Why it’s impossible dairy industry compete with imported milk products

15Aug 2018
By Financial Times Reporter
DAR ES SALAAM
Financial Times
Why it’s impossible dairy industry compete with imported milk products
  • 150,000 The amount of milk processed in Tanzania daily in litres, compared to 2 million litres per day in a neighbouring country
  • “If I am not mistaken, around 22 dairy processing companies have closed between 2000 and 2018.
  • It is impossible to compete with imported milk because we work with smallholders who produce expensive milk”

TANGA Fresh, one of Tanzania’s oldest milk processing factories, has launched a new long life milk product to compete with imported UHT milk.

General Manager, MICHAEL KARATA.

Its General Manager, MICHAEL KARATA, talked to the Financial Times about the need for the government to offer tax relief to the local dairy industry and cut multiple regulations that are preventing local dairy producers from competing with cheap, imported milk products.

Q. What are the current levels of milk consumption in Tanzania?

A. ​Our consumption is around 45 to 47 liters of milk per person per annum. Very unfortunately, our milk has now become a luxury commodity that the majority of the population simply cannot afford on a regular basis. ​Based on the experiences of other countries, including some of our neighbours, it is only through the school milk programme, that we can help to finally improve the milk consumption pattern in Tanzania. We are involved in a school milk drinking programme in our own small way, although what is needed is to have a national programme.

Q. What is the installed capacity of Tanga Fresh vs actual production?

A. Our previous installed capacity was at 50,000 liters per day while recently we upgraded our installed capacity to 120,000 liters per day. Our current actual production now stands at 45,000 liters per day.​

Q. How many employees does Tanga Fresh currently employ?

A. The benefits of having Tanga Fresh goes beyond just the employees directly employed by the company. First of all, over 6,000 smallholder dairy farmers are assured of market security for their milk as a result of Tanga Fresh and are paid twice a month -- mid and end of the month. With an average family group of 5 people, we are therefore talking of 30,000 plus people benefiting from our operations. Secondly, the beneficiaries of Tanga Fresh are its direct employees, which add up to around 200 staff members.

Q. How did Tanga Fresh perform in 2016 and 2017 and what is the forecast for 2018, 2019 and beyond?

A. Most of our farmers are based in Tanga Region and 2016 and 2017 were bad years for us due to persistent drought. In 2018, business has picked up and with our long life milk expansion project, we shall be able to perform well although the short term view will be difficult. All dairy processing plants in the country are undergoing the same challenge.   ​

Q. Apart from drought, what other key challenges does Tanga Fresh and the Tanzanian dairy industry in general face?

A. Very unfortunately, the local dairy industry is facing a lot of challenges. From what I know, we have a lot of milk in the country but most of it is non-collectable due to infrastructure problems and other factors. Milk is also a very highly perishable product and has its own challenges. Multiple regulation in the industry does not help. In Tanzania, most of the dairy farmers are small and hence milk collection can become difficult. This is also common in other agricultural crops although in milk it becomes very sensitive. If I am not mistaken, around 22 dairy processing companies have closed between 2000 and 2018. One must ask why do people invest just to close down? In Tanzania, I doubt if we process more than 150,000 liters per day, however our neighbouring country processes more than 2 million liters per day. Why is this the case?

Q. What should be done to overcome these obstacles?

A. As an immediate measure, the government should zero rate the sector on locally produced milk and milk products. This will allow those on value added tax (VAT) to claim back their input tax. Secondly, the government should remove VAT on dairy packaging as this will give offer a much-needed relief to all small processors who can then grow their businesses. If we help dairy processing to become a vibrant business, then there is every opportunity for small dairy farmers to grow.  ​

Q. Why aren't Tanzanian milk processors able to effectively compete with imported milk in terms of output and price?

A. It is impossible to compete with imported milk because we work with smallholders who produce expensive milk. Secondly, we have too many regulations in the country which cost us money. Since we are not competitive, then how can we produce and sell competitively?​

8. What expansion plans does Tanga Fresh have?

A​. At this moment, we have finalised our expansion plans and what we need now is to increase the productivity of our farmers. Should the government also come in and give the right support, then we can see a vibrant dairy industry in Tanzania.  ​