|Strategies for market orientation of small scale milk producers and their organisations. Proceedings of a worshop held at Mogororo Hotel, Mogororo, Tanzania, 20-24 March 1995. (1995)|
|Session 5: Comparative evaluation of dairy marketing systems.|
Willison G. Mteti
Tanzania Dairies Ltd., Arusha
The foundation of the dairy industry is the dairy farmers who produce milk. The development of the industry passes various stages, from small holder farms with focus on satisfying family needs, medium scale to large scale farms. With increased herd size and cow performance, surplus milk is obtained which needs an organised marketing system to dispose it. Although surplus milk is usually sold to neighbours, the main consumers are in the urban centres. Milk has to be transported from the villages to the towns. The need for processing the milk is realised. The government at this stage takes special interest in the industry. The role of the government is to set conducive policies, and necessary infrastructure, to facilitate the development of the industry. Milk plants are erected to process and sell milk. Roads have to be. constructed to facilitate collection and transportation of milk. The policies set by the government are documented and laws are enacted to legalise their implementation.
Tanzania has passed through the above stages between 1961 and 1973 as far as the diary industry is concerned. Between 1974 and 1984 the organisation of (he diary industry was not clearly defined. Between 1984 and 1994 the industry has bee collapsing as the government decided to neglect the legal aspect of the dairy policies.
Recently a number of economic policy reforms have been made by the government. These include the trade liberalisation, and Parastatal sector Reform which have affected the dairy industry more than others.
This paper tries to explore the existing dairy industry legislations, actions taken by the government in implementing them and the results of such actions on the development of the dairy industry. The paper proposes some policy reforms necessary for revival of the dairy industry in view of the present policy reforms.
a) General features of a dairy industry:
The Dairy Industry in most parts of the world started with small scale traditional cattle rearing in rural areas. The primary objective of milk production was to feed the family and neighbours ie. satisfy local demand. As the herd increased, production increased and there was surplus milk which had to find market outlet in some other areas particularly the urban centres. Later on the concept of Commercial Dairy Farming emerged, characterised by Small Scale and Large Scale Dairy Farming. This created more surplus milk for sale therefore demanding an organised marketing system to facilitate movement of the product from point of production to the final consumer.
The above developments required policies and organisation set up that would facilitate the selling of the milk and create an environment conducive for the overall development of the industry. The need to process milk was felt as the need to extend the shelf life of milk and improve milk sales in urban centres was realised. This was also accompanied by the need to develop the infrastructure ie. good roads, suitable vehicles for milk collection and distribution etc.
Many countries which have well developed dairy industry the government have taken special interest in the industry right from dairy farming to milk processing and marketing. The main concern has been to ensure that milk is handled in hygienic manner in order to avoid multiplication of bacteria some of which are etiological agents for certain human diseases. They have taken care of the above needs by having comprehensive policy documents, often with accompanying acts of parliament to support their implementation as long as they believe in the rule of law. The laws set standards t be observed in aspects of performance, product quality, suitability of facilities used in handling, transporting, processing and selling of milk and matters of health and hygiene with serious concern about infectious diseases transmitted through milk.
b) Tanzania's experience
i) Experience before 1986.
Tanzania did what other nations were doing between 1.961 and 1973. The government made the required policies, and the organisation set up needed, by establishing Zonal Dairy Boards and Authorities as shown in the Dairy Industry Ordinance No.61 of 1961 (Cap 456) and later Dairy Industry Act No. 32 of 1965 (Cap 590) which established the National Dairy Board (NDB). These acts were accompanied by some subsidiary legislations (By-Laws, Regulations and Orders) some of which are in operation up to now. From 1975 large scale dairy farms were developed in many parts of the country. Farmers started buying dairy cattle from large scale farms and small holders started to emerge. Milk Processing plants were erected where the Boards in Consultation with the Minister were satisfied that there was enough milk to justify installation of a milk factory. The subsidiary legislations played a role of ensuring that sufficient and clean milk was produced by the farmers and made available for processing and marketing to satisfy the growing demand in the urban centres.
The participants in the industry were farmers, milk transporters, milk processors, distributors, importers and consumers. No serious conflict of interest was observed between the participants during this period because they were all represent in the Boards and involved in the establishment of regulations.
Unfortunately the implementation of the policies violated contents of section 5 (1) of the ordinance (Cap 456), and section Boards and Authorities, making the organs established fail to operate as expected. The National Dairy Board was abandoned in 1973 when the minister decided not to appoint new members after expiry of tenure of office of the old members.
In 1974 the government established Tanzania Livestock Development Authority (LIDA), to supervise the development of the livestock sector. The establishment of this authority did not make the mistake made during the formation of the Dairy Boards. It was properly established according to the law with its office in Dar es Salaam. LIDA operated for twelve years and was dissolved by Act no. 4 of 1986 but the reasons were not mentioned.
ii) Experience after 1986.
Since the Dissolution of LIDA the only regulatory organ for the Dairy Industry which still remains is the National Food Control Commission established by the Food: Control of Quality Act No. 10 of 1978. The Contents of Sect. 27 of this act touched slightly on the dairy industry dealing specifically on prohibition of sale adulterated milk (subsection a) or milk from diseased cows (section 28).
The Tanzania government started to loose interest in observing the Dairy Industry legislations from 1974 up to now, deviating from what was done in other developing countries where milk production and marketing has stabilised: It may-not be surprising to find that many senior officials in the
Ministry of Agriculture are not informed about all existing legislations on the Dairy Industry.
There has been a lot of policy reforms in Tanzania recently, but the most crucial reforms affecting the diary industry are the Liberalisation of Trade, and the Parastatal Sector Reform Policy.
iii) Impact of Economic Policy Reforms adopted buy the Government recently:
The Liberalisation of Trade has abolished monopoly in business and given freedom for the dairy farmers to sell their unprocessed milk directly to the consumers and at a price agreed upon between the farmer and his customer. The farmers have enjoyed higher prices and declined from supplying their milk to processing plants. It has been difficult for the milk plants to compete with the farmers in the market. The low milk supply is making the investment in the Milk Processing Sub Sector unviable. The would be investors may find it difficult to get sufficient milk from the farmers and ascertain the return to investment if the business environment is left to remain as it is now.
The issue of quality of the milk and its suitability for human consumption which could be checked during processing is no longer considered to be important. This poses great risk to consumers and the recently observed increase of diseases such as tuberculosis in the country could partly be attributed to this.
The Parastatal Sector Reform Policy is geared to free the government from involvement in business. The aim is to restructure the companies which are now under ownership of the Government through invitation of private share capital, in a form of a joint ventures, direct sale or closing the unviable companies.
In these developments the vacuum created by lack of regulatory organ for the industry is likely to be exploded by opportunist new owners of the companies to feed the public products which are unsuitable for human consumption. We could refer to recent cases reported on the press where food which was unsuitable for human consumption was sold to the public or improperly labelled milk being sold in the country.
Absence of regulations may also discourage foreign and local private investors in taking interest in running the collapsing diary processing industry.
c) Conclusions and recommendations
The following conclusions and recommendations are made from the above facts.
i) There is a strong need to review the dairy development policy and stress the importance of milk processing, regardless of who processes it. Establishment of a regulatory organ for the Dairy Industry which will coordinate the development of the dairy industry is necessary. This organ should be the National Dairy Board established by the existing law.
ii) The Board in collaboration with the Ministry of Agriculture should prepare a comprehensive Dairy Development Master Plan.
iii) The role of the government should be to create the environment and establish the infrastructure and policy environment needed to facilitate the development of the dairy industry e.g. roads, regulations.
vi) The dairy industry should be restructured. A vertical integration of the dairy industry recommended by ISCDD is the most suitable organisation for the development of this subsector.
v) The Dairy Industry Act No. 32 of 1965, Cap. 590 should a undergo a major review to match with the present needs of the industry. The regulations, by laws, and orders made under this law should be strictly enforced.
Farmers can sell their milk to the milk processing plants directly or enter into contract processing arrangements whereby the farmer comes to the factory with his milk, it is processed and packed at an agreed and he goes and sells his milk in the market.
Alternative markets can be sought where milk processing plants do not exist through Authorities appointed by the Board. The Board shall ensure that the milk is processed or heat treated before it is sold.
Q. Dr. Mbogoh
Mr. Mteti associates 'woes' in the dairy industry to dissolution of TLD. Why would government dissolve TLDA if this is and other organisations such as National Dairy Board were functioning as expected?
Response: Mr. Mteti
I think the reasons were of political nature.
Q. Dr. Rugambwa:
In view of the many well intentioned regulations to guide the diary industry in the country, and in view of the collapse of dairy processing can we say that the government has been talking more than acting and what has TDL done about it.
Yes, what the government is doing now to rescue the milk processing industry was suggested to it by TDL as early as five years ago.