Rwanda Consulting Abroad Program Spring 2012

Transcription

1 Rwanda Consulting Abroad Program Spring 2012 By John Brittell

2 Agenda MacroView Agricultural Sector Overview Value Chain Analysis Kenya Value Chain Analysis Rwanda Appendix

3 Rwanda - MacroView Indicator Feb 2012 Real GDP Growth 7.1% Inflation 7.8% Interest Rate 7.0% Lending Rate 16.6% Deposit Rate 8.2% Savings Rate (nation, 105 th ) 16.6% Risk Premium (on lending) 9.2% Credit Rating (Fitch,S/P) B, B FX Rate (US$/RWF): 600 RWF FX Rate (KSH/RWF): 7 RWF Key Export Partners: Kenya! Trade Balance (% of GDP) -14.1% Debt/GDP 15% All Figures Current (either 2011 or Feb 2012) Source: Central Bank of Rwanda, Jan 2012, Economist Intelligence Unit, CIA Factbook

4 Source: EIU Rwanda 2012, Oanda.com Rwanda MacroView FX Rates

5 Rwanda MacroView GDP & Growth Drivers GDP Composition Agriculture 34% Industry 14% Services 52% Source: DCA Rwanda Guarantee Report Dec 2009

6 Source: EIU Rwanda 2012 Rwanda MacroView Exports

7 Population (2009 Census) *11.4 million people, 81% rural, 2.8% growth rate overall, 8.2% urban growth rate; *400 pple/sqkm! The most dense country in Africa Age Demographic: youth < 14yrs are > 41% of population Labor: xx% unemployment rate. xx% of formal employment and more than xx% of informal employment in agriculture Income distribution: Education: Mostly agrarian. 70% literacy rate (men 76%, women 64%), 96% primary school enrollment Societies: cooperatives limited Rwanda MacroView Social

8 Agriculture Sector Overview

9 Agricultural Sector Overview Agriculture Products: coffee, tea, pyrethrum (insecticide made from chrysanthemums), bananas, beans, sorghum, potatoes; livestock Challenges: land degradation, overuse, and fragmentation

10 Kenyan Value Chain Analysis

11 USAID s Value Chain Analysis What Does Value Chain Analysis Entail Per USAID? In identifying opportunities for upgrading and the constraints to these opportunities, the analysis should focus on answering the following questions: What and where are the market opportunities? What upgrading is needed to exploit them? Who will benefit from this upgrading? Who has the resources, skills and incentives to drive upgrading? Why has it not happened already? What will it take to make it happen?

12 Kenyan Dairy Value Chain

13 Overview of Kenyan Dairy Kenyan Dairy Value Chain Production: 3 rd largest producer in Africa (behind Sudan & Egypt) 4.7b liters (2008); 3 rd largest Ag sub-sector (larger than tea); contributes 3.5% of GDP (14% of total Ag GDP) Consumption: per Kenyan 110 liters / year; the highest developing country consumer (Mauritania, Mongolia); 3x as much as Ugandans; 4x as much as avg. African Expenditure: ~ 18% of income spent on milk, second only to cereals (maize); 40% of income generated is from dairy (ILRI) Net Importer of Milk: $3M opportunity 2.3b liters imported; 70% imports are of milk powder; KCC (co-operative creameries, Ltd) collapse limited exports of milk Supply largest cattle herd in Africa of 7m Growth 2-3% / year Net Exporter of Milk 2010 reports due to EAC trade Opportunities source of improved bull semen, source of improved genetics, COMESA intl prices the most significant commodity in Kenya Markets formal vs. informal not the same

14 Kenyan Dairy Value Chain Overview of Kenyan Dairy Employment: husbandry skills low; but milk bars, mini-dairies, processors, cooling plants, cottage industries all offer employment (account for 3.5% of GDP); 1.8m dairy farms or 35% of rural households Efficiency of local production compared to global averages (yield gap): yields per cow in US ~ 9,000 kg / year; SA & Argentina ~ 2,500 to 3,500 kg / year; Kenya ~ 670 kg / year (NewKCC) ~ 564 kg / year by FAO Geography of production: 53% in Rift Valley, 25% in Central Province Major players: NewKCC, Brookside Dairy, SpinKnit, Githunguru account for 92% of market Constraints Regulation heavy with very low support for artificial insemination (improved bull semen) and veterinary services Capacity - smallholder (2-3 cows) farms produce 80% supply, low per farmer production supply to processors shady Quality is poor; adoption of technology low Costs high production costly, processing and packaging costs high and preclude investment Investments weather to volatile; price premium for chilled milk

15 Kenyan Dairy Value Chain VC Point Inputs Production Transport / Bulking / Cooling Distribution / Processing Marketing / Distribution Stakeholders Who is doing this? - Cows, Goats, Camels of good breed - Land & Water - Limited feed supply (no napier grass), - Little vet services, - Structure/ housing - Waste management - 80% from small (1-4 cows) holder farmers - Produce 3.2b liters (2005) ~32% of this enters formal market (based on rainy seasons x2) - Zero grazing = lower production due to feed - Semi and Open range grazing offer 15-30liters per day - milk marketed (2005)increased by 21.2% to over 1 billion liters - Low technology adoption - 85% milk is fresh, 3% yogurt, fermented 7%, 2% value added products (cheese, butter) - 75% of total costs of production; 90% variable costs - ~ 20-25% of total marketed milk sold through formal processors; remainder goes through informal sector - 34 registered processors (>80% market controlled by 3 companies NewKCC (39%), Brookside (31%), SpinKnit (13%) - Kakuzi (largest one) - New packaging brings price point lower (250ml and 500ml = 25% lower price point) - Sustainable Distribution system: via bikes! Financing Needs that have/have not been met - Feeding (nutrient intake) - Purchase of land to prevent Common land grazing; also to seed feed (napier grass) - Access to water - Access to improved breeding (AI artificial insemination); lower costs to semen - Transportation from Farmer to Cooler/Processor - Cooling centers a must in bank loans to farmers; largest problem in supply chain - Large players only utilize 30-40% capacity; Brookside the 70% capacity utilization - Consumption happens in small quantities, typically for tea drinking - Raw milk better for Kenyans - Boiling is good enough over pasteurized milk - Transportation Additional Info/Notes - Fodder preservation smoothens milk flows - New technology (by ICIPE) controls crop pests affecting dairy Suppliers - Animal feed - Breeding / Vets - Dairy Equip - Farm Equip - Livestock Insurance Other uses - Compost Manure - Biogas - Center for Development Enterprises - EADD Kenya (east Africa dairy development) - Heifer Intl.

16 Kenyan Dairy Value Chain Consumption Price: Ksh / liter Farmer (Producer) Spread: Ksh / lliter Marketing & Distribution Spread: 1-2 Ksh / liter Transporter or Hawker Spread: 4-5 Ksh / liter Processing Spread: Ksh / liter Bulking & Cooling Spread: 2 Ksh / liter Distribution Spread: n/a

17 Rwanda Dairy Value Chain

18 Overview of Rwanda Dairy Rwanda Dairy Value Chain Production: value of milk ~ $64billion Consumption: Rwandans drink 12 L / year; Ugandans drink 22 L / year, Kenyans 110 L / year; 16% home, 35% spoilage Expenditure: Net Importer of Milk: $3M opportunity 2.3b liters imported; 70% imports are of milk powder; KCC (co-operative creameries, Ltd) collapse limited exports of milk Supply cattle herd of 1.2m; 14% millking cows; 8% are improved breeds Growth milk 0% / year; although livestock 3.5% CAGR Opportunities Kenya Commodity Markets 47% informally marketed, 2% formally marketed; limited cooperatives; locally produced milk serves locals; value added products serve intl. markets!

19 Rwanda Dairy Value Chain Overview of Rwanda Dairy Employment: husbandry skills low; but milk bars, mini-dairies, processors, cooling plants, cottage industries all offer employment (account for 3.5% of GDP); 1.8m dairy farms or 35% of rural households Efficiency of local production compared to global averages (yield gap): yields per cow in US ~ 9,000 L / year; SA & Argentina ~ 2,500 to 3,500 L / year; Kenya ~ 670 L / year; Rwanda 700 L / year very inefficient Geography of production: Eastern (Umutara) 5+ hectares, 100+ Ankole cows; Northern, Southern, Western all < 1 hectare w/ < 3 cows Major players: MINAGRI, Inyange Industries, Nyagatare Dairy Farmers Union, Dukorere Igihugu Farmers Cooperative (DUFACO), Constraints Regulation heavy with very low support for artificial insemination (improved bull semen) and veterinary services Capacity/Farm Size largest farm sizes in Eastern 1.4 hectares; smallest farms in Southern.34 hectare; average < 1 hectare Quality is poor; adoption of technology low; limited cooling centers Costs high production costly, processing and packaging costs high and preclude investment Investments weather to volatile; price premium for chilled milk

20 Rwanda Dairy Value Chain

21 Rwanda Dairy Value Chain Milk Inputs & Production Contract Price 190 RWF Farm Gate Price (direct to farmer) Transport (by Cooperative) Cooling (by Cooperative) 150 RWF 20 RWF 20 RWF - What are the inputs for Dairy Farmers? - Fixed: cows, land, labor, storage - Variable Costs: feed, water, vet, fodder - Production aspects to consider: - Milk types - Players & Location - Efficiency - Quality - Pricing (based on feed)

22 Transportation (I) bicycle vs Rwanda Dairy Value Chain

23 Transportation (I) commercial Rwanda Dairy Value Chain

24 Bulking & Cooling Rwanda Dairy Value Chain

25 Processing Rwanda Dairy Value Chain

26 Rwanda Dairy Value Chain Retail Vendors Milk Vendor Location?

27 Pricing Informal Market: Dry vs. Rainy Season Rwanda Dairy Value Chain

28 Pricing Formal Market: All Seasons Rwanda Dairy Value Chain

29 Rwanda Dairy Value Chain Retail Pricing Milk Product Volume Retail Price UHT Whole Milk Tetra Pack 1 liter 750 RWF UHT Low Fat Milk 500ml 650 RWF UHT Whole Milk Tetra Fino 500ml 350 RWF UHT Whole Milk Tetra Fino 250ml 250 RWF Pasteurized Milk Jerrycan 5 liters 3,000 RWF Pasteurized Milk Jerrycan 3 liters 1,900 RWF Pasteurized Milk Jerrycan 2 liters 1,300 RWF Pasteurized Milk Gable Top Pasteurized Loose Milk (Dispensers) 500ml 400 RWF 1 liter 450 RWF

30 Questions

31 Appendix

32 Kenyan Dairy Value Chain

33 Margins Analysis Kenyan Dairy Value Chain

34 Dairy Case Study: BSMDP DfID Business Services Market Development Project: Local Model

35 Dairy Case Study: BSMDP DfID Business Services Market Development Project: HUB Model