Milking Profits: A Tale of Cows in Kenya

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Tuesday, 13 November, 2012 - 07:17

Non-governmental organisations should connect to markets and build networks to sustain their development ventures 

It is not funding that is the problem for civil society but access to markets, according to Sisa Ntshona, head of enterprise development at ABSA Bank. He was speaking at the Impact Investing Conference, held by Greater Capital at the University of Pretoria’s Gordon Institute for Business Science (GIBS), and it seems few are buying into his point of view.

It is a powerful argument, but delivered to an audience of non-governmental organisations (NGOs) and wannabee social entrepreneurs? It is just not getting him the bout of applause he deserves. He bravely ploughs on arguing that what fails to transform organisations from small and struggling to stable, is their inability to sell and distribute their goods - nota lack of funding. In other words, there is little that connects them to markets.

It is a few months on and I have been toying with this logic but just cannot see past the limitations that exist for nonprofits that come with having no money.

And then I stepped into the world of dairy farming in East Africa and suddenly it all made sense.

It all started with a mid-term report I was handed titled ‘Milking for Profit’.

The report details a project that works to uplift subsistence dairy farmers in Kenya, Rwanda and Uganda run by a consortium of dairy experts known as East Africa Dairy Development (EADD).

In 2008, EADD started its first project in Kenya. The collapse of the state-owned processor in 1999 had opened the country’s dairy market to competition which suited large scale producers and further isolated the small farmers.These subsistence farmers typically produced and sold an average of three to five litres of milk per day, generating insufficient income to invest in stock and good food to boost yields. Compounding these problems was the lack of facilities to chill milk (it apparently needs to be cooled within two to four hours of being poured), low standards in stock and poor animal care.

The subsistence household is a common scenario across Africa: the homestead that owns a goat, a cow and a few chickens dots the continent’s rural landscape. The traditional social response to this picture is equally common - NGOs and donors sweep in with training programmes on modern day farming techniques, funding for more animals and donations of quality feed. Yet all these years on and a few billion dollars in development aid and the picture has not changed much.

So, EADD ignored the traditionalists and took a business approach to the problem. Instead of providing funding and support to their beneficiaries, they connected their participants to markets. They did this firstly by building chilling plants – 22 to date - so that the quality of milk could be maintained. They signed up 90 000 farmers and ran extensive programmes to improve the quality of care for animals. They made the chilling plants accessible to farmers so that they could easily bring their milk to fill up the 10 000 litre tanks. Within two years those signed up were earning an average wage of US$4 500 a year from the sale of milk and heifers - that is US$12 per day, six times more than the previous income standard of US$2 per day.

The chilling plants were reporting an average monthly profit of US$1300, giving investors a return on their investment within one year. Though EADD is keen to point out that this is not the primary reason for the investment.

This is a remarkable story, and clearly a strong model which EADD is replicating in Uganda and Rwanda.

And importantly, it validates Ntshona’s theory that we need to focus our energy on connecting to markets to grow our work and not be blinkered by the limitations of no funding.

Yes, sure, in the complex world of delivering social services connecting to a market is not as simple as building bricks and mortar solutions like a chilling plant. And I understand firsthand the frustration of no funding. However, the tale of cows in Kenya shows us that we should be asking some questions: who make up our markets?

Our markets are our participants (a far better word than beneficiaries), our investors (far more equitable word than donors), government and our public.

And how do we connect with them?

Currently, I would say that largely we don’t. Not as a collective. Not in a way that forces us to improve our standards and raise the calibre of the work that we do. Not in a way that has us jostling to scale-up or carries the energy and voice of civil society. Yes, we do it in sectors with different bodies but the question is - do they connect us effectively?

Instead, nonprofits chug along as the subsistence farmer, locked in a hand to mouth mentality, happy when we get handouts, pleading poverty when we do not.

It is time that we banded together. Built our metaphorical chilling plants, raised the profile of the agencies that represent us, built the bridges to our audience, and marketed the work that we all do. Raised our standards and raised the calibre of our work.

It is time to connect to markets.

- Kerryn Krige is Programme Manager for the Network of Social Entrepreneurs at the Gordon Institute of Business Science. She has a long history working with nonprofits and is a regular contributor to this site.  If you would like to continue this debate, please get in touch at ayandamalindi@yahoo.co.uk.

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