government of the republic of zambiacollection centre limits the participation of potential farmers....

New Partnership for

Africa’s Development (NEPAD) Food and Agriculture Organization

of the United Nations Comprehensive Africa Agriculture Development Programme (CAADP)

Investment Centre Division

GOVERNMENT OF THE REPUBLIC OF ZAMBIA

SUPPORT TO NEPAD–CAADP IMPLEMENTATION

TCP/ZAM/2906 (I) (NEPAD Ref. 04/01 E)

Volume IV of IV

BANKABLE INVESTMENT PROJECT PROFILE

Smallholder Dairy Development Project

November 2004

ZAMBIA: Support to NEPAD–CAADP Implementation

Volume I: National Medium–Term Investment Programme (NMTIP)

Bankable Investment Project Profiles (BIPPs)

Volume II: Nega–Nega Smallholder Irrigation Scheme Development Project

Volume III: Sustainable Aquaculture Development Programme

Volume IV: Smallholder Dairy Development Project

NEPAD–CAADP BANKABLE INVESTMENT PROJECT PROFILE

Country: Zambia

Sector of Activities: Dairy Development

Proposed Project Name: Smallholder Dairy Development Project

Project Area: Copperbelt and Central Provinces

Duration of Project: 5 years

Estimated Cost: Total Cost ............. US$3.2 million

Suggested Financing:

Source US$ million % of total

Government 0.32 10

Financing institution(s) 2.25 70

Beneficiaries 0.16 5

Private sector 0.48 15

Total 3.21 100

ZAMBIA:

NEPAD–CAADP Bankable Investment Project Profile

“Smallholder Dairy Development Project”

Table of Contents

Abbreviations........................................................................................................................................ iii

I. PROJECT BACKGROUND.......................................................................................................1 A. Project Origin ....................................................................................................................1 B. General Information..........................................................................................................1

II. PROJECT AREA.........................................................................................................................3

III. PROJECT RATIONALE............................................................................................................5

IV. PROJECT OBJECTIVES...........................................................................................................6

V. PROJECT DESCRIPTION ........................................................................................................6

VI. INDICATIVE COSTS .................................................................................................................8

VII. PROPOSED SOURCES OF FINANCING ...............................................................................9

VIII. PROJECT BENEFITS ................................................................................................................9

IX. IMPLEMENTATION ARRANGEMENTS ............................................................................10

X. TECHNICAL ASSISTANCE REQUIREMENTS .................................................................12

XI. ISSUES AND PROPOSED ACTIONS ....................................................................................12

XII. POSSIBLE RISKS.....................................................................................................................13

ANNEXES: ...........................................................................................................................................15 Annex 1: Map of Project Area ..................................................................................................17 Annex 2: List of References ......................................................................................................19

NEPAD – Comprehensive Africa Agriculture Development Programme

Zambia: Investment Project Profile “Smallholder Dairy Development Project”

iii

Abbreviations

ACP Agricultural Commercialization Programme ADB African Development Bank ADSP Agricultural Development Support Programme AI Artificial Insemination CAADP Comprehensive Africa Agricultural Development Programme CB Copperbelt Province DRC Democratic Republic of Congo ECF East Coast Fever EU European Union FAO Food and Agriculture Organization of the United Nations GART Golden Valley Agricultural Research Trust GDP Gross Domestic Product GRZ Government of the Republic of Zambia IFAD International Fund for Agriculture Development LDP Livestock Development Programme LDT Livestock Development Trust MACO Ministry of Agriculture and Co–operatives NALEC National Livestock and Epidemiology Information Centre NEPAD New Partnership for Africa’s Development NGO Non–Governmental Organization PRSP Poverty Reduction Strategy Paper UNDP United National Development Programme USAID United States Agency for International Development WHO World Health Organization ZATAC Zambia Agribusiness Technical Assistance Centre



1

I. PROJECT BACKGROUND

A. Project Origin

I.1. The project was proposed by the Department of Veterinary and Livestock Development of the Ministry of Agriculture and Co–operatives (MACO). Smallholder dairy development is an important component of the Livestock Development Plan (2000–04) (LDP) as well as the Agricultural Commercialization Programme (ACP) and the Poverty Reduction Strategy Paper (PRSP). The LDP provides the framework for livestock policies to be followed. Key areas for interventions are: stimulating livestock production, effective health control measures and improving market integration of the livestock sub–sector. Pillar 5 of the Comprehensive Africa Agricultural Development Programme (CAADP) highlights livestock and fisheries development as important components of agricultural development.

I.2. The LDP highlights the need to meet national demand for livestock and livestock products and to explore export potential. Farmers, especially smallholder livestock ones are encouraged to adopt strategies like working under outgrower arrangements, setting up marketing committees, establishing disease control funds and group formation. It is also noted that with the liberalization and privatization policies adopted by Government of the Republic of Zambia (GRZ), community based livestock producer–led associations/groups should be the custodians of stakeholder interests. This is necessary for smallholders to obtain better services and to improve individual productivity. In dairy development, the end goal is to strengthen a large number of smallholder producers to become major contributors of fresh milk and other dairy products and to ensure that dairying becomes a major income generating activity.

B. General Information

I.3. The livestock sector accounts for about 3% to the agriculture’s share of the Gross Domestic Product (GDP) in Zambia. The sector provides essential food products such as meat and milk, raw materials such as hides and skins, blood meal and horns and sustains employment and incomes of the rural population in the livestock areas. Through animal draught power and as a source of organic manure, it contributes directly to increased agricultural production in general and food security in particular. Mixed crop and livestock farming is widespread among small–scale farmers in the country.

I.4. Table 1 indicates estimated cattle population in Zambia. The largest proportion of cattle is found in the “traditional” or smallholder sector (83% cattle) and the balance is in the commercial farming sector.

Table 1: Estimated 2001 Cattle Population Province Bulls Cows& Heifers Oxen and Steers Calves Total Cattle Central 4,276 59,639 32,509 23,169 119,593 Copperbelt 459 10,690 2,268 5,304 18,721 Eastern n/a n/a n/a n/a 52,907 Luapula 248 1,415 159 310 2,132 Lusaka n/a n/a n/a n/a 42,391 Northern 653 8,547 1,967 4,573 15,740 North Western 3,977 34,762 6,616 9,633 54,988 Southern 12,994 165,493 112,756 75,027 366,270 Western 23,568 216,051 135,031 548,879 923,529 National Totals 46,175 496,597 291,306 666,895 1,596,271 Source: National Livestock and Epidemiological Information Centre (NALEC)



2

I.5. Table 1 indicates that Western, Southern, Central, and Eastern Provinces account for 89% of the cattle population in Zambia. The country has vast potential for increased livestock production which is currently under–utilised. Productivity in the traditional sector is characterized by slow growth (5–8 years to reach market weight), high mortality rates and low reproductive performance. In comparison, production from the commercial sector feature low calf mortality, high reproductive rates and high off–take.

I.6. Reasons for low livestock productivity in Zambia include the high incidence of animal diseases, inadequate animal nutrition, poor husbandry and management practices, poor marketing infrastructure, and ineffective extension and research services.

I.7. The dairy sub–sector plays a major part in the livestock sector. Production of milk for the market is dominated by smallholders largely due to more farmers joining the dairy co–operatives/farmer groups. It is estimated that smallholder dairy farmers contribute about 50% of the marketed milk (150 million litres), 23% is supplied by large–scale commercial farmers, while the remaining 27% is imported as milk and milk products. Dairy co–operatives provide readily available market for milk from producers. In some areas of the country, notably Southern Province, milk collection centres or sheds are located about 8–30 km radius from small–scale dairy farmers and the major milk processors are located 60–160 km from the collection centres. The distance of milk collection centre limits the participation of potential farmers. There is therefore a need to establish more milk collection centres to reduce on the distance.

I.8. The per capita consumption of milk in the country is 16 litres while the World Health Organization (WHO) recommended per capita consumption is 45 litres. Therefore, according to the Department of Veterinary Services and Livestock Development, Zambia needs to produce about 900 million litres per year to meet the demand for milk and other dairy products (like cheese, butter, yoghurt, etc.) for a national population size of around 10 million people. Thus, there is significant scope for increased milk production.

I.9. Challenges to smallholder dairy production and livestock production in general include: high risk of cattle diseases, lack of constant supply of high quality and reasonably priced inputs like feed, lack of easily accessible milk bulking points, limited supply of well organized and reasonably priced source of grade stock, inadequate dairy training, extension and vet services, and poorly organized farmer groups. Therefore, there is a need for increased investment in the dairy sub–sector by the private and public sector and with support of the co–operating partners.

I.10. Various organizations including government are supporting or implementing a number of initiatives in the livestock sector in general and the dairy sub–sector in particular in various parts of the country. These include:

• Heifer Project International: This international NGO has provided in–calf heifer loans to some co–operative farmer groups in the Copperbelt and Southern Provinces since 1999. Farmers pay back in kind by passing on the first female calf to other deserving members. To date, a total of 361 heifers and 29 bulls have been given out on such terms to some 215 members in the two provinces with Southern Province being the leading beneficiary area with 341 heifers and 28 bulls being given out. With more financial support, it is possible to up–scale this programme to cover more farmers especially in the Copperbelt were demand is very high.

• Land O’Lakes Zambia Enterprise: It has been involved in training smallholder producers, developing producer associations and co–operatives, and facilitating the



3

establishment of producer–owned milk collections centre; providing technical assistance, training and technology to dairy processors; assisting the industry in strategic promotional and educational campaigns that articulate the nutritional benefits of consuming dairy products; implement a code of conduct for quality assurance systems; and linking with local partners and organizations in dairy production, processing, promotion and education.

• Zambia Agri–business Technical Assistance Centre (ZATAC): has been involved in providing loans to farmers to install milk sheds and milk tanks in the Southern Province.

• Golden Valley Agricultural Research Trust (GART) and Livestock Development Trust (LDT): These two institutions are involved in breeding and multiplying animals which are then sold to smallholder farmers in various parts of the country. They also train farmers in animal husbandry including nutrition and breeding. The two institutions cannot meet the demand for livestock due to low conception and calving rates and financial constraints. These institutions have the potential to play a significant role in the livestock sector if properly capitalized.

• Private dairy processing companies: There are several big dairy processing companies like Parmalat, Finta, ZamMilk, etc., that operate in the major towns of Southern, Lusaka and Copperbelt Provinces

• Government: Through the MACO provides limited amounts of grants to GART and LDT to help them implement dairy development activities, though the amounts provided are insufficient. The Department of Veterinary and Livestock Development provides services like extension, veterinary and monitoring the development of the livestock sector in general. However, budgetary and staff constraints limits the effectiveness of the Department’s performance.

• Donors: In the past, the following donors have made significant contributions to the livestock sub–sector in Zambia: the European Union (EU), the governments of Netherlands, Belgium, Norway, and Japan, IFAD, FAO and UNDP. Most of the interventions by these donors have essentially focussed on livestock disease control. Some of these donor agencies may be approached to help support the proposed dairy project on the Copperbelt Province.

II. PROJECT AREA

II.1. The Copperbelt Province is a highly urbanized area with a population density of 53 persons per square kilometre and the highest population concentration (1,527,294 persons according to the 2000 population census). The Central Province has a population density of 40 persons per square kilometre. Mining has been the major economic activity for many years, although for Central Province, agriculture is an important economic activity as well. With the decline in copper, cobalt, lead and zinc production due to declining reserves, there have been major reductions in formal employment in the two Provinces. The industrial base which supported the mines has also declined. This has left large segments of the population in the Province to seek alternative means of livelihood. Agriculture, and in particular, dairy farming offers the greatest opportunities for economic diversification, which is the cornerstone of government policy. Within agriculture, diversification aims at moving away from maize into other crops, livestock and fish farming.



4

II.2. There is a high concentration of forestry plantations on the Copperbelt which offers dairy farmers a good supply of timber and timber products which can and is being used to construct proper housing for their animals.

II.3. The Copperbelt falls within agro–ecological region III with high rainfall (1,000–1,500 mm per year). There is an abundance of natural rangeland for livestock feed or alternatively, farmers can plant pasture for their livestock. Central Province falls within agro–ecological Region with rainfall ranging 800–1200 mm annually. Some of the most fertile agricultural soils are located in Region II.

II.4. Currently, there are some smallholder farmers involved in dairy farming in some areas of the two Provinces. These are found in Luanshya, Misundu and Kaloko on the Copperbelt and in Mpima Scheme (Kabwe District) in Central Province. The two Provinces have some large commercial dairy farmers like Cedrics, Kafubu Dairy Farm, Kamfinsa, and Baluba Valley Farms on the Copperbelt, and a concentration in Mkushi and Chibombo Districts in Central Province.

II.5. In terms of markets for milk and other dairy products, the major towns of Central, Copperbelt and even Lusaka Provinces have a large number of institutions like hospitals, schools and colleges that demand these products. These areas have a large concentration of urban households including a large segment of Moslems whose diets require high volumes of milk. Neighbouring Democratic Republic of Congo (DRC) also offers a large potential market for agricultural products like dairy.

II.6. The project period will run for a period of five years. In the initial period, the project will focus its activities in the Ndola/Luanshya/Kitwe/Chingola area of the Copperbelt Province. Currently, the area has a small cluster of smallholder dairy farmers operating under the Jele Heifer Co–operative in Fisenge area on the Ndola/Luanshya road within a 30 kilometre radius. The group has a total of 52 members, 27 of whom have at least one milking cow each and the majority of the members are female. A prominent commercial dairy farmer in the area initially supported a few farmers with 10 dairy animals. Heifer International also came in the picture and provided some of the group members with one in–calf dairy animal. The idea is that each farmer would then pass on the young animal to another promising farmer for rearing. Individually, the members provide their own water systems for their animals. Future plans by the group include construction of biogas tanks on their farms and construction of a milk collection and cooling facility for which a site has already been acquired.

II.7. During the latter years, the project would be expanded to cover other districts on the Copperbelt (Mpongwe, Chililabombwe, and Massaiti), as well as Mpima Settlement Scheme in Kabwe District of Central Province. The scheme with an area coverage of 5,000 hectares, has been in existence since the 1970s. The scheme is located about 15 km from Kabwe which in turn is about 200 km from Lusaka. In the past, dairy farming in the area was heavily promoted. At its peak, the scheme had 75 dairy farmers but this has drastically reduced to 10 currently largely due to loss of animals as a result of diseases. Farmers in the area have been plagued by constraints such as livestock diseases (Foot and Mouth) which is the major cause of the decline in livestock numbers; lack of transport to ferry milk to markets and absence of milk collection and cooling facilities. Farmers in the scheme market their milk within Kabwe District on an individual basis. The scheme has great potential to become a major dairy entity if supported.

II.8. A major constraint currently faced by smallholder dairy farmers in the target project area is lack of organized market places. There are no milk bulking or cooling facilities for smallholder dairy farmers and the milk is sold by individual farmers. As volumes of milk increases, this poses a major challenge. The few large–scale dairy producers in the area are not linked to the smallholders as they operate their own commercial enterprises. Smallholder farmers do not add value to their milk, though



5

this is very important as prices tend to be higher for such products. Currently, milk fetches a favourable price of K1,500 per litre among smallholder farmers on the Copperbelt and demand is high.

II.9. The target group for the project would include the existing smallholder dairy farmers in the Luanshya/Ndola/Kitwe catchment area and those who have expressed desire to take up dairying in other towns of the two target provinces. In particular, women and retirees with a reasonable resource base i.e. land would be targeted. Female headed households are particularly important in terms of poverty alleviation and household food security and nutrition. These target groups’ current survival or coping mechanisms include small–scale food crop production, small–scale trading, and some livestock rearing activities.

II.10. Different institutions will be expected to play their respective roles within the project. These include the following:

• Farmer groups: organization, training, and lobbying as well as actual project implementation.

• MACO’s Department of Veterinary and Livestock Services which is mandated to monitor all livestock activities. Its role would include sensitization, mobilization, training, livestock extension, and provision of veterinary services at cost.

• GART/LDT. These would be expected to carry out breeding of dairy animals for farmers.

• Heifer International/Land O’Lakes/Zambia Agribusiness and Technical Centre (ZATAC): These would facilitate acquisition of dairy animals, equipment, construction of milk collection centres and help provide technical skills and information.

• The private sector. This would provide milking equipment, veterinary drugs, and offer a market for farmers.

III. PROJECT RATIONALE

III.1. Given the Copperbelt/Central Provinces’ high urban population concentration, there is very high demand for milk and other dairy products. The two areas are ideal for dairy farming given proximity to major markets and a good resource base. Diseases like HIV/AIDS have left a high number of female or child–headed households. Changes in demographics, where there has been growth in the 0–10 age group and the need to improve the health and nutrition levels of women, children and the HIV/AIDS affected are some of the rationale for the project.

III.2. Past efforts aimed at establishing smallholder dairy schemes in the project area failed due to several limiting factors such as poor management practices by farmers, livestock diseases and the fact that the dairy schemes were heavily driven by the government and not farmers themselves. If the dairy industry develops, consumption of milk and other dairy products will increase. The nutrition status of the most vulnerable segment of the population especially children and the elderly can thus be uplifted and the incidence of diseases brought down. There is also a large market in DRC’s Katanga Province for a variety of agricultural products including milk and other dairy products. Hence increased income earnings from dairy farming will enable farmers to meet pressing needs like schooling, health services, clothing, and to purchase inputs like fertilizer and seed for crop production.



6

III.3. There are no adverse effects expected from investment in dairy. To the contrary, it is expected that improved smallholder dairy farming in the project area will enhance crop/grasslands–livestock integration as well as improved nutrient management.

III.4. The recent revival of some of mining activities in towns like Chingola, Kitwe, Solwezi and Luanshya, offers opportunities for increased purchasing power. Unlike crops or other farm enterprises, the advantage with dairying is that it gives farmers regular income. Interest and actual smallholder dairy farming is being rekindled and there is need to build on this. The proposed smallholder dairy project will thus contribute to the diversification thrust and help reduce poverty in the project area.

IV. PROJECT OBJECTIVES

IV.1. The overall objective of the Smallholder Dairy Development Project will be to promote increased production, quality and marketing of milk and other dairy products among smallholder farmers in order to raise incomes and nutritional levels and thus assure food security amongst the population in the project area.

IV.2. The specific objectives of the project are:

• to promote the development of an increased number of smallholder dairy producer groups in the Province;

• to improve milk marketing channels, including the identification of new market opportunities; and

• to promote value adding to raw milk, including preservation.

V. PROJECT DESCRIPTION

V.1. The Project will run for five years and will comprise the following five components:

• Producer group mobilization: These will be mobilized and supported in dairy farming. It is expected that a total of ten groups will be mobilized and supported;

• Acquisition and supply of dairy animals: Through some financing arrangement which will be channelled through a reputable and experienced institution, smallholder dairy groups will be availed with dairy animals as well as breeding bulls and Artificial Insemination (AI) services;

• Infrastructure development: Producer groups will, on a cost sharing basis, be assisted with the construction of milk collection and cooling facilities, paddocks, and water points for their animals as well as for production of livestock feed;

• Training of dairy farmers and Departmental staff: Most of the farmers will require training in all aspects of dairying as they currently possess little knowledge on some important issues. Farmer training will focus on business management/record keeping, co–operative organization, clean milk production, management of cow health, calf rearing and breeding, feed management, and proper planning of tasks and marketing.



7

Departmental staff in the project area will be trained in all aspects of animal husbandry as well as animal health; and

• Project management: It will be important to strengthen the capacity of farmer groups themselves to effectively manage their dairy enterprises so as to maximise profits. Staff of the Department of Livestock and Veterinary Services in the project area will also be supported to ensure efficient service provision and monitoring of project activities.

V.2. The main activities will include the following:

• mobilization of farmers interested in going into dairy farming;

• provision of finances to facilitate farmers’ acquisition of dairy animals, bulls and dairy requisites such as milking equipment, and purchase of vehicles for milk transportation;

• provision of various services such as extension on improved pasture, animal husbandry, paddocks, milk handling techniques, veterinary services and market information;

• establishment of producer–owned milk collection system and cooling facilities; and

• establishing market linkages between producer groups and processors.

V.3. The project will initially target a total of 500 smallholder farmers on the Copperbelt and Central Provinces (Kabwe’s Mpima scheme). This works out to 10 farmer groups comprising a maximum of 50 members per farmer group. With an average household comprising seven members, this translates into a total target group of 3,500 potential beneficiaries. These numbers are based on the existing group members in the target area and those who have expressed willingness to get involved in dairy farming. In addition to the above target group, the Copperbelt Province has a number of other settlement areas in which at least six other farmer groups comprising some 200 more potential dairy farmers can be targeted later during project implementation. These cover Chingola, Chililabombwe, Mufulira and Masaiti Districts. During the project period, existing farmers will expand their enterprises, while new ones will establish their dairy units. A comprehensive baseline survey needs to be undertaken to establish the status of potential dairy farmers, their resource base, constraints and needs prior to project implementation.

V.4. The project will also aim to strengthen the capacity of the MACO’s Department of Veterinary and Livestock Development in providing technical backstopping (extension services, AI, vet services, etc.) throughout project implementation. To effectively carry out this, staff on the ground will need support in terms of transport, equipment, vet medicines, and housing.

V.5. Because some farmers have land constraints, it is proposed that they practice zero grazing and that the sizes of their dairy herds should be small. The animals can then be fed on crop residues and fodder which farmers themselves should grow. Farmers will also need high yielding cows, either pure breeds or very good cross–breeds to maximize their earnings. In the initial stages of the project, each farmer could be availed a minimum of two cows so that as one dries up in readiness for the next calving, the other cow can continue to provide milk. This way, farmers can generate income all year round with proper management. Those farmers that excel could be assisted to acquire an additional 3 cows depending on their land size. Thus, to reach a good level of profit, a maximum of five dairy animals could be availed to each farmer under the project. A combination of a dairy and crop enterprise on the farm will ensure the most efficient use of resources. Farmers will need support to effectively organize marketing of their milk through construction of collection points and cooling tanks, and where possible, assisted with simple value adding equipment for packaging unpasturized milk and yoghurt making. Farmers may also be supported with irrigation facilities to enable them



8

grow animal feed, i.e. fodder. Measures will be taken to explore the possibilities of sourcing dairy animals within the Copperbelt, especially from the few large–scale dairy operators. Where this is not possible, other areas within the country could provide the animals.

VI. INDICATIVE COSTS

VI.1. It is difficult to determine accurate costs for the proposed project at this early stage of formulation. However, the following major cost items have been taken into account in assessing project costs as presented in Table 2:

• capital investments in farmer group owned milk collection and cooling facilities, transport (small trucks) to collect milk, as well as some value adding equipment like small packaging equipment for making unpasturized milk and for making yoghurt, power equipment like solar panels, and irrigation equipment for growing animal pasture;

• major inputs in smallholder dairy production are: feeds, vet drugs and kits, and AI services;

• transport for MACO staff mobility on the ground and staff housing;

• training and capacity building of farmers and ground staff, including farmer exchange visits by a private NGO and MACO staff on the ground;

• financing facility to be channelled through some private entity like Heifer International and Land O’Lakes which will be used to purchase dairy animals for farmers as well as to put up infrastructure like milk collection points, coolers etc and to provide other support services like training of farmers;

• institutional support to GART/LDT, National Artificial Insemination Centre for breeding programmes of dairy animals as well as provision of AI services; and

• project monitoring and co–ordination by MACO and institutions like FAO and donors financing the project;

• technical assistance costs. It is assumed that there will be a mix of both national and international technical assistance.



9

Table 2: Cost Summary per Activity (in US$) Activity Total % Base

Costs a) Investment costs – construction of milk collection points (5 sites) 250,000 8.6% – erecting 10 milk tanks and coolers (2 tanks per site of 1,500 litre capacity) 200,000 6.8% – irrigation works 200,000 6.8% – construction of 5 staff houses 100,000 3.4% b) Purchase of dairy animals and bulls 0.0% – 1,000 pure bred dairy animal 700,000 24.0% – 50 bulls 50,000 1.7% – AI services (lump sum) 200,000 6.8% c) Operating costs (vet drugs, milk utensils – lump sum)

200,000 6.8%

d) Transport 3 x 5 ton trucks (milk collection) + 4 motor bikes for MACO staff)

170,000 5.8%

e) Training of farmers (lump sum) 200,000 6.8% f) Institutional support (lump sum) 400,000 13.7% g) Technical Assistance (lump sum) 150,000 5.1% h) Project Coordination and Management (lump sum) 100,000 3.4% Total Baseline Costs 2,920,000 100.0% Contingencies (10%) 292,000 10.0% Total Project Costs 3,212,000 110.0%

VII. PROPOSED SOURCES OF FINANCING

VII.1. The Government of the Republic of Zambia will, within the context of the New Partnership for Africa’s Development (NEPAD), look for co–operating partners to help fund the proposed project components. Key components to be funded by co–operating partners include; investment costs for the construction of milk collection and cooling facilities, provision of a financing facility to a reputable and experienced NGO of the beneficiaries’ choice to facilitate the acquisition of dairy animals for farmers, empowering institutions like GART/LDT to breed dairy animals for farmers, support for AI and veterinary services, training of farmers, institutional support (in form of transport) to MACO staff in the project area, and technical assistance requirements. On its part, GRZ will, through its usual budgetary allocations fund staff salaries, running costs for officers on the project and provide housing and office space for staff. Beneficiary dairy producers will contribute their labour to the construction of facilities like paddocks, proper upkeep of the animals in terms of supply of feed and water points. The private sector will be expected to supply the farmers with milking utensils, veterinary drugs and any necessary requisites.

VIII. PROJECT BENEFITS

VIII.1. Expected benefits from the proposed project include the following:

• Increased incomes for the smallholder dairy farmers in the Province;

• Improved nutrition levels for children and adults;

• Cow dung to be used as manure that will add fertility to the soil;



10

• Increased employment opportunities. Farmers reaching 15 milking cows can employ about 6 workers;

• Reduced poverty among the target group and surrounding areas;

• Increased agricultural diversification; and

• Strengthened institutional capacity for farmer groups and Departmental staff at field level.

VIII.2. Experience from the Jele group shows that this can generate significant impacts. Farmers in the Jele group are now able to earn daily incomes, with monthly income levels reaching up to K300,000 from milk sales alone. Further, malnutrition levels among the under–five children has dramatically reduced, the number of animals is steadily increasing and cattle manure is being used for crop production.

VIII.3. The possible returns to a two–cow enterprise (costs and benefits for an individual dairy farmer) are shown in Table 3:

Table 3: Returns from a Two–Cow Dairy Enterprise Item Kwanza Fixed Costs – Cost of constructing one paddock (use local mat.) 100,000 – Cost of milking utensils 200,000 Total Fixed Costs 300,000 Variable Costs – Cost of 2 in calf heifers 3,000,000 – Cost of feed (zero grazing) 100,000 – Labour (farmer’s own) 100,000 – Vet services 100,000 – Misc. 200,000 Total Variable Costs 3,500,000 Total Costs 3,800,000 Sales Sale of milk: 280 lac. days x 2 x 15 litres/day x K1,500/litre 12,600,000 Net Returns 8,800,000

IX. IMPLEMENTATION ARRANGEMENTS

IX.1. The driving force behind the project will be the dairy farmer groups organized in associations or co–operatives that are self driven for a common goal. This is important for sustainability purposes and for ownership. In terms of implementation arrangements, the project will thus be build upon the Jele cluster model and promote dairy farming in which farmer groups are engaged in milk production, marketing and value adding. Women farmers will be specifically targeted because from the existing experience, they have proved their commitment to dairying and have a high chance of being successful dairy farmers, they are most vulnerable economically and they can effectively support their families through income generated from dairying. For project effectiveness, each group or cluster of farmers could number 30–50 members and be within a reasonable radius of say, 5–20 km for ease of delivery of milk and provision of services.



11

IX.2. The groups will be officially registered and the members will undergo training on all aspects of dairy farming. Group members will be responsible for the day to day dairy operations, including planning and executing of project activities such as proper feeding of animals, sourcing veterinary services, milking equipment, delivery to collection points, and to markets. The beneficiary farmers will contribute their labour to the maintenance of the milk collection and cooling facilities, construction and maintenance of livestock paddocks, water points, and sourcing or growing of feed for their animals. Within their groups, farmers will elect their own leaders on a rotational basis to oversee the smooth operation of the project. The farmer associations could also link themselves with other players such as Heifer International and Land O’Lakes which have experience in dairying and could provide them with valuable technical skills and other support.

IX.3. Potential dairy farmers interviewed in the project area were not keen on credit arrangements. This is particularly because of the stringent requirements involved with borrowing money channelled through financial institutions like banks. Current economic circumstances make long term traditional credit schemes based on cash payments difficult to deliver to smallholder farmers. With inflation rates of over 20% per annum and regular devaluations mean that interest rates are around 35–40% mark. Meanwhile smallholders have little to offer in the way of security. Farmers in the project area thus expressed desire to work with reputable institutions like Heifer International which has demonstrated capacity to source and supply dairy animals on a revolving loan scheme and provide training to smallholder farmers. The dairy animals and investments like trucks for transport, cooling tanks, AI services etc provided to farmers will also be on credit basis for which repayment could be from milk sales. Hence, the importance of establishing collection and cooling points to ensure that milk from farmers is pooled. Farmer contribution or repayment will be essential for sustainability of the project. It is therefore recommended that this proposed project adopts such an approach in which funds from co–operating partners and the government could be channelled in this manner.

IX.4. The funds will flow from co–operating partners supporting the proposed project intervention to government i.e. the MACO. The funds would then be channelled through implementing institutions (private/NGOs) under agreed terms who would set up a financing facility to support major project components. Components to be funded would include: procurement of dairy animals, bulls and AI services, infrastructure development (milk collection sites, coolers, irrigation works, etc), transport, training costs for farmers, and project management. Recovery from farmers would be from milk sales on agreed terms. Government budgetary allocations to MACO’s Department of Veterinary and Livestock Development and a portion of the donor funds would go towards supporting such project activities like farmer mobilization, extension services, staff housing, monitoring, technical assistance etc. As indicated earlier, farmers and the private sector would also be expected to make their respective contributions to the realization of the project.

IX.5. Criteria for selecting farmers to be involved in the project will include interest in dairying, willingness to voluntarily join and work with legally constituted farmer groups and to attend skills training on dairying, possession of at least one hectare of land possibly with title, show of commitment by paying group membership fees/share contribution, and capacity to provide a minimum amount of labour and working capital to the dairy enterprise. As indicated above, special attention will be paid to gender with emphasis on those women willing to take up dairy farming.

IX.6. The Department of Veterinary and Livestock Development will backstop the farmer groups on various aspects of the project including mobilization, sensitization, group formation and registration. Stakeholder consultation is critical to avoid top–down approaches in project design and implementation. The Department’s responsibility will be devolved to the district level where the actual project will be implemented. For effective provision of services by the Department, it is strongly suggested that an officer should be seconded to work with the farmer associations on matters to do



12

with effective livestock husbandry practices, including feeding, hygiene and veterinary services. However, funding to the Department from the government and donors will have to be increased for the staff to function better. As farmer groups become knowledgeable, expand their enterprises and become prosperous, they could be called upon to support the officers who would be seconded to work with them. This could also be considered as farmers’ contribution to the project.

X. TECHNICAL ASSISTANCE REQUIREMENTS

X.1. The Project would require short–term demand driven technical assistance which could be a mixture of both local and international personnel. The following are the areas for which technical assistance (TA) will be required: (a) farm management (covering budgets, record keeping etc); this would be required for a period of three (3) months each in the initial two years of the project; (b) short–term technical assistance covering three and five months respectively will also be required from FAO to help the Ministry articulate a comprehensive dairy policy as well as to help formulate a new Dairy Act. The current Dairy Act dates back to 1964 during the days of boards. Given the changed policy environment, this will need to be replaced.

XI. ISSUES AND PROPOSED ACTIONS

XI.1. The following issues are highlighted as important in the project focus:

XI.2. Gender Consideration. The project will particularly aim to target women smallholder farmers as those currently involved in dairying have proved to be successful. This may prove to a controversial issue on the part of men left out of the project. Hence, attempts should be made to sensitize potential project participants on issues of gender and to ensure that the project takes on board those men willing to take up the challenge of dairy farming.

XI.3. Policy Consideration. The government announced the policy of privatisation of veterinary services. This implies that farmers are expected to pay for vet services even if these are provided by Ministry veterinary staff. However, some of the new livestock farmers feel that vet services by Ministry staff should be provided free of charge. A way around this issue is to ensure that farmers are facilitated to acquire their own vet drugs and that they call upon the vet officers to administer the drugs to their animals. Alternatively, the project could facilitate veterinary officers with drugs.

XI.4. Status and Role of MACO Officers. MACO officers feel left out of the current efforts in smallholder dairy development in the proposed project area. A private NGO, Heifer International has taken a very active role in promoting dairy farming through training of farmers and providing some support. MACO staff should be encouraged to play a more proactive role and work side by side with the NGO and other players in promoting dairy farming. However, this is only possible if the government increases its funding to MACO officers.

XI.5. Another issue relates to the location of MACO livestock officers vis–à–vis the proposed project area. Officers located near the project area feel they cannot help the target farmers as they are geographically located in a different district. The way round this issue to second officers to the farmer groups and ensure that they live side by side with the farmers they are supposed to service. Similarly, the issue of mobility of officers is very important. The government and with support from co–operating partners should ensure that officers are mobile by providing them with motor bikes. Farmer groups are willing to assist with meeting running costs of the motor bikes.



13

XII. POSSIBLE RISKS

XII.1. Lack of Commitment on the Part of Farmer Group Members. Some of the potential members who have expressed interest in taking up dairy farming may lose interest as they experience delays in project start up. Further, others may also lose interest if the cost sharing/cost recovery approach is included. It is important that resources are sourced in time so that the project starts as per plan. Farmers will also need sensitization about the importance of them contributing to the project, as this is important for sustainability.

XII.2. Lack of Investment Funding to the Proposed Project. The project may experience delays in sourcing financial support from co–operating partners or the government. The government should ensure that it promotes the project to as many donors as possible including those that are in the process of formulating various projects so that they include support to dairy farming in the target area.

XII.3. Lack of Co–operation and Co–ordination. The project requires that both private (farmer associations and others) and the public sector (Department of Veterinary and Livestock Services) play their respective roles in project implementation at the district levels. The two players might fail to co–operate and co–ordinate their activities. Hence regular stakeholder consultations is important. Further, the government needs to ensure that it increases its budgetary allocation for operations of activities by staff at field level.

XII.4. Weak Economic Base. This may negatively affect consumer purchasing power for milk and dairy products in the project area and thus lead to marketing problems. Concerted efforts should be taken by government to stabilize the macroeconomic framework in order to provide a conducive environment for increased investment in the economy in general and the agricultural sector in particular.



15

ANNEXES:

Annex 1: Map of Project Area

Annex 2: List of References



17

Annex 1: Map of Project Area



19

Annex 2: List of References

1. EURATA (European Union Rural and Agriculture Temporary Association).

2. European Commission. Zambia “Appraisal and Formulation of projects in Support to Animal Health and Production in Zambia” Final Report. December, 2001.

3. Jele Heifer. Scheme Multipurpose Co–operative Society Ltd By–laws (undated).

4. Land O’Lakes Inc. Market Channel Development for the Zambia Dairy Industry, October, 1999.

5. Land O’Lakes Inc. Zambia Dairy Enterprise Initiative in Partnership with Zambia Agribusiness Technical Assistance Centre (ZATAC Ltd) (undated).

6. Ministry of Agriculture, Food and Fisheries. Livestock Development Plan 2000–04. Vol. 1 Background and Justification.

7. MACO. Agricultural Development Project (Smallholder Agricultural Support Project) “Livestock Component” (undated).

8. MACO. Concept Note on Priority Interventions in the Agricultural Sector, November, 2003.

9. MACO. Diversification of the Economic Base of the Copperbelt Province into Agriculture as a Poverty Reduction Strategy, 2001.

10. Concept Note “Development and Promotion of Smallholder Dairy in Zambia and Malawi.” (undated).

11. Zambia NEPAD–CAADP National Medium–Term Investment Plan (NMTIP) 2004.

12. Regional Land Management Unit (RELMA). “Regional Workshop on Milk Marketing: From Producers to Consumers: Processes for Policy, Legal and Institutional Change in Milk Marketing.” Kenya, November, 2002.

13. Zambia 2000 Census of population and Housing: “Agriculture Analytical Report”, Central Statistical Office, November, 2003.

14. The National Economic Diversification Taskforce. Integrated Diversification Implementation Plan for the Copperbelt and Southern Provinces and National Game Park Areas, Vol. II July, 2003.

government of the republic of zambiacollection centre limits the participation of potential farmers....

Documents