONCLUSIONS This survey is only a snap shot of what happens in the kiosks, but it gives a reasonable idea of different patterns of purchasing decisions from the kiosk customers. It has limitations (it is not exhaustive and was carried on a limited number of kiosks) and strengths because of the selection criteria of the kiosks: The selection included the following criteria:

• Their October sales of raw milk (data from the 2008 Milk Audit); small, medium and larger sales were represented in the three districts of Kigali;

• Their geographical location among these three districts covered diverse areas: residential, administrative or commercial, wealthy and poorer neighborhoods;

• The anonymity of the kiosk owner allowed the survey to be carried out often with the help of the owners of the sales persons;



• Milk buyers were interviewed at all times of the day covering therefore the various group of customers (morning purchases to take home, milk drunk on the premises especially at lunch time, evening purchases after work). Consumer Sample Profile breakdown

Gender % • Male 58 % • Female 42 %

Age category • < 25 45% • 25 – 40 47% • 40-50 7% • >50 1%

Marital Status • Married 38% • Single 62%

Children in the household • Yes 64% • No 36%

The role of the milk kiosk in the milk distribution to the households Several findings are emphasizing the essential part played by the kiosks for the distribution of the milk to the households of Kigali:

• Sales destined to the households: quantities lower than 8 liters (to be taken home) represent over 90% of the purchases of raw and boiled milks combined to be taken home where very little transformation of the milk occurs; when it takes place, butter making represents two thirds of the process over one third for fermentation.

Women tend to be the purchasers of milk in small quantities (< 8 liters) for their family, while men buy more in the larger quantities for resale. Raw milk might be boiled at another kiosk before resale to its customers, or boiled on the premises and sold for resale to either a shop or a restaurant without facilities to process the milk. Seldom raw milk was sold over 350 RwF per liter during this month of October when the survey took place: 90% of the sales were priced between 130 and 350 RwF per liter, which seemed to be the most that the market could bear for use by the households.

• Consumption on the premises: boiled and fermented milk sold in the kiosks in

quantities of 0.5 liter (2 cups) are drunk on the premises more by men than women, often replacing the noon meal at a better price than in a restaurant. The kiosk offers there a dependable service to the working community of Kigali: affordable prices close to the work place.

Influence of the income level on the purchasing decisions Whatever is the topic, the importance of the income level kept recurring all along the survey. If kiosk customers can afford it, they will not buy from a kiosk they know is selling poor quality milk, they will prefer not to buy if they know that the refrigerator in the kiosk is not functioning properly. Only 12% of the kiosk customers buy packaged pasteurized or fermented milk from supermarkets, which sell at more than double the price per liter. Their only option is to buy from the kiosks even if they are aware of the poor quality of the milk (they deal with the issue by boiling the milk immediately upon



arrival at home), and to buy every day (79% of the kiosk customers do not own a refrigerator). The lack of money is the first reason given by the kiosk customers who feel they cannot at times buy milk. The importance of the income level is even more evident when looking at the purchases of dairy products other than milk, cheese, butter, powder milk, set yogurt and ice cream: their price put them out of reach of this group of kiosk customers who buy them mostly on an occasional basis. The highest the income level is, the more frequent are these purchases. The kiosk customers, targeted by the survey, depend strongly on the kiosks to provide milk for their family at a price they can afford. As long as their purchasing power does not increase, their purchases of dairy products (milk, cheese, powder milk, butter, set yogurt and ice cream) will remain limited. Regular follow up surveys, carried out on a wider scale at different times of the production during the year, would address weaknesses of this first study, provide hard data on which base decisions and measure the trends and the evolution of the market for dairy products.



Attachment C Recommendations on Milk Quality

By Dr. William Coleman

Significant Findings The most significant factor facing the improvement of milk quality in Rwanda is the lack of clean safe water or even any water at the farm level. Milk is being transported from the farms mostly in 20 liter or smaller plastic jugs once used for cooking oil or even motor oil. These are almost impossible to clean and sanitize even if there was good water available. Transportation is often only on foot or by bicycle and milk can take many hours to reach the selling point. This is not likely to change very quickly as this is the way most all goods go to market in Rwanda. Motorized transport is very limited and most roads are unimproved except for major highways. Under these conditions milk quality is reduced very rapidly. Regulatory agencies try to monitor finished products as called for in the regulations but are understaffed and limited in lab facilities to do much more. There are hygiene inspectors and veterinarians in the Districts and Sectors who monitor milk selling points and some farms in their areas but this seems very subjective and not very routine. Processing plants range from milk boiling facilities to some very modern plants now under construction. All struggle with milk quality, sediment, high bacteria, low fat and protein, added water and added starch. Most have limited testing facilities and only screen with tests such as alcohol or Resazurin and a lactometer, little or no milk is rejected. Milk collection centers are often limited to just a lactometer and its proper use is often questionable. Conditions found in these centers are not always very clean or sanitary as many lack a good water supply and adequate cooling tanks. Milk is not very likely to arrive at any selling point in less than 2 hours after milking and is always very warm. Most milk sold in small shops is boiled and often sold warm and may be taken home and boiled again. In Kigali over 1500 of these shops exist and very few have any way to cool milk but they do provide a good means to get milk to the general population at a reasonable price. At this time the processing and packaging of milk adds a cost that many families in Rwanda cannot afford. While all areas of the industry seem interested in change and improvement they struggle to get a grip on how to get it accomplished. Currently there are really no incentive programs that might facilitate any of the needed changes. Recommendations My recommendations will be in the following areas; Producers, Transporters, Milk Collection Centers, Processors and Regulators/Inspectors. I will try to provide what I see as the basic changes that can be made to begin to facilitate an improvement of milk quality. Producers

• Improve the water supplies. If clean safe water is not available water used for cleaning and sanitizing should be treated with chlorine bleach prior to coming in contact with milking utensils.

• Wash and sanitize all milking equipment after milking is completed. • Again sanitize all milking equipment before milking is started. • Milk buckets and pails should not be used for other purposes and should be stored upside

down to drain and dry in a clean area.



• Udders must be washed and dried prior to milking. • There should be no wet hand milking using milk or water. • Milk is to be filtered through a clean and sterilized cloth into the shipping container. • Milk should be transported to the receiving buyer in less than 2 hours after each milking.

Transporters

• Milk should be transported to the buyer within 2 hours of milking unless it has been cooled to less than 5 degrees.

• Milk reloaded from collection centers must be transferred in cans that have been cleaned and sanitized.

• Milk transported by foot or on bicycles must be delivered to the buyer within 2 hours of milking.

• All milk containers must be washed and sanitized before leaving the collection center, plant or shop.

• If washing and sanitizing is to be done at another location that location must be approved by the buyer to meet proper hygiene standards.

• All milk must be transported in containers that can easily be washed and sanitized and must have tight fitting lids.

• Milk transported on trucks must be covered with a tarp or other covering to protect them from the sun and dust.

• Truck transporters should begin to convert from cans to bulk tank trucks, especially for hauling milk from collection centers.

Milk Collection Centers

• All milk collection centers (MCC) must have a clean water supply and electricity. • MCC must have a cooling tank capable of cooling milk to 5 degrees or less in 2 hours. • Milk received should be screened for quality using Resazurin or alcohol test, lactometer and

starch test. • Improved system should be established for measuring milk received from producers to insure

proper payment. • Milk should then be filtered through a sanitized cloth into the cooling tank. • Emptied milk containers must be washed and sanitized before leaving the MCC. • MCC should purchase a pump to prepare for loading bulk tank trucks

Processing Plant Receiving

• Plants receiving warm milk should either process it immediately or cool to less than 5 degrees within 2 hours.

• Milk should only be received in containers that can be easily washed and sanitized. • All milk should be tested for bacteria, sediment, added water, starch and antibiotics. • All containers must be washed and sanitized before they leave the plant. • If the washing and sanitizing is to be done somewhere else that location must be approved by

plant personnel as meeting hygiene standards. • Steps should be taken to begin receiving milk in bulk tank trucks.

Regulators/Inspectors



Meetings should be conducted by all agencies involved in milk related activities (RBS, RARDA, Cities, Districts and Sectors) to prevent duplication of inspections, sampling, testing and other duties. The following are my suggestions as to who should be doing what: RBS

• Conduct sampling and testing of milk and dairy products to see that they meet standards as set forth in laws or regulations.

• Conducting plant inspections for compliance with laws and regulations. • Convert to inspection forms which list all points necessary for compliance. • Conduct inspection unannounced but on a set schedule. • Train Districts and Sector personnel in what is required by the laws and regulations to be

evaluated in their inspections. Also indicate how product sampling is to be done and how samples are to be sent to their laboratory for analysis.

• A licensing or registration program needs to be established to track all transporters and plants. Any fees should be reasonable.

RARDA • Their veterinarians should be responsible to see that farms and collection centers are inspected

on a routine bases. • If they are unable to conduct the inspections they should train District and Sector vets to do

this work. • Their sampling should be limited to monitoring antibiotics in milk at the bulking point level.

Routine screening test, such as a snap, could be conducted on tank-fulls of milk at collection points. Follow on positive tests can be conducted and oversee disposal of contaminated tanks of milk. .

• Reviewing of milking procedures and hygiene should be covered in any farm visits conducted by their personnel.

• A licensing or registration program needs to be established to track all milk producers and collection centers. Any fees should be reasonable.

Districts

• Cover inspections as delegated by either RBS or RARDA. • Train and demonstrate to hygiene personnel and veterinarians the proper way to conduct these

inspections in collaboration with RBS or RARDA. • Insure submission of milk and other dairy product samples to RBS or RARDA for analysis as

directed (not necessarily collect them. That should be the task of the sector personnel) • The emphasis at this level should be to provide oversight on proper hygiene and sanitation

procedures. Sectors

• The main duty of the sector personnel should be on hygiene of shops selling milk and also include other duties as assigned by the district.

• Inspection of shop or other selling points should be conducted using a form that lists all the areas to be checked and evaluated.

• No product testing need be done at this level. Products of concern should be sampled and submitted to RBS for testing.

• These inspectors need only test temperatures and possibly for added water. • Most attention should be placed on the proper cleaning and sanitizing of all utensils and

containers associated with the handling and selling of milk. • Inspections should be conducted on a routine bases and be unannounced. • Sector personnel should work with their clients to make the necessary improvements to

comply with laws or regulations.



• A licensing or registration system is needed to track all shops selling milk. Any fees should be reasonable.

Additional Recommendations Industry and regulatory changes that will be necessary if milk quality is to be improved have been covered. There is however, a big piece missing to the overall improvement of milk quality in Rwanda. No one knows what the true milk quality or lack there-of really is. RBS and RARDA do not have the time or personnel to make such a determination nor is it really their job. LOL through this project has conducted a simple survey and found the milk quality to be very poor. The conditions found in Rwanda are not that different from those encountered on other similar projects in other countries. In every case the ultimate answer was to establish some type of independent laboratory capable of accurately testing large volumes of milk and other dairy product samples. Such a laboratory could conduct an overall evaluation of the current milk and dairy product quality and better prepare the industry to make the necessary improvements. This facility would eventually be supported by producer and processor groups for the benefit of their members. It would provide a means to work out quality problems and give direction to the industry and producers to solve compliance problems and meet the standards required by laws and regulations. While RBS and RARDA may feel this is part of their job it really is not. Their concern should remain with compliance issues and not with how the industry or the producers will go about meeting them. So the independent laboratory sits in the middle as a facilitator to compliance. It can also lend itself to the establishment of a Quality Awards program or a Seal of Quality for plants and packaged products. Critical control points for raw milk quality testing Location Test(s) Agency Farm Temperature (bulk tank), water quality RARDA/Sector Vets Transporter Temperature RARDA/RBS Collection Center Segregation or rejection screening tests

(Resazurin, alcohol, lactometer, starch, temp, antibiotics, sediment, somatic cell count)

RARDA oversight/ MCC conducting tests

Receiving plants (processors)

Verification of screening tests as needed (as in MCC) Sampling for payment (bacteria, somatic cell and components)

RBS oversight/ Plants screen/ Independent lab for testing

Shops and vendors Routine screening sampling and payment (temp, lactometer, etc. as needed by vendor)

RBS oversight/ sector inspector for sampling/ independent lab for testing

Additional Considerations Due to the lack of proper cooling facilities especially on the farms there is another method of bacterial control and milk preservation that could be considered, the lactoperoxidase system for the preservation of raw milk. It is my understanding that such a method would be acceptable to the RBS for milk that is to be heat treated or pasteurized prior to use.



This system involves the addition of sodium thiocyanate and sodium percarbonate ( hydrogen peroxide) to raw milk within 2 hours of milking. Depending on the temperature of the milk this system can add 8 to 12 hours of bacterial preservation prior to processing. It does have its advantages and disadvantages. It can be an excuse to avoid proper cleaning, sanitizing and cooling. However taking into consideration the lack of water, electricity and cooling facilities on farms in Rwanda presently it could aid in solving the problem of high bacteria counts in the raw milk from the farms. Another disadvantage may be cost of application and control of its addition to the milk. If this system is to be considered the addition should be done by the transporters who pickup the milk at the farms within the recommended 2 hours of milking. This would take a good bit of education and training of these transporters to be sure the system is being proper applied. Proper oversight of its use would also have to be established, including finding a way of identifying who these transporters really are. Obviously the lactoperoxidase system needs further research and study before the introduction of its use in Rwanda. I would recommend that the “Project” study ifs possible use and do a cost to benefit analysis to see if it might be a possible answer to raw milk quality concerns in Rwanda over the short run until milk quality conditions on the farms can be improved. Conclusions Many of the recommendations I have covered in this report can be accomplished in a short period of time others will take longer. No one should look for an immediate solution, it may take 5 years or more to complete. The main task is to provide the safest and best milk supply for the citizens of Rwanda in as reasonable amount of time as possible and as economically as possible.



Attachment D

Observations and Recommendations on Milk Pricing Incentives and Processing By Paul Christ and Dave Peters

Milk Pricing:

I. Key Findings

A. Milk production is mostly a small scale, subsistence enterprise in Rwanda. A producer may have a small land holding on which he produces crops and milks one or two cows to supplement the family income and diet. Some milk is surplus to the family needs and is sold in the market.

B. There are a few larger farms with five to 25 cows which are commercial enterprises. These are usually associated with commercial dairy plants.

B. A common method for selling milk is from household to household. This is common in Kigali, but there are no statistics available to measure the size or importance of this method of marketing. It is probably more important in the rural areas than in the city.

C. A second method for selling milk is to transfer it to a milk assembler, usually a

bicycle operator, who seeks to fill one or two cans for delivery to a milk buyer.

D. A third method is to deliver milk directly from the farm to a milk collection center, a bulking point, a milk kiosk or a dairy plant.

E. In Kigali, the most important channel for distributing milk to consumers is the milk

kiosk. Project researchers have identified more than 1,500 of these in the city, represent about 90 percent of the milk passing through formal market channels. These kiosks receive raw milk from farmers or milk assemblers, cool some of it for sale as raw milk in bulk, and boil the rest for the production of fermented milk and so-called pasteurized milk. These last two products are sold in individual servings to patrons of the kiosk. The operate much like a lunch counter or a refreshment café.

F. A second method for selling milk is to transfer it to a milk assembler, usually a

bicycle operator, who seeks to fill one or two cans for delivery to a milk buyer.

G. A third method is to deliver milk directly to a milk collection station, a milk kiosk or a dairy plant.

H. The quality of milk produced and marketed in Rwanda is poor. An analysis by the

project staff of 742 samples from all levels in the farm to market system showed that less than eight percent were below 200,000 bacteria, the maximum considered acceptable for milk for pasteurization. Another 14 percent were between 200,000 and one million bacteria; four percent were between one and two million and 25 percent were between two and ten million. Half the samples were above ten million bacteria, well above the level of acceptable milk for manufactured dairy products such as cheese and butter. Poor quality seems to start at the farm and gets worse as milk passes through the marketing channel.



I. Bacteria counts at these levels would normally become a threat to human health, but

Rwandan sellers and consumers have adapted by boiling milk before consumption. This practice provides some safety in that it destroys nearly all pathogenic bacteria. Also, the production of fermented milk from boiled milk tends to development of pathogenic bacteria

J. But, if Rwandan packaged milk and dairy products are to be acceptable in commercial

markets, the quality of milk going into them must improve, eventually to satisfy international standards.

K. Milk prices to farmers are determined by “the market”. To Rwandan industry

participants, this means a milk buyer proposes a price to sellers, with sellers accepting the offer or making a counter proposal. It seems that most of the pricing power rests with buyers, but a seller can influence price by switching from one buyer to another, or selling his milk directly to households.

L. Milk prices to farmers tend to vary by season, higher in the dry season and lower in

the wet season. These price changes seem to follow changes in production more than changes in consumption. Milk prices also vary from buyer to buyer.

M. There is a lot of informal communication about prices in the dairy industry. Milk

buyers, whether plants, milk kiosks or milk collection centers seem to know what others are paying for milk. Such information is probably less prevalent among dairy farmers.

N. Farm milk prices tend to range between Rwf 140 to Rwf 200 per liter, depending on

the time and place.

O. Farm milk prices are based solely on volume, irrespective of composition.

P. Milk buyers usually are equipped to test milk for acidity and density. These tests are crude measures of bacteria counts and added water, respectively. If the milk offered for sale is not within the buyer’s tolerance, it is rejected, and not purchased at any price.

Q. The rejection criteria for acidity varied from .16 to .21, depending on the buyer. I did

not discover the rejection criteria for density.

R. It is likely, that the rejection criteria may increase or decrease based on the general availability of milk.

S. There is no entity in Rwanda with the credibility, resources and skills to perform a

large volume of quality and composition tests of milk and dairy products.

T. There are no reliable statistics available in Rwanda about the size, structure, behavior or performance of the dairy industry.

II. Conclusions.



A. The quality of milk in Rwanda will not improve unless there are incentives to do so. At present, the only incentive to sell quality milk is the fear of rejection. Even this is not adequate, as a milk seller can find alternative outlets for bad milk.

B. Incentives for improving the quality of milk can take the form of reward or

punishment. Reward could take the form of a price premium for quality milk and public recognition of good quality performance. Punishment could take the form of a price discount for lower quality milk or prohibition from selling milk in the market.

C. The practice of paying for milk by volume (Rwf per liter) only reflects part of the

economic value of milk. It does not reflect variation in the nutritional content of milk from different sources, nor does it reflect the potential difference in yields of manufactured dairy products.

III. Recommendations.

A. Establish an independent central laboratory to perform quality and composition tests on milk from all sources in Rwanda. This laboratory would not displace the present screening tests performed by milk buyers, but would provide both a wider range of tests and more objectivity and precision than is available in the existing milk buying facilities.

The central laboratory should be controlled by a board of directors representing a range of interested parties, including dairy farmers, dairy cooperatives, milk collection center operators, milk plants, dairy kiosk operators, the Food Science Department of the University, and the government. This board would have the responsibility of insuring adequate financing for the laboratory, the hiring of the executive director of the laboratory, and for general policies regarding the operation and performance of the laboratory.

B. Set up a milk sampling system for determining milk quality and composition at

each level where a financial transaction takes place, or milk from one source is commingled with milk from other sources. The board and management of the central laboratory should be responsible for this development.

There are established standards and techniques for collecting and protecting milk samples, so many people in the supply chain would have to be trained in proper methods. Samples could be transported daily to the central laboratory by regularly scheduled bus service, or by a dedicated sample assembly system organized by the central laboratory and the dairy industry.

Sampling, preserving, transporting and testing of samples is expensive, so the frequency of sampling should be limited. The statistical quality of sampling improves with frequency, but so does the cost. One sample a month is much better than none, and two is better than one. However, statistical analysis in the U.S. shows that four times a month provides equivalent average results to daily sampling and testing.



C. Organize one or more dairy industry associations. One such association could be made up of commercial processors of milk. These firms are similar in that they package milk and dairy products for sale to consumers through shops and restaurants.

Another association could represent milk collection centers and/or dairy farmer cooperators. A third association could represent dairy kiosk operators. The purpose of these associations would be to discuss dairy industry issues and problems, and to formulate a consensus for responding to them. The government should not have a role in these associations, but may be called upon to implement recommendations that require uniform application across the industry.

D. Adopt a milk classification system that differentiates milk by quality. I

recommend that there be four levels of bacterial quality recognized by the industry and government. The first of these would be milk with 300,000 bacteria, or less, per milliliter. This milk would be suitable and acceptable for producing packaged pasteurized milk. With good manufacturing and handling practices, both in the plant and the shop, this milk should have a reliable shelf life of eight days or more.

The second quality level should be 300,000 to two million bacteria. This milk could be used for boiling and consumption within 48 hours of production. Products such as fermented milk, butter and cheese could be made from this milk. The third quality level should be two to ten million bacteria. This is undesirable milk, but at the present time, represents a large share of the Rwandan milk supply. It is not good for any packaged products, and only marginally acceptable for use for boiled and fermented milk. Over time, with continuous quality improvement, the upper limit for this class of milk should be lowered until it is no longer an important part of the milk supply. The fourth quality class should be rejected milk, representing any milk with more than ten million bacteria. This milk is not suitable for any use as human food and should be excluded from the milk supply system. As suggested above, the threshold for rejecting milk should be reduced over time as the overall quality of the milk supply improves.

E. Reject substandard milk. The above classification system does not take into account

other important factors related to quality, such as somatic cells, sediment and added water. These should be dealt with on an accept or reject basis. Somatic cells in milk do not represent a threat to human health, but they do reflect the health of the animals from which the milk was drawn. They are the products of infection in the udder, and therefore are aesthetically offensive to most people. As milk testing and reporting improve, somatic cell test results can be used to educate farmers about mastitis control.

Sediment usually represents manure in milk. It is a major source of bacteria

and its presence is aesthetically offensive to most people. A standard for accepting or



rejecting milk based on sediment should be adopted at a level that would not exclude a major part of the Rwandan milk supply.

Water is another matter. Adding water to milk is a form of theft under the

present milk pricing system. Water adds volume, but no nutrition to the milk. It adds cost to the system because it must be cooled and transported as if it were milk. If the water is not clean, it can add bacteria and sediment to the mixture of milk and water. But most important, it leads to everyone in the milk marketing chain involuntarily paying good money for something that has no value. In practice, however only about 25 percent of the 745 milk samples tested by the USAID Milk Competitiveness Project had added water. About half of these had more than ten percent added water. Nevertheless, added water cannot be tolerated in the milk supply. Therefore, rigid criteria for rejecting milk with added water need to be adopted. I recommend that any milk at any level in the marketing system with five percent or more added water be rejected. Measurement of water in milk is now done on the basis of density, and that is adequate as milk is received. However, as more sophisticated tests become available from the central laboratory, more exact measures of added water can be applied. However, these test results will not be available for a few days, and the milk will already have been received, processed and consumed. In these cases, a penalty of double the volume of added water should be applied. For example, if there is three percent added water, the payment for the milk should be reduced by six percent. As with high bacteria milk, rejected milk with added water can find another market, such as direct sales to households. The only feasible way to avoid this is to denature the milk with added water, by adding red, blue, or green food dye. Then, everyone in the milk marketing system will know which milk is adulterated, and which is not. This last suggestion may engender significant opposition, especially from those who add water to milk. However, if the industry is serious about eliminating added water, then it is an effective approach.

F. Pay a premium for high quality milk and impose a penalty of poor quality milk.

I suggest that payments for milk in the first classification, above, be paid a premium of ten percent over the base price. Milk in the second classification should receive no premium or discount. However, milk in the third classification should receive a discount of ten percent. These numbers are arbitrary, but are meant to be large enough to be noticeable, but not so large and to engender significant opposition from low quality producers. It may be that the consensus of the Rwandan dairy industry is that these numbers are too high or too low. That is fine, but the principle of rewarding good and penalizing bad needs to be applied. Otherwise, there is no direct incentive for dairy industry participants to improve their performance.

Quality premiums are paid by most milk buyers in the United States. There is nearly a century of tradition of enforcing different standards for Grade A milk (acceptable for pasteurized, fluid use), and for Grade B milk (acceptable for all other uses). The price difference for these two grades of milk is established by the Federal Milk Marketing



Order Program. As a result, less than five percent of the United States milk supply is Grade B. In addition, a small premium and/or penalty, based on somatic cells is mandated by the Federal Milk Marketing Order Program. But most milk buyers voluntarily pay higher premiums for low somatic cell milk. The result is that the United States milk supply experiences a continuing decline in average somatic cells. This experience provides optimism that quality premiums and penalties will give similar results in Rwanda. In the beginning, it is likely that the sum of the penalties imposed will be greater than the sum of the premiums paid. The difference will accrue to whomever is buying the milk. In a competitive market, we would expect that this difference would be added to the base price for all milk, without increasing or decreasing the profit of the milk buyer. Similarly, as the quality of the milk supply improves, more money is likely to be paid out in the form of premiums than is collected in the form of penalties, seeming to reduce the profits of milk buyers. Again, in a competitive market, the base price for milk is likely to go down, leaving milk buyer profits the same as before. The successful adoption of this proposal depends of widespread acceptance by the industry. That is why it is important that dairy industry associations be formed and a consensus developed that it is a good idea. If that process takes place, then it may be wise to ask the government to require uniform and universal application of the new pricing regime. However, this should not be done until the industry is ready for it.

G. Adopt a milk quality recognition program. Over time the central laboratory will

accumulate information about the quality of milk sold by each farmer, and accepted by each milk buyer. The same information would be available for the total milk supply of each processor and marketer.

This information should be used to publicize and recognize the farmers and operators in the dairy industry that do the best job of producing and maintaining quality milk. Methods of recognition could include newspaper articles, other media reports, public recognition at industry meetings, and certificates of merit. The cost for such a program would be low, but the competition to secure such recognition would encourage improved performance.

H. Stop paying for milk by volume, and start paying for milk solids. The

composition of milk varies by breed of cow, season, stage of lactation, nutrients in the feed and other factors. In the United States, average milk contains about 3.7 percent butterfat, 3.1 percent true protein, 5.8 percent other solids, and 87.4 percent water. The most important components, of course, are butterfat and protein, with butterfat being the most valuable.

Dairy farmers in many countries, including the United States, are paid directly for the kilograms of milk solids in the milk they sell. There is also a small payment for volume in the U.S. This payment method has a major advantage of paying virtually nothing for added water. It also rewards milk sellers for the amount of nutrition provided by the milk. With respect to manufactured milk products, the solids in the



milk contribute directly to yield. Therefore, high solids milk produces more valuable outputs than low solids milk. Payment for the solids in milk requires specialized milk testing programs. However, the technology for such testing is well developed and can be done uniformly and efficiently in a high volume central laboratory. With the milk sampling and testing program suggested above, this practice can easily be adopted. Switching to a milk solids payment program requires a significant amount of producer education. The first step is to provide the farmer with accurate information about the composition of his milk. The next step is to explain the difference in value in the market from high solids milk relative to low solids milk. The third step is to demonstrate that the total amount of money paid for milk will not change, albeit high solids producers will get more and low solids producers will get less. The transition from a volume based pricing program to a milk solids based pricing program can be done in steps. The first step would be to assign to butterfat the full value of the milk, and then to pay the farmer a butterfat price that reflects that value. For example, a liter of milk weighs close to 1.029 kilograms. If the butterfat content is 3.7 percent, then there is 0.38 kilogram of butterfat in a liter of milk. If the price for a liter of milk would otherwise be Rwf 150, then the price per kilogram of butterfat would be Rwf 395 ( Rwf 150 / .38 = Rwf 395). So, if the farmer delivered 100 liters of milk to the market in a month, he would be paid the same amount for 38 kilograms of butterfat as he would have been paid for 100 liters of milk. Payment for milk on the basis of butterfat would also encourage greater uniformity of milk products, as it would encourage processors to standardize milk for the production of fluid products, and use the excess butterfat to make cream or butter for sale. Thus, the total value of all products from the milk supply would go up. This change, like the change to quality premiums and discounts would require support from the industry, and a mechanism for universal adoption. The same process of discussion, debate and consensus would occur before making the change. The further shift to separately pricing butterfat, true milk protein and other solids could occur over time, as each previous step is successfully implemented.

IV. Conclusion.

Milk quality and pricing programs have developed over time and have served the development of the Rwandan milk market. However, many improvements are possible that would improve the quality of the milk supply, the efficiency of the marketing system, and the ability to conform to international market practices. I hope the above recommendations will serve those objectives.

Processing: General Observations: 1. Milk Production and Collection (See attached PowerPoint presentations)



Milk production continues to grow at an 8% rate in Rwanda, partly because of the numerous Development and Government programs, and because it is profitable to many. In 2008, 170,000 MT is forecasted to be produced for consumption. The raw milk from small farmers is put into 20L yellow plastic jerry cans and transported to a milk collection center (MCC) mostly by bicycle. The “runners” or collectors with the bicycles are independent contractors. Some collectors ask for every forth days milk, or 25%, as a fee. Industry reports suggest that the collectors get about 15% for their service, which is considered quite high. However, raw milk must be at the MCC within 2 hours from milking. This can only happen if the farmer is close by or he has a runner to provide that service. The farm gate price of milk is seasonal. There are two dry seasons and two wet seasons. The dry season in January is very short and does not have the same impact as the summer one. The milk price from an MCC for chilled raw milk delivered to a kiosk in Kigali in cans is 180 RWF/L ($.32/L). The farmer actually gets about 140 RWF/L ($.25/L) before adjusting for the collector’s payment. This is a low price as December is in the rainy season. A typical dry season farm price might go up to 180-200 RWF/L due to increased market demand and short supply. The MCC can be cooperative managed or managed by the dairy processing plants. Note: The current price is lower than the current US milk price of $15.36/cwt ($.34/L) and is lower than a lot of developing countries such as the Philippines where milk prices are $.35-$.40/L. However, it is relatively high considering the poor quality and the limited chance to produce any value-added products from this milk. It is not clear when the cows are dried off. Apparently cows are dry during the summer dry weather season adding to the low production. They probably do not give milk more than 270 days as the local cows tend to dry off when the calf is weaned. Average production per cow is only 2.1 L /day. Only 13,000 cows are exotic breeds, with the rest of the 264,000 cows being the local Ankole breed. About 20% of these are mixed. Once milk arrives at the MCC it is tested, filtered through cheesecloth and cooled to 4C in a farm-style bulk cooling tank. Cooled milk is then transported to the market via flat bed trucks in a variety of food grade aluminum milk cans with lids. Few stainless steel cans exist. This milk has been tested, filtered and cooled, but the milk quality is poor, with at least half being over 10 million bacteria/ml. Transferring to cans, and a rough truck ride to the plants aerates the milk. This and additional potential of contamination from dirty cans means further deterioration of milk quality. The collected milk is only morning milk from the farmers. The evening milk goes to home consumption, or is sold or bartered to the neighbors. One obvious problem at the MCCs is that cooling tanks are filled up completely with warm milk (not half way as they are designed). Instead of 2 hours to cool the milk, it may take 4-5 hours. In the hot season, if the compressor is not working properly or if electrical “ brown outs” occur, the milk never gets to 4C before being transported to the urban markets. Clean potable water for cleaning must be hand carried from wells usually several km away from the farm. Water was seen being taken from polluted rivers. This is the first problem that must be solved before milk quality will improve. River water must be boiled or treated with chlorine before using to wash hands, udders, or cans at the farm. The challenges with small-scale dairy farming in Rwanda are as follows:



•Access to clean water •Milk is a perishable (heating and cooling issues) •Access to roads •Access to feed (land and forage issues) •Access to medicines •Basic sanitation skills •Cow health and feeding skills •Manure disposal (water contamination issues) •Requires a cash investment – cows, corral, milking shed, utensils and supplies Other observations: •Collectors provide a service but almost always reduce quality •Containers need to be washed and have lids •Milk is already 2-4 hrs old upon arrival. MCCs need to start cooling immediately. Many times milk sits another 1-2 hours before unloading even starts. •No area for sampling, testing and weighing •Exposure to birds, rain and sun •No concrete or pavement to prevent mud and dust •No access to water for washing cans •Cooling tanks are not designed to cool milk within 2 hrs if full of warm milk •Lack of testing equipment •Lack of cleaning chemicals and sanitizers Conclusions and recommendations: 1. It is possible to collect and transport milk from small farmers and have milk < 300,000 bacteria 2. Clean potable water is a must (or water boiled or treated with chlorine). 3. Containers with tight fitting lids are a must. 4. Bulk tanks must be used as designed. 5. Collection stations must be properly designed. 6. Most farmers are too far from the plant or collection station to participate in a collection and distribution system based on 2 hr delivery and 2 hr cooling. 7. A lactoperoxidase system of milk preservation should be at least considered for a single processor with milk from small farmers. A PowerPoint presentation and several articles on Lactoperoxidase Systems (LP-s) was provided to those who were interested. (See attachments). There is in-country expertise also. At least one person, a quality control technician at Inyange, has done his master’s thesis on LP-s. LP-s has been used in Kenya and elsewhere in East Africa. The limitation by CODEX is that milk collected from a LP-s must not be sold as exported dairy products to international markets. I do not think this is a problem for Rwanda in the next few years. 2. Processing Plant Survey Processing Plant #1 – Rubilizi Dairy This plant is processing about 2000L per day with a 400 LPH pasteurizer. They have raw milk storage of 5600L (2 tanks @2800L). The pasteurized milk, fermented milk and cream are packaged in 500ml



gable-top cartons on two manual, single-head fillers. They make butter, 100gr and 200gr yogurt and bulk pasteurized milk in cans for institutional accounts like the Red Cross and restaurants and hotels. Raw milk quality is poor. They get only about 3 days shelf life on pasteurized milk. Milk is rejected when delivered above 20 acidity. Milk with 19-20 is used for cultured products. Milk between 15-18 is used for pasteurized milk. Farmers are delivering milk directly from an area of about 5 km. Milk is received warm. Prices are relatively high: 200 RWF/L and 250-300 RWF/L in the dry season. Farmers deliver between 15L and 500L at a time. Some deliver twice per day. Some MCC milk is purchased at 250 RWF/L. In general, plant management feels that milk from MCCs is of poorer quality because coops cheat by adding water and starches. (LOL’s assessments is that MCCs are the same or better, and at least milk is cooled before reaching the plant.) Farmers are paid once per month. Plant capacity was estimated to be 5500 L per day. Processing Plant #2 – Inyange Industries LTD This plant is processing between 2000-3000L per day of milk. They have a 1000 LPH and a 500 LPH pasteurizer. They pasteurize all products at 85-90C for 30 sec. This affects the taste of pasteurized milk slightly but gives an 8-day shelf life. They make pasteurized milk, cream and yogurt. The yogurt is a set-type in 250 ml cups. Milk and cream are in 500 ml pouches. Their primary business is bottled juice and water production. They pay farmers 250 RWF/L milk, a very high price. They feel their quality is better than most dairies. They reject above 18 acidity, below 1.026 density, below 2% fat or if water addition is above 8%. Farmers are given three warnings to improve and then removed from supplier list. They inspect farmers twice per year. They are testing for fat, protein and lactose. They do bacteria testing on finished product. They are in the process of implementing HACCP. Flowcharts and SOPs are posted in the production area. CCPs are monitored and logged. Sanitation is good. Overall this is the best operating plant visited. They are training employees for the opening of their new facility in May 2009. Estimated capacity is 15,000 L per day. Processing Plant #3 – Nyabisindu Dairy The dairy plant is owned indirectly by the Department of Defense through a conglomerate called Horizon. Horizon has many companies including coffee and insecticides. They own a 300 cow dairy farm with about 100 cows being milked by hand. We were told that the cows average 10L/day. They desire to make improvements in their farm such as automated milking and a bulk-cooling tank to improve milk quality. They are willing to improve milk quality and use their farm as a demonstration farm. Average fat is 4.0% and protein 3.2%. The plant owns three MCCs. They need to make improvements to these as well, including cooling tanks with better cooling capacity. They cannot cool milk in less than 4 hours. Horizon is willing to work with LOL and can have an immediate impact on raw milk quality. The plant is very old, built in 1937. It is clean and equipment is okay but old. They have a capacity of 10-15000 L/day but currently run at only 3000L. The pasteurizer is 3000 LPH. They pasteurize at



72C for 15 sec. (Note: It should be much higher considering their high bacteria milk, and yogurt needs to be pasteurized at 85-90C for 30 seconds.) They have culturing capacity for 6000 L/day. They have a gable-top filler that can run 1600 CPM (800 LPH). Currently they are only making fermented milk as shelf life on pasteurized milk was only 2-3 days and they were having too many returns. They do not separate the extra cream and are losing profits. They want to separate again and make cream and butter. They make 200 ml yogurts that are filled on a 2000 CPH Hamba multi-lane filler. Their best milk goes to yogurt production. They sell to distributors and are nationwide in all the big cities. General comments: Although the plants are generally clean, none of the three existing plants are meeting basic GMPs. Doors and windows are wide open allowing rodent and insect entry for instance. Inyange was the best of course and is in the process of implementing GMPs and HACCP. The old plant at Nyabisindu needs some serious updating, or needs to be shutdown. New Processing Plants Plant #1 – Inyange at Masaka This new plant will have a milk processing capacity of 100,000 L per day, plus 100,000 L per day of juices and 50,000 L per day of mineral water. The milk processing capacity is 50,000 L per shift using a 5000 LPH tubular UHT pasteurizer. The milk will be packaged on a 0.5 L Combi-block brick filler (5000 LPH); juice will be packaged on Tetra Pak TB-8 brick filler in 0.5L and 1.0L packages. Processing equipment is primarily from Alfa-Laval. They plan to export 60% of the production in UHT, and 40% will be sold in the domestic market. Products will include UHT milk, pasteurized milk in bottles, ice cream, butter and yogurt. They plan to open in May of 2009. They have a raw fruit processing area for peeling, crushing and removing pulp and seeds from a variety of fruits for juice and nectar production. They can also use frozen juice concentrates. The plant was designed by BIF (Beverage Institute of Africa) and would be able to meet all GMPs and could easily be a HACCP facility provided they actually monitor and enforce their quality standards for the acceptance and rejection of raw milk. They have offered laboratory space in their QC area to temporarily house an independent, central testing lab to launch and support a national milk quality initiative. Plant #2 – Private Dairy at Ruhinzi This new plant is privately owned. It has Chinese equipment – processing and packaging. The capacity is 10,000 L per shift. It will open next year. The equipment is set in place but needs to be connected to electricity, steam and water. The process piping is nearly finished. They have an insulated tank to mount on a flatbed truck that will make them the first to have a milk tanker to pickup and deliver milk. Plant #3 – Nygatare Eastern Dairy



This is a new small processing plant scheduled to open in 2009. They have a target capacity of 30,000 L of milk when running two shifts. The pasteurizer is 2000 LPH. There is only 5000 L of raw milk storage. There are not nearly enough tanks (raw and pasteurized) for 30,000 L of mixed production. The basic equipment is Alpes from France. The packing machines are Chinese. They claim that they will have 60,000 new customers in Kigali that will purchase 0.5 L of pasteurized milk and fermented milk. They will skim the cream and churn butter. Later they will add yogurt production. They will have a refrigerated warehouse in Kigali, where distributors and wholesalers will pick up the product on 30-day credit. They have one MCC that was visited. (See PowerPoint presentation for pictures.) It needs some assistance from LOL. It has no water for washing cans, and the electricity is only 220V. The cooling tanks require 380V, 3 phase; therefore the tanks do not cool properly. Partly at fault is filling the tank over half full with warm milk. 3. Rwanda Milk Market (See PowerPoint Presentations) The estimated 2008 production of 170 million L is divided between the rural market (76%) and the urban market (24%). The rural market is home consumption and sales to village neighbors, while urban markets are primarily retail consumers and home consumption in the cities. Kigali is the largest city with 1 million residents and consumes over half of the urban-marketed milk and most of the imported products. The rest goes to the other large cities. The average per capita consumption of dairy products in Rwanda was estimated in 2007 at 15.9 L/yr per person. The urban market was higher at 21.0 L / yr per person versus 14.6 L in the rural areas. Milk consumption is nearly always higher in cities where upper and middle class citizens have access to more variety and safer dairy products. Of the current 120,000 L per day that is coming to the urban markets, only 6000 L goes through the three processing plant. The balance of 114,000 L is processed at milk kiosks using kitchen-type boiling and pasteurizing techniques. 62% is then cooled in on-premise bulk cooling tanks to 4C and sold either by the glass in the retail area, or sold for home consumption to walkup buyers with their own containers or 1.0L plastic bags. The milk is almost always boiled again at home; and then consumed right away by children, or made into cheese or yogurt. The milk kiosks are well entrenched in the urban market and provide a generally safe and regular supply of pasteurized milk into urban homes at a very reasonable price – less than half the cost of milk in half liter gable-top cartons from the processing plants. Secondly, they provide 500 ml of fermented milk or pasteurized milk by the glass that is consumed on premise, primarily for breakfast and lunch at 250 RWF. The peak consumption is between 11 AM and 2 PM when thousands of workers (office and retail clerks, taxi drivers, construction workers, etc.) buy the milk plus a doughnut for 350 RWF. This is a healthy and reasonably priced breakfast or lunch. Over 1500 kiosks exist in Kigali alone. Many are in need of better equipment, clean water and refrigerated storage. At least 20% need to improve or face closure in order to guarantee food safety to the public. However, this is simply a matter of licensing, training and regular inspection. In no way should the government close all of these kiosks to force the milk through the plants. The milk quality is so poor that the product would not run through the plate HTST equipment without constant plugging. The shelf life would be no more than 2-3 days with much of the product being



returned from retailers for spoilage. It is better to have this milk boiled at the kiosks and consumed the same day (or in the worst case the next day). Even safer than pasteurized milk is the fermented milk that has a low pH to combat the growth of any bacteria that may contaminate the product after boiling. As the milk quality improves and people have more spendable income, they will gradually purchase more products produced in the processing plants because of longer shelf lives and more convenient packaging. Once the milk supply starts to improve, there will be a period where milk should be sorted by processors and made into a variety of dairy products (See PowerPoint presentation). First class milk (<300,000 /ml) should be used for UHT milk, premium yogurt and cheeses. Second class milk will be used for most everyday products – cream, butter, milk bars, hard cheeses (like Gouda and Edam), and pasteurized milk and yogurts. Finally, 3rd class milk could be used for pizza cheeses, fresh cheese as an ingredient for processed cheese and fermented milk products. It is suggested that one central plant could be used to make cheese and deal with all whey related issues. All the dairy plants that can sort milk could jointly own it. The cheese could then be returned to the processor shareholders to be marketed under a number of brand names in the urban market or for export. Inyange is considering closing the old plant when the new plant opened. The plant has the basic processing equipment already and refrigerated storage areas for ripening. Only cheese vats and brining equipment need to be added to make cheese. Conclusion: It is possible for small farmers to have milk delivered to the MCC or plant with <300,000 bacteria/ml. Success at the farm relies on basic sanitation skills using clean potable water and a collection system to have milk at a cooling source in less than 2 hours. What is lacking now are good clean containers with tight fitting lids; and organization and coordination between the farmer and the collector to cut down the travel time to less than 2 hours. Once at the collection station, milk only needs to be cooled to 4-6C within 2 hours to maintain the bacteria at the same level it had upon arrival. Currently, milk sits 1-2 hours outside before testing and unloading onto a cooling tank. And the milk cooling tanks are farm bulk tanks that are not designed to cool warm milk if completely full. The result is cooling that takes place at best between 4-6 hours, not 2 hours. The result is bacteria levels exceeding 10 million/ml. All of these items above are easily correctable by farmers and cooperatives handling the milk. However it will take a financial incentive to get things started as the precedent is already set in Rwanda that any milk (warm, cold or adulterated) will be purchased by plants and kiosks. As milk quality begins to improve, milk can be sorted into various classifications so that higher priced, value-added products can be made to recover any milk quality premiums offered to farmers and MCCs.



Attachment E

Observations on Potential Use of Milk by Processors Power Point by Dave Peters



Attachment F

Observations and Recommendations on potential dairy IGA for PLWHA Assn Ariong Abbey in collaboration with Gene Kuntz

Farm Level Production 3 Cow zero grazing herd model unit Please refer to the Excel workbook “Rwanda zero grazing-Nyagatare and Gatsibo” for the comprehensive analysis of the viability of the model. In preparing this analysis, careful consideration was taken to make the model as real as possible by utilizing on the field data and operating parameters. It takes into account the deviation of on farm annual investment costs and occasional revenue, qualitative assumptions as well as quantitative numbers for production and variable costs. The three key indicators are;

Total milk sold for cash = 7,542 liters per year (Home consumption considered) Net profit per liter sold = 125/= Rwf Return to total costs = 1.70 (net profit/total production costs)

Implementation and recommendations Working together with the IGA opportunities assessment consultant, it is recommended that the initiative be rolled out in January 2009 with an initial 5 associations and another 5 to be ramped up within the next 6 months. The initial steps will provide a critical gauge for any challenges that may arise. In the following table are the first 5 Associations recommended for the initial phase;

No Association Location # of members

# cattle owners

1 Amizero Gatsibo 48 15 2 Ihumure Nyagatare 62 30 3 Kwisungana Nyagatare 45 25 4 Abatonibamana Nyagatare 80 30 5 Dukundane Nyagatare 64 30

The following are recommended for the second phase;

No Association Location # of members

# cattle owners

6 Abamaranashavu Nyagatare 62 39 7 U.V.A Nyagatare 53 21 8 Rengerubuzima Nyagatare 70 30 9 Turwanekubuzima Gatsibo-Gitoki 160 30 10 Inziranzizza Nyagatare 65 12



The proposed steps One The first step will be to organize and conduct educational sessions aimed at making the association membership appreciate and understand the 3 cow model unit as an income generating initiative that is workable. These sessions should be conducted within the operating confines of each association. Concurrently, on farm statistical data should be collected from members who are already engaged in livestock/dairy activities relating to number of cattle, ages, breeds, State of Kraal, milk production etc. This information will be crucial at the financing stage to determine who qualifies and to what extent. CHAMP/CHF should be positioned to conduct the initial sessions and ABS to provide close support in obtaining on farm data. Two In order for the associations to function as economic entities they will need to operate as cooperatives. This is also in line with the Government directive. From within the association(s), a sectoral committee of all members engaged in livestock/dairy activities should be formed. This committee will be the nucleus from which a cooperative will be formed. Other members who are not yet engaged in this activity and even those outside the association should be free to register into the cooperative. The cooperative will thus emerge from within the association. What should be borne in mind is that according to the Cooperative law No. 50/2007 of 18/09/2007, Article 10, “A minimum number required to establish a primary cooperative organization shall be seven (7) persons. They shall not belong to the same family”. It further states that, “No person shall be a member of more than one cooperative organization with similar services operating in the same area”. Training in basic cooperative development principles, values and benefits, democratic governance, transparent management of shareholder resources and farm record keeping should be conducted. CHAMP/CHF district level cooperative development officers and/or sub-contracted Community Service Organizations will deliver this training. They will also provide technical guidance to assist them in registration. Land O’Lakes to provide capacity building support. Three The following financial alternatives were identified;

i) Of the two financial institutions considered, Banque Populaire Du Rwanda S.A. (BPR) was identified as the most suitable in terms of flexibility, reach and loan conditions. Their Security guarantee funds scheme was found to be particularly appropriate. The loan interest at 13% is perhaps the best bargain and its guarantee funds attract up to 7% interest. The development organization enters into an MOU with the Bank. The Bank separately loans the client finances and recovers it. The advantage is that repaid funds will be available to other clients.

ii) There are existing guarantee facilities for various schemes in some financial institutions. It would be helpful to explore them and zero down on those found appropriate for funding.

iii) The individual and group guarantee loans options should also be discussed with the Bank with a view to getting those target clients with tangible collateral to access these facilities

iv) There are some farmers who are keeping substantial herds of traditional Ankole cattle. Some of them are interested in converting part of their herds to cross breeds and/or exotic cattle. It



would therefore be prudent to identify these farmers and also encourage others start up the zero grazing units. Conversion is currently four (4) Ankole cows to one (1) cross bred heifer.

v) Where possible and funds permitting, some grants maybe given.

Financing the scheme is a major factor in getting this initiative off the ground. The implementing partners should therefore discuss this exhaustively and follow up with the relevant financial institutions/schemes.

Four Presently, animal management is very poor at farm level. In a zero grazing system, fodder and other supplements are brought to the cow. Dairy cattle keeping especially by smallholders are profitable only when the cow is well managed. Dairy cattle management should therefore be a top priority. Cattle kraals should be well built and maintained, vaccination and de-worming done regularly, water made available and pastures brought to the cow well chopped. The use of cost effective appropriate technologies should be introduced to reduce farm production costs. For example, the use of fabricated grass choppers would provide an income generating opportunity for a local artisan or a group member whose skills and capacity to fabricate this implement would be built. Many farmers are experiencing problems with Artificial Insemination. Many lack the knowledge and skills in managing this process. The approach and methodology of training on these skills should be community oriented and as practical as possible. Training sessions should be conducted at association venues and one model pilot demonstration farm established (by improving a fairly good existing one) in each association. ABS and/or together with other CSO’s will provide technical training to enable the farmers adopt this very important skills and build the capacity of local artisans/willing members to start fabricating appropriate farm implements. CHAMP/CHF and Land O’Lakes should look into the possibility of acquiring two AI kits for the initial phase. ABS will build the capacity of some member farmers to manage the AI process and also charge a fee for these services as an IGA. Five The cooperative once formed will become a business hub around which several activities will be taking place. A mini-milk collection centre (MCC) with a cooling capacity of upto 500 liters would ideally be set up to absorb the increased milk production from the cooperative. The MCC will be operated and owned by the cooperative. Each cooperative should ideally have its own mini-MCC. However, funding not permitting, the cooperative will require a very reliable transport system to collect and haul milk from farms and sprint it fresh to the nearest UDAMACO MCC. Land O’Lakes should conduct an investment costs, cost-benefit and break-even analysis for these two scenarios- the MCC and transport system.



Six Input supplies such as veterinary drugs, salt licks, sprayers etc are in short supply or are too distant to the target clients. There is also a marked shortage of major dairy equipment suppliers in Kigali City. These are business opportunities for enterprising individuals and companies ABS should identify and build the capacity of struggling small shop owners within the locality not only to stock and sell these supplies, but also know the basics of how they are used. Land O’Lakes should get into contact with such dairy equipment dealers within the East African region and interest them into taking up the opportunity.



Attachment G

Zero Grazing Summary for 3-cow herd Gene Kuntz and Ariong Abbey

ZERO GRAZE DAIRY (3 cow herd) NOTES: Value of fodder and manure sales not yet properly estimated; labour estimates also to be verified. RWF/herd USD/herd

Typical Improved Model Typical Improved Model

MILK PRODUCTION

Average litres per animal per day

5

8

13

5

8

13

Lactation period (days per year)

200

220

270

200

220

270

Total milk produced (litres per year)

1,000

3,300

10,530

1,000

3,300

10,530

Milk sold for cash (litres per year)

-

963

7,542

-

963

7,542

Average price per litre

-

140

185

-

0.25

0.34

Gross milk revenue (per year)

-

134,820

1,395,191

-

245

2,537 ADDITIONAL REVENUE

Calf and heifer sales (annual equiv)

38,244

38,244

108,305

70

70

197

Manure sales

-

-

-

-

-

-

Total gross revenue (all sources)

38,244

173,064

1,503,496

70

315

2,734 PRODUCTION COSTS (per herd)

Total variable costs

1,250

27,175

117,750

2

49

214

Depreciation

143,008

149,558

439,774

260

272

800

Total production costs

144,258

176,733

557,524

262

321

1,014

Total cost per litre produced

144

54

53

0.26

0.10

0.10

Total cost per litre sold

-

184

74

-

0.33

0.13



RWF/herd USD/herd

Typical Improved Model Typical Improved Model

FARMER PROFIT (per herd)

Gross profit

17,872

145,889

1,385,746

32

265

2,520

Gross profit per litre produced

18

44

132

0.03

0.08

0.24

Gross profit per litre sold

-

151

184

-

0.28

0.33

Net profit

(125,135)

(3,669)

945,972

(228)

(7)

1,720

Net profit per litre produced

(125)

(1)

90

(0.23)

(0.00)

0.16

Net profit per litre sold

-

(4)

125

-

(0.01)

0.23 RATES OF RETURN

Return to variable costs

14.30

5.37

11.77

14.30

5.37

11.77

Return to total costs

(0.87)

(0.02)

1.70

(0.87)

(0.02)

1.70 LABOUR

Hired labour (days/ha)

-

-

120

-

-

120

Family labour (days/ha)

220

360

240

220

360

240

Total labour (days/ha)

220

360

360

220

360

360

Gr. return per day total labour

81

405

3,849

0.15

0.74

7.00



Attachment H

Evaluation of IGA potential in cow dairying Gene Kuntz power point

Assessment of 20 Associations

Focusing on the ability to generate income from raising dairy cattle in the

Districts of Gatizbo and Nagatarye

Method of Assessment

• Met with all 20 associations– 13 associations in Nagatarye– 7 associations in Gatizbo– Averaged two association visits per day over a two

week period– Met a total of 536 members

• Interviewed and visited three to four members from each association

• Interviewed suppliers, buyers, and technicians that serve the two districts

Cooperative Activities of Associations

• Sewing/Tilling• Cows/milk• Handicrafts• Butchery• Beekeeping/Honey• Mushrooms on Rice Hulls• Rice Threshing• Pigs• Marketing Vegetables/produce• Poultry

Current Styles of Raising Cattle

• Zero Graze– Rather new to the area– Relies on collecting and feeding forages– Animals stay within a confined structure

• Open Graze– Need a minimum of 1 hectare/mature dairy

cow– Graze during the day and bring into a karal

near the house at night



The Model Dairy Unit• 3 cows in a zero graze facility• 2 cross bred cows & 1 exotic cow • Facility will cost 385,800• Cows will cost 2,000,000• Equipment 70,000• Operating Costs

– Breeding 5,000– Vaccination 1,200– Insects and worming 1,000– Total 7,200

Total Investment 2,469,200 RF

Repayment Capacity?

• Milk Income– 7,700 liters of milk @ 140/L = 1,078,000/ year

• Milk income = 2,953/day• Commitments to loan= 2,344/day

– (2,000,000 @16% for 36 months)• Commitments to annual costs = 20/day• What is reasonable?

– I would like to see 2,930/day of income

3 Cow Zero Graze Structure

• Timber 160,000• Concrete 80,000• Metal 74,000• Water Collection 7,500• Total 321,000 RF

Challenges

• Lack of cattle management skills• Water availability• Cattle die• Breeds of cattle• Access to markets• Quality forages

USAID DAIRY COMPETITIVENESS PROJECT QUARTERLY ...

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