! Formalizing the Informal Sector Dynamics of the Political Economy

Transcription

1 Formalizing the Informal Sector Dynamics of the Political Economy The case of the informal milk trade in Kenya Bill Grant Harun Baima Kevin Billing Collins Apuoyo Sponsored by

2 Introduction a story of transformation Kenya Dairy sector has evolved steadily over the last 15 years changing structure; Increasing formalization of the sector; growing steadily in numbers of participants, volumes, quality and income The growth has been driven by the informal sector Transformation led by government policy, facilitated by two non-traditional donor funded initiatives DFID BSMDP one of DFID s first market system projects DFID Governance Challenge Grant Initial analysis, implementation approaches, and changes Introductions 2

3 Markets Retailing Kenya Dairy Value Chain Rural Consumers Hawker/ Milkbar (10,000) Poor Ksh/l Caterer/ Hotel (145,000) Urban consumers Small Retailer (90,000) Rich Ksh/l Large Retailer( 10) Wholesaling Transpor1ng Processing Pasteurizing Cooling Collec1on/ Bulking 35 % of the marketed milk 480 million Traders (5,000) 50 % of the (10) marketed milk 700 million 15 % of the marketed milk Coopera1ves/Selfhelp Groups (1,000) Large/ Medium Dairies 200 mn Small Dairy (20) Produc1on 3 Smallholder farmers (625,000) Channel 1: Channel 2: Rural Raw Milk Informal Trade Medium/Large Dairy farmers (2,000) Channel 3: Pasteurised milk Channel 4: Dairy Products

4 Markets Retailing Kenya Dairy Value Chain Rural Consumers Hawker/ Milkbar (10,000) Poor Caterer/ Hotel (145,000) Urban consumers Small Retailer (90,000) Rich Large Retailer (10) Wholesaling Transpor1ng Processing Traders (5,000) Large/ Medium Dairies (10) Small Dairy (20) Pasteurizing Cooling Collec1on/ Bulking Coopera1ves/Selfhelp Groups (1,000) Produc1on 4 Smallholder farmers (625,000) Channel 1: Channel 2: Rural Raw Milk Informal Trade Channel 3: Pasteurised milk Medium/Large Dairy farmers (2,000) Channel 4: Dairy Products

5 Critical constraints for traders Major concern is food safety Informal trade of raw milk was illegal. Transactions costs: Stopped by health department and police, fines Seizure of vehicles, confiscation of equipment (cans) Spoiled milk, delays Regulator (KDB) was heavily influenced by large dairies, but: Short on revenue Reality is: 80% of milk is sold raw because market wants it. KDB did not know how to regulate, interact with informal sector Image issues for raw milk traders 5

6 BDSMP Dairy Market System Interventions KDB : FORMALIZATION OF THE INDUSTRY STEMMING FROM TRAINING ON QUALITY Certification of trainers Increased consultation Branding of KDB Quality Improved income for KD Better monitoring and evaluation Enabling Environment Markets Retailing Wholesaling Transporting Processing Service Market *Milk dispensers *Hawker distribution network Service Market: Training of traders, transporters, milk bars in food safety and safe milk handling Service market: Laboratory testing Service markets for information transmission thru: *Media Programmes *Livestock Breeders show Pasteurizing Cooling Collection/Bulking Production Input/feed Development of Service Hubs Service Markets: *Supply of commercial dairies *transport to the collection centers *bulking and chilling of product Service Markets: *distribution of AI semen *marketing of AI services *Agrovet for feed and medicines

7 BDSMP Dairy Regulatory Interventions KDB : FORMALIZATION OF THE INDUSTRY STEMMING FROM TRAINING ON QUALITY Enabling Environment Markets Retailing Certification of trainers *approval of training courses Branding of KDB Quality *increased confidence-> sales Wholesaling Transporting Processing Increased consultation *National Dairy Regulators Consultative Forum *Regional Regulators Forums *regional Stakeholders Forums *Formation of District Stakeholders Committees Improved income for KDB *sale of licenses, increased cess collection Pasteurizing Cooling Collection/Bulking Production Input/feed Improved systems M&E system was developed so KDB is now able to track the actors in the sector better

8 Fixing the enabling environment BSMDP SITE Development / NGO actors Facilitators: Temporary actors Kenya Dairy Board Police Public Health Legislation and regulation Private trainers District regulatory Forums Market: Permanent actors Milk Transporters Farmer groups Informal milk vendors 8

9 Outstanding issues for traders Not as protected hence continued harassment Negative perceptions and poor image of their sector Imbalance of power in the sector disadvantaged (formal sector and sector agencies) Large number of their own working same old ways They wanted to be recognised and work together 9

10 Fixing the enabling environment BSMDP SITE Development / NGO actors Facilitators: Temporary actors Kenya Dairy Board Police Public Health Legislation and regulation Private trainers District regulatory Forums Market: Permanent actors Milk Transporters Farmer groups Informal milk vendors Dairy Traders Ass n 10

11 Process of sector engagement Mobilization of traders in key production and high market activities Consultation process and self-organisation rationalisation (small groups, regional associations and final national level) Organizational development focusing four pillars On-going support to sector and associations; driven by strategic outcomes at enterprise, raw milk sector and business environment levels

12 Status---DTA Dairy trader groups Based on geography and/or category i.e. milk bar, bicycle trader, transporter Dairy Traders Association Branches (10) Formed by groups in a geographic area coming together e.g. 9 groups in Kirinyaga. Membership varies from 275 and 525 Dairy Traders Association Formed by leaders of DTAs coming together to form a National Association and a National Committee. National body registered with Registrar of Societies in April 2009 Total membership of DTA is 8500 individual traders in 2010 (over 200 members joining per month at current rate) By 2015 there are 14,000 members 1 2

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14 What has changed in the Sector by 2010 Viewed at different levels Traders and the regulators Self-regulation Growth at enterprise and sector level Services to traders Influencing policy Increased linkages to Producers & Consumers Market system 14

15 Changes Work with Regulator u Engagement at policy level KDB and MoLD Clarity (transparency) of regulatory requirements boosts incentives to compliance. Established Dialogue between the traders and the regulators u Reduced cost of doing business for the traders Ease and location for certification, e.g. in Kisumu one-stop service, e.g. in Eastern on-site health inspection, e.g. Miwani 15

16 Changes Self Regulation Code of Conduct for the traders regulated at cluster level quality issues, Farmer relationships payment on time Significant changes in practices elimination of adulteration, better quality milk, stabilisation of trade that can be tracked 16

17 Changes: Enterprise level Growth of enterprises Increased volume traded by sector and individuals Upgrading of enterprises From bicycles to motor cycles, tuk-tuks and pickups From mobile vendor to milk bars Processing of liquid milk to mala and yoghurt, innovative business/food solutions especially for youth and urban labour force. New equipment milk steel cans, storage tanks, Dispensers 17

18 Changes: Services to members A wide range of services offered or facilitated by the associations. Access to service providers especially for quality improvement and processing (mala and yoghurt). Protection during harassment Financial services Welfare and table banking Kshs. 1.42m loaned every week from current savings by members (at 10% for the week). Links with banks/fsi e.g. Faulu and Equity in Nakuru and Kirinyaga. 18

19 Changes: linkages Producers Reliable buyers & better prices Informal credit systems from traders Greater access to info through the associations/ groups Consumers Easier access to affordable quality milk stabilized at Kshs per liter delivered at the door Can buy quantities they need from 25ml to 50 liters Personal relationship with supplier Credit can pay weekly Preferred product whole milk 19

20 Other Changes Traders have greater confidence in their enterprises rapid change of self-image Growing consumer confidence and respect by others food safety being assured Increased and affordable services to the sector emerging 20

21 Changes: KDB Ease of access to traders: single point of contact More income levies and cess one stop paying point, scheduled Growing confidence on safety by traders Realistic engagement in the VC by working with the dominant market player 2 1

22 Markets Retailing Kenya Dairy Value Chain Rural Consumers Hawker/ Milkbar (10,000) Poor Urban consumers Rich Ksh/l Ksh/l Caterer/ Small Hotel Retailer (145,000) (90,000) Large Retailer (10) Wholesaling Transpor1ng Processing Pasteurizing Cooling Collec1on/Bulking 3035 %% of of the the marketed milk 480 milk million 600 million Traders (30,000) (5,000) Large/ Medium Dairies 50 % of the (8) marketed milk million billion % of the marketed milk mn Coopera1ves/Selfhelp Groups (1,000) Small Dairy (10) Produc1on 22 Smallholder farmers (750,000) (625,000) Channel 1: Channel 2: Rural Raw Milk Informal Trade Channel 3: Pasteurised milk Medium/Large Dairy farmers (2,000) Channel 4: Dairy Products

23 Changes since 2010 Changing Political Economy: New requirement for pasteurization Investment in small scale pasteurization services o Advent of local dispensing machines o Increases conflict with police and health agents, o raising costs to traders o Regulatory framework does not reflect actual operations on ground. Devolution in Kenya - County Governments now investing in the sector, county dairy plans, new (fragmented) support to farmers - cooling stations 23

24 Markets Retailing NEW: Kenya Dairy Value Chain Rural Consumers Hawker/ Milkbar (10,000) Poor Caterer/ Hotel (145,000) Urban consumers Poor middle class Milk dispensers Small Retailer (90,000) Rich Supermarkets (300) Wholesaling Transpor1ng Processing Pasteurizing Cooling Collec1on/ Bulking 20 % of the marketed milk 600 million Informal Traders (8,000) Licensed raw milk Traders (14,000) Farmer owned: self help groups, coops, companies Pasteuriz ing Licensed milk Traders (250) Process ing Coops Large Private Dairies 60 % of the marketed milk (3) 1.5 billion 20 % of the (7) marketed milk 540 mn Small Dairy (35) Produc1on Tradi1onal Smallholder farmers (700,000) Progressive Small-holder farmers (120,000) Medium/Large Dairy farmers (15,000) 24 Channel 1: Rural Raw Milk Channel 2: Informal Raw milk Trade Channel 3: Licensed Raw Milk Trade Channel 4: New processors Channel 5: Large Dairies Channel 6: Dairy Products

25 Conclusions Can effectively organise the informal sector Markets and consumers drive the sector Formalization can benefit all parties clear value proposition Numerous interventions, each building on the last, to make the whole system work The regulatory practices have been rapidly responsive to these changes. However, the statutes are well behind the market realities (could this be the case in other sectors?) 2 5

26 Conclusions (2) 2 6 Clear diagnosis, end market analysis, open mind Markets and consumers drive the sector and external business models must respond Need to work with the entire market system - interdependent Facilitation process needs to identify the incentives to the market actors and drive the actors together Changing political economy can support or undo many gains, needs consistent monitoring and advocacy.

27 THANK YOU William Grant The BEAM Exchange is a programme funded by the UK s Department for International Development ( DFID ) and the Swiss Agency for Development and Cooperation. It is administered by PricewaterhouseCoopers LLP, working with organisations including the Institute of Development Studies and ITAD.This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP and the other entities managing the BEAM Exchange (as listed above) do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.