Shining a light on Malawi’s dairy supply chain

This impact case study looks at what has been achieved by a DEGRP agriculture project investigating the Malawian dairy sector.

Led by Dr Cesar Revoredo-Giha from the Land Economy, Environment and Society Research Group at Scotland’s Rural College (SRUC), the project has helped shine a light on Malawi’s dairy supply chain, and has already influenced a key decision on VAT for domestically produced milk.

The challenge

In recent years, governments and donors alike have sought to improve dairy farming in sub-Saharan Africa. A sustainable dairy sector can improve health and contribute to economic growth, as well as to food security. Kenya and India, for example, have successfully developed their dairy industries and created many jobs as a result.

To achieve this, countries need strong supply chains – from production through to raising demand in consumers. Domestic dairy production also needs to compete with international prices or demand for dairy products is substituted by imports.

In Malawi, dairy has the potential to be a key investment sector – much of the country is suitable for dairy farming, and donors such as the United States Agency for International Development (USAID), Japan International Cooperation Agency (JICA) and the UK’s Department for International Development (DFID) have all invested in the sector. Yet to date, domestic production has fallen short of what is possible. A large part of the population is still unable to access nutritious and safe dairy products, even though dairy consumption looks set to rise with increasing urbanisation and economic growth in other sectors.

The research

In a bid to understand what is hampering Malawian dairy sector performance, DEGRP agriculture researchers from Scotland’s Rural College, Lilongwe University of Agriculture and Natural Resources, and the African Institute of Corporate Citizenship decided to investigate the functioning of the dairy supply chain in the country. Their rationale: revamping the formal dairy supply chain could potentially be an effective way to stimulate sector development and increase its contribution to food security and economic growth.

From June 2012 to May 2015, the research team collected information about the dairy supply chain from a range of sector actors. In addition to surveying 460 dairy farmers, they conducted interviews with staff from milk processing plants, milk retailers, and managers and members of regional Milk Bulking Groups (MBGs) – groups that organise the collection of milk from small-holder farmers and store it until it’s ready to be processed. They also interviewed policy-makers and other key stakeholders from government, non-governmental organisations, and development partner organisations.

The research uncovered a range of issues within the dairy supply chain that are affecting the sector’s performance and further development, indicating that supply chain reform is essential.

Findings revealed, for example, that most of the dairy producers surveyed were not operating efficiently, with influencing factors including level of farming experience among individual farmers, amount of land available for grazing, and the type of cattle being reared.

Milk quality also emerged as a key obstacle to sector productivity, the supply chain analysis suggesting that just over a quarter of milk sent to processors is not fit for consumption, and is either thrown away or finds its way toward the informal market. Causes of poor quality milk included poor hygiene at the production stage, spoilage while the milk is in chilled storage due to power cuts, and milk adulteration by farmers hoping to get more of their milk accepted by processing plants.

Tied to the above, shortcomings in infrastructure for milk processing, storage and collection were found to have important effects on the performance of the entire supply chain. In addition to unreliable power supplies, some bulking groups lacked adequate cooling and storage facilities. The collection of milk from remoter rural areas is also hampered by poor roads.

Other factors influencing sector performance included high marketing margins on dairy products, processing plants not working at full capacity, and the knock-on effect on quality, efficiency and productivity of producers not being paid enough for their milk. For a complete overview of the project’s key findings, read our ‘Research in Context’ brief on dairying in Malawi.

The project’s impact

Up until this point there has been little academic interest in the dairy supply chain in Malawi, and existing research was often old or not detailed enough. This DEGRP project has created a more up-to-date and comprehensive picture of the Malawian dairy sector, plugging the data gap and communicating findings to the Malawian Government, dairy supply chain stakeholders, donors, and many others.

Since the project’s completion, the team have continued to expand its databases to include new or updated information on milk collection and prices paid to producers by different milk bulking groups in the regions investigated. These data are regularly used by key stakeholders as they are excellent indicators of the sector performance.

In addition, key relationships developed during the project’s lifespan have endured beyond the project end, and led to promising change on the ground in Malawi. For example, the team have a strong relationship with the Shire Highlands Milk Producers Association (SHMPA), which collects more than 80 per cent of the milk destined for processors in Malawi. In 2017, research produced by the team was used in negotiations by SHMPA and other stakeholders to persuade the Malawi Revenue Authority (MRA) not to impose a 16.5% VAT on domestic milk, as the burden would be borne disproportionately by the domestic dairy industry, particularly farmers. The MRA went on to eliminate the proposed new tax on milk, citing the effects on the domestic dairy sector as their main reason.

Next on the team’s agenda is further work in Malawi to extend their DEGRP research on dairy supply chains into other regions. They also plan to do supply chain research on other areas of the agriculture sector, for example on underutilised crops such as millet and amaranth in several countries of Sub Saharan Africa, including Malawi.