Corporations make a killing milking Africa

In 2009, the Nigerian government gave some white farmers from Zimbabwe loans and 1,000 hectares (ha) of land each to set up dairy farms in Shonga, an important centre of agriculture about 400 km from the capitol Lagos. Hopes were that their "ultra-modern" farms, stocked with Jersey cows brought in from South Africa, would make a dent in the country's massive dairy import bill.[1]

"I saw an opportunity here ... and I can tell you now there is no doubt I am here for the long term," said David Higgins, a South African hired to manage the operation's milk plant, which became a supplier of fresh milk to FrieslandCampina, the Dutch dairy corporation that has dominated the Nigerian market for decades.

However, less than ten years later, the project had all but collapsed. Most of the Zimbabwean farmers had left, and those remaining were "drawing their exit plan", as one Nigerian researcher put it.[2]

It turns out imported Jersey cows and white "modern" farmers were not the solution to Nigeria's dairy import woes. The problem, as every cattle herder in Nigeria knows, is the competition with the cheap imported powdered milk that companies like FrieslandCampina dump into the country. The Zimbabwean farmers and their modern methods were equally powerless against it.

Nigeria imports about 98% of the dairy products consumed in the country and spends an average of USD 1.3 billion a year on these imports. It is also the world's biggest importer of fat-filled milk powder from Europe-- a cheap milk lookalike that is made with a mix of milk powders and palm oil that has nearly quadrupled in exports from Europe over the past decade.[3] FrieslandCampina, which brings in huge quantities of subsidised powdered milk from its dairy plants in Europe, controls about 75% of the Nigerian dairy market, with just five companies controlling 99% of it.

Yet Nigeria has one of the largest cattle herds in the world and has a long tradition of local dairy production. By all accounts, things should be similar to Kenya, where herders and small farmers with local breeds of cows supply about 90% of the milk consumed in the country through networks of small-scale traders. The difference is that Kenya has long protected its local dairies with tariffs on imports, while Nigeria opened its market in the 1980s under structural adjustment programmes, and the government has made no real efforts to reign in the import flows ever since.

FrieslandCampina likes to blame the "poor structure of local dairy supply chains" for the situation, and whenever the political scene gets too hot, it rolls out promises to invest in "developing" the dairy sector. It built its first large-scale dairy farm in Nigeria in Vom in the Plateau State, back in 1984, but sold the operation, called Integrated Dairies, to a Nigerian politician a decade later.[4] More recently, with funding from the Dutch government, the company launched a Dairy Development Programme with the Government of Nigeria, in which it pledged to source 10% of its milk from local sources through "backward integration". Yet, over the initial five years of the project, from 2011-2016, Nigeria's milk powder imports remained unchanged, and FrieslandCampina was only sourcing 3% of its milk locally.[5]

In 2016, with oil prices tanking and its foreign currency reserves badly depleted, the Nigerian government sought to put milk on a list of imported items with forex restrictions to encourage local production. But after several meetings with FrieslandCampina, in which the company assured the government that it would build up local supplies, the government-backed down.

Three years later, with dairy imports as high as ever, the government finally put milk on the list, accusing companies of treating the "national aspiration [to increase the local milk supply] with imperial contempt".[6] The companies pushed back hard, however, and the government relented yet again, giving FrieslandCampina and five other corporations an exemption on the import restrictions in February 2020, saying that these companies were committed to "backwards integration".

This latest round of public-private partnership is closely tied to a controversial ban on open grazing that 17 state governors from across southern Nigeria agreed to in May 2021, and which has been called "satanic" by herder leaders.[7] To this end, FrieslandCampina has been given 10,000 ha and Coca-Cola 4,000 ha within the Bobi Grazing Reserve in Niger State to build dairy farms and settle Fulani herders for contract production. Similarly, the Danish multinational dairy company Arla has a partnership with Kaduna State to build its own dairy farm and to settle 1,000 nomadic herders on farmlands provided by the government. The Dutch and Danish governments are helping to fund these projects and provide the participating herders with "improved" crossbred cattle and training on European-style dairy farming, as is the Bill and Melinda Gates Foundation through a programme called Advancing Local Dairy Development in Nigeria.

The Gates-funded programme is a collaboration with six dairy companies in Nigeria, coordinated by Sahel Consulting (formerly Sahel Capital). One of the companies, L&Z Integrated Farms Limited, is owned by a Mauritius-based private equity fund managed by Sahel Consulting that has investment from the German, Dutch and UK development banks, as well as Nigeria's sovereign wealth fund.[8] Arla is another one of the companies involved, and the rest are Nigerian dairy companies mostly owned by local politicians or their family members.[9]

Sahel says it is taking a "private sector-led and market-based approach to solve the problems inherent in the dairy sector", but it completely sidesteps the biggest problem: imports of cheap, subsidised powdered milk. The project's attempt to shift herders to expensive, European-style dairy farming is thus doomed to fail, just as the Zimbabwean farmers did at Shonga and all past efforts to "modernise" Nigeria's dairy sector have. This is, after all, the main reason why herders from Nigeria and the surrounding countries, who have had no problem meeting Nigeria's galloping consumption of beef over the past decades, have been shut out of the dairy market.[10]

Similar scenarios are mushrooming across Africa. It is no wonder. The continent's fast-growing urban populations represent a pot of gold for dairy corporations. FrieslandCampina made a whopping USD 48 million in profit from its Nigeria operations in 2019.[11] Now it wants to double its revenues in Africa by expanding in other countries such as Côte d'Ivoire, where the company's recently acquired dairy plant relies entirely on imports. When asked about this lack of local sourcing, FrieslandCampina's West Africa director, Roger Adou, said the company was in the process of building an "ecosystem" of local dairy farmers trained in Dutch farming methods. "You cannot blame multinational corporations for the poor organisation of local supply chains," he said.[12]

Another big player in Africa is the French dairy giant Danone, which joined forces with the Dubai-based private equity company Abraaj Group to take over the Ghana dairy company Fan Milk. After Abraaj went bust, Danone took over the whole company in 2019, using it as a base to expand its reach across West Africa, including in Nigeria, where it has a "backward integration" project with Ogun State.

All of the local dairy projects that these foreign corporations are pursuing should be properly understood as fronts, designed to distract from the massive amounts of money they siphon out of Africa from their sales of cheap, excess powdered milk. The system is built on heavily subsidised overproduction in Europe, North America and Australia/New Zealand. That excess gets dumped into Africa, mainly in the form of fat-filled milk powder, where it is processed and sold to urban consumers at prices that undercut the supply of wholesome local milk. In 2019 Africa imported 2.1 million tonnes of dairy products worth some USD5.3 billion, up from 1.46 million tonnes in 2009, worth USD3.6 billion).[13] [14]

Donors insist that Africa's reliance on imports can be resolved by "modernising" their farms and supply chains. The Gates Foundation supports multiple initiatives in Africa to boost per farm milk production by replacing local breeds with high-yielding breeds and introducing commercial animal feeds and pharmaceuticals, such as the East Africa Dairy Development Project in Kenya, Rwanda, and Uganda.[17] So too do the governments of the Netherlands, France and Denmark-- home base to the largest companies exporting dairy to Africa.[18] (Box: Africa's rich livestock diversity) Meanwhile, the Economic Community of West African States has launched a five-year "dairy offensive" based on the same model, as its member states move ahead with trade deals with Europe that will reduce tariffs on milk powder from a feeble 5% to zero![19]

Private equity funds are also piling into Africa, with much of their funds supplied by development banks and foundations convinced that there's money to be made in this modernisation drive. Yet, of the multiple investments private equity firms have made in local African dairy production, few are succeeding (Table: Private equity funds and dairy in Africa). Dubai-based Midcom, for example, tried to buy into the dairy business in Uganda in 2013, with backing from the World Bank's International Finance Corporation and the Rise Fund, a US-based private equity fund managed by TPG. It's subsidiary, Pearl Dairies, claimed it would not only become a major player on the national market, but that it would build an export business to neighbouring African countries. But a trade spat with Kenya, where the local dairy industry is controlled by the family of the president, sent the company into a tailspin (Box: The cream on top). In March 2021, Pearl Dairies announced it was shuttering its Ugandan dairy plant and shifting to organic honey production for export to Europe.[20]

Development banks, donors and governments are wasting money and resources trying to industrialise local dairy production in Africa when there is huge untapped potential in traditional systems, which are being held back by imports. Herders in Burkina Faso, for example, once supplied the entire nation with fresh milk. But imports of cheap fat-filled milk from Europe have all but destroyed their production over the past decade. "I've tried selling my milk, but most of the time it goes to waste and ends up being poured away," says Hamidou Bandé, president of Burkina Faso's National Herders' Union. He keeps 300 cows but now only sells their meat because he cannot find a market for their milk. "It hurts. The milk we throw away could have been for the calves or our children."[21]

Contrast this situation with that of Uganda, where a 60% tariff protects small dairy farmers on dairy imports.[22] Today smallholder dairies, composed of small-scale cattle farmers and herders and small-scale dairy vendors and processors, supply 80% of the milk consumed in Uganda. With regional tariffs keeping milk powder imports out of East Africa, small dairy farmers in Uganda have been able to effectively supply a surge in demand over the past two decades, and they have done so with indigenous cattle breeds and traditional farming practices.[23] The country's few dairy companies have, on several occasions, tried to use their political connections to get laws passed to undermine this so-called "informal sector", but farmers and small vendors have allied to stop them. Nationwide protests of farmers and vendors forced the government to back away from a ban on raw milk sales in both 2007 and 2014.[24]

There is no justification for the billions of dollars that exit Africa every year to pay for dairy imports. Dairy can and should be produced locally. As can be seen in Uganda, and neighbouring Kenya, there is one simple, effective measure that can be immediately taken: a stop on imports of powdered milk.

There are several options that African governments can take immediately to put the brakes on imports of powdered milk if there is political will. But many African governments are going in the opposite direction, in negotiations with Europe for the Economic Partnership Agreements or even in Africa's own Continental Free Trade Agreement (AfCFTA), which undercut the possibilities their countries have to protect local dairy production. The governments of the big surplus milk-producing countries in Europe, North America and Australia/New Zealand are also maintaining their relentless pressure on Africa to absorb more dairy from their corporations, even as these policies leave their own dairy farmers in crisis.

Donors and governments have to stop pushing industrial dairy, and development banks need to stop financing companies that compete directly with smallholder dairies. What is needed are regulations, policies and programmes that support smallholder dairies, making it easier for them to supply urban markets with fresh milk. Simple measures like the provision of small cooling tanks or efficient pasteurisation burners can make a huge difference. So too can municipal regulations that provide small vendors and traders accessible and safe spaces to bring their dairy products from the countryside to urban consumers. And foreign governments and donors should start by turning their attention back home, where the industrial, corporate-controlled dairy systems are not only killing Africa's dairies but are causing numerous environmental and social problems at the source. Actions need to be taken to greatly reduce dairy production in these countries while ensuring livelihoods for their dairy farmers.

There are several inspiring initiatives already underway in Senegal, Burkina Faso and other African countries encouraging the consumption of local milk. These need to be ramped up and multiplied, while keeping dairy corporations like FrieslandCampina and supermarkets like Auchan, who are falsely advertising themselves as "local", out of the picture. It is time that Africa's diverse smallholder dairies, composed of millions of herders, farmers, vendors, and processors, utilising traditional breeds of cattle, goats and sheep, and making all kinds of yoghurts, cheeses and other healthy dairy products, are finally celebrated and supported.