The East African dairy sector is receiving a major investment that will significantly impact farmers in Kenya and Uganda.
Agriculture in Uganda makes up a significant slice of Africa’s economy and investors are taking notice of the East African dairy sector.
The International Finance Corporation (IFC) and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) $35 million in senior debt financing. This will be used to upgrade a major powdered milk plant in Uganda and support the acquisition of a packing facility in Kenya.
This investment is expected to significantly impact both Kenya and Uganda. Ultimately, this will improve access to the raw milk market for smallholder farmers. It marks a path forward for other countries who are struggling with food insecurity.
According to Delphos, who secured the financing, they raised over $4.7 billion in financing for projects across Africa. This investment will not only bolster food security in the region but also strengthen the dairy supply chain against macroeconomic shocks. All of this contributes to sustainable agricultural development in East Africa.
Impact of Agriculture on the African Economy
Africa News recently reported that the agriculture sector employs approximately 72% of the African population and contributes about 24.1% to the GDP. The dairy industry, valued at $3.8 billion, plays a key role, with exports bringing in $106.2 million annually, the report said.
Milk and dairy products are essential in fighting hunger and promoting food security in the region. However, the sector faces several challenges. With seasonal fluctuations in milk supply, underutilized processing facilities, widespread informal trade, and quality issues, issues arise.
To tackle these problems, Uganda’s Dairy Development Authority (DDA) launched the Dairy Policy Action Plan in August 2022. This multi-year initiative aims to increase milk consumption, boost production, enhance quality, and open new markets. Eventually, engaging various stakeholders in policy interventions.
This deal comes after Kenya opened its doors to Pearl Dairy Farms last March. This allowed the company to invest in local dairy factories. Pearl Dairy Farms signed an agreement with the Kenya Development Corporation to invest jointly in local dairy ventures.
