The Policy Environment
of Kenya’s Dairy Sector
A supportive policy environment is needed
to aid the development of Kenya’s dairy industry,
which contributes significantly to employment, public
health, and the overall economy of the nation.
However, certain policy issues need to be
urgently addressed, including the pace of review of policy and
legislation, the appropriate enforcement of regulation, the development of
institutional capacity, and widened stakeholder representation.
Specific policy priorities relate to
provision of veterinary services (particularly health and breeding
services for cattle), access to credit, and road infrastructure
policy and legislation initiatives need to take full account of broader
national goals (such as the creation of employment and poverty reduction)
and the reality of systems presently operating in the dairy sector.
Kenya’s dairy industry is
one of the most impressive in the developing world, and can boast a
century of progress (box 1). The country contains 70 percent of the dairy
cattle in eastern and southern Africa. The importance of milk production, marketing, and
processing to the wealth, and health, of the Kenyan people cannot be
However, it is also true that
a number of constraints have hampered the development of the sector,
limiting the ability of many agents to operate to their full potential.
Current attempts to formulate constructive and supportive policies are
crucial to the future of Kenya’s dairy industry.
This brief looks at the current
impact of policy and associated legislation upon the various agents
operating in the dairy industry, and considers might progress might be
made in policy development.
Box 1. Important dates in the history of Kenya’s
Establishment of Department of Veterinary Services to provide disease
control and research services, particularly for the dairy cattle breeds
being introduced from Europe.
Establishment of Kenya Cooperative Creameries (KCC) to process and
market dairy products.
Swynnerton Plan opens up commercial farming to indigenous Kenyans.
First enactment of the Dairy Industry Act (Cap. 336), setting up the
Kenya Dairy Board (KDB).
Independence of Kenya is followed by the subdivision of European-owned
farms, introducing many smallholders into a highly subsidized dairy
Last livestock census in Kenya.
Abolition of the quota system, following the report of the Kibaki
Commission of Enquiry on Dairy Development, ends the domination of KCC
by large-scale producers.
revision of Dairy Industry Act.
Privatization of artificial insemination (AI).
Liberalization of milk prices and marketing ends KCC’s monopoly in
urban areas and leads to the rapid multiplication of private sector
Dairy Development Policy introduced to help guide the industry from the
old ethos of subsidization into a new era of privatization. The
government’s role is reduced to regulation and creation of an enabling
Kenya Veterinary Association Privatization Scheme formulated to assist
the privatization of veterinary services.
Draft Dairy Development Policy explicitly provides institutional
guidelines that are supportive of small-scale milk production and
informal marketing. It also redefines the role of KDB to go beyond
regulation and be a catalyst for dairy development.
Draft Dairy Bill introduced.
policy and legislative environment
Current important policy-related
Pace of policy revision.
The Dairy Development Policy was first formulated in 1993 to guide the
industry through the liberalization process initiated the previous year.
The policy was updated in 1997 and revised, after wide stakeholder
consultation, in 2000, when it was accompanied by a draft Dairy Bill,
which is yet to be enacted. The process has been slowed by frequent
structural changes at ministry level.
While this change process drags on, conflicts in regulation and
implementation of dairy policies continue to dog the sector.
Since market liberalization in 1992 informal milk sales have grown in
prominence, but most informal traders are not licensed. Licensing is
pegged on possessing fixed trading premises, thus excluding most itinerant
traders. Although this requirement is not based on the Dairy Industry Act,
it is enforced by the Kenya Dairy Board (KDB) under the Public Health Act
(Cap. 242). This situation exists despite research showing little
difference in the quality of milk samples collected from unlicensed
itinerant traders and licensed fixed vendors. Many traders have indicated
their willingness to pay cess in return for licensing and the security of
Institutional capacity to enforce regulations. The
general lack of capacity to enforce dairy industry regulation, and the
implications for the dairy enterprise, is exemplified by current concern
over the variable and often poor quality of livestock foods.
Liberalization of the feed market has allowed many processors to penetrate
the market, supplying the concentrate cattle feeds which, in intensive
dairy production systems, account for over 40 percent of costs. However,
the Kenya Bureau of Standards lacks the resources and capacity to
adequately monitor feed quality, creating loopholes for some feed
manufacturers to reduce quality standards, especially when certain feed
ingredients (such as oilseed cakes) are scarce.
Stakeholder representation. A
significant number of stakeholders in the dairy industry have little or no
effective voice in decision making, particularly smallholder producers,
and raw milk traders in the informal market and their customers. However,
if the interests of all stakeholders are to be addressed, effective
representation, whether on the Kenya Dairy Board, or in other stakeholder
associations, is crucial. In this respect, the increasing role played by
cooperatives in milk production and marketing may provide a pathway by
which the voice of small enterprises might be heard.
infrastructure and services and environment
at each stage of the production, distribution, processing, and marketing
chain are affected by policy-related issues:
Provision of health
Health provision has been hampered by slow privatization of veterinary
services. Eight years after the setting up of the Kenya
Veterinary Association Privatization Scheme (KVAPS) in 1995 to assist this process, only 13 percent of registered
veterinarians are engaged in private practice. Current legislation is not
encouraging: the Veterinary Surgeons Act (Cap. 366) prohibits animal
health certificate or diploma holders from practising veterinary medicine—a
degree is the minimum requirement. In addition, the Pharmacy and Poisons
Act (Cap. 244) prohibits veterinarians from engaging in drug sales,
reducing the viability of private veterinary practice. The market gap has
been filled by a large increase in the number of agro-vet shops (often
manned by unqualified staff) supplying animal health products, introducing
potential danger of drug misuse and abuse.
Provision of breeding
services, including artificial insemination (AI), have also not developed
as hoped since privatization. There are only 300 private AI service
providers to date (entry restrictions include non-recognition by the
government of inseminators trained by the private sector), and the cost of
imported semen is high. The alternatives for smallholders are not
attractive—bull service, with the associated risks of inbreeding and
disease, or the local semen provided by the Kenya National Artificial
Insemination Services (KNAIS), which is perceived to have a high failure
rate. Since there are many institutions playing different roles in dairy
genetic improvement it was proposed in 1993 to group them together under a
Kenya Livestock Breeders Organization charged with the responsibility of
developing a self-sustaining breeding programme.
credit. Lack of access to credit is one of the major constraints facing
small-scale farmers. Formal institutions often require collateral that
many borrowers may not have, and charge high interest rates. Microfinance
institutions that can meet the needs of small-scale entrepreneurs at
relatively favourable terms are still thin on the ground. Policy reforms
were proposed in 1997 to establish an Agricultural Development Bank (ADB)
as a subsidiary of the Agricultural Finance Corporation (AFC), and to get
commercial banks to increase their minimum lending to agriculture from 17
to 20 percent of their deposit liabilities. Although these are yet to be
achieved, AFC is on the rebound with new funding and management this year
after near collapse from mismanagement and political interference.
accessibility. Given the high perishability of fresh milk, an efficient collection,
processing, and marketing system is crucial to the overall viability and
profitability of commercial dairying. Feeder roads play a key role in the
efficiency of milk collection. However, many roads have been inadequately
maintained and are in poor condition. The cess collected from milk sales
is not used for maintenance of feeder roads, unlike the case for cess
charged for cash crops such as tea and coffee. The Kenya Roads Board (KRB)
has been established to oversee the development of the road
infrastructure, acting through various agencies.
This review of current policy issues and
their implications highlights certain priorities:
There is an urgent need for a quick
review of the policies and regulations that are not in tandem with broader
national goals (e.g., creation of employment) and the economic reality of
Harmonization of the different acts that
affect the dairy sector is required to reduce existing conflicts.
Private service provision should be
encouraged with appropriate policies to fill gaps created by the
liberalization process. Where that is not possible, sustainable
alternatives should be sought, such as the introduction of cost sharing,
or the training and equipping of community-based service providers.
Institutions charged with the
implementation of stated policies and regulations should be made effective
by provision of adequate resources and capacity. Where appropriate,
institutions should explore alternative systems, such as self-regulation
and partnership with the private sector.
Full representation of all stakeholders
on key bodies which influence policy would ensure that the process of
policy reform fully reflects the economic realities currently operating in
the dairy sector.