It’s been more than a year and a half since President Yoweri Museveni and his Algerian counterpart, President Abdelmadjid Tebboune, agreed that locally produced milk can be exported to the North African country.
According to Dr. Samson Akankiza Mpiira, the Executive Director of the Dairy Development Authority (DDA) documentation for the export of a billion liters of powdered milk is being finalized. The first consignment is due to be dispatched in February next year.
Algerians have a high annual consumption per capita of about 147 kilograms of Milk Equivalent (ME) compared to neighbors such as Tunisia with 90 kgs, or Morocco at 66 kgs. However, less than 10% of the milk produced is consumed as fresh. This explains the high demand for reconstituted imported milk powder.
The IFCN Dairy Report 2023 states that Algeria’s annual production is 2.5 million tonnes which is about half of Uganda’s current output. To cover the remaining part of milk consumption, Algeria would have to double its dairy production.
Milk from New Zealand holds market dominance, especially the powdered version while Uruguay, Argentina, the European Union, and recently Turkey, command a strong presence in various other product ranges.
Through a regular tendering process, ONIL, the state-owned purchasing agency, is the main player in the Algerian powdered milk market. However, the government also provides nearly $130 million annually in subsidies to support domestic milk production. Beneficiaries include dairy cattle breeders, milk collectors, and processors.
Amos Dairies Uganda Limited, Brookside Dairy Uganda Limited, and Pearl Dairy Farms Limited are lined up as the designated exporters. Total projected earnings under this arrangement will top $500 million.
Although Algeria is a net importer of dairy products, the challenge facing our exporters is not a small one. Since the presidents met in March 2023, two new entrants, namely Russia and Belarus. Both are big producers and both are aggressive in securing new markets.
Ugandan exporters are in a race against time to gain even a toehold and that is not all. The Algerian government plans to sharply reduce dependency on imported milk products. Qatar-based, Baladna Food Industries has received approvals to implement the world’s largest integrated agricultural project to produce approximately 1.7 billion liters of milk annually.
With the Algerian National Investment Fund holding 49%, on completion, the $3.5 billion joint venture, will enable the country to meet 50% of the demand for powdered milk.
With 2023 revenues of $5.2 billion, Saudi Arabia’s Almarai, a food and beverage conglomerate, has also announced plans to expand its presence in the Algerian retail milk market.
In spite of the intensity of the competition and as long as they are willing to fight for market share, there are still lucrative opportunities for Ugandan exporters. The Algerian market is expected to grow at a rate of nearly 11% annually between now and 2028.
On and off, Kenya has been Uganda’s leading milk buyer. However, the Kenyans’ often moody trade practices have forced Ugandans to steadily search elsewhere for buyers, including Bangladesh, Burundi, the Democratic Republic of Congo, Japan, Oman, South Sudan, Tanzania, the UAE, Zambia, and lately Nigeria.
Uganda’s current exports are concentrated in four key products non-concentrated milk, low-fat and high-fat concentrated milk, and milk-derived fats and oils. Other by-products are butter, cheese, ghee, and whey protein powder which is used as an ingredient for other foods.
According to a 2022, Dairy Action Plan, dairy products are one of the key commodities earmarked for increased foreign exchange earnings under the Agro-Industrialisation Programme of the National Development Plan III.
Dr. Mpiira, the DDA Executive Director says the sector has gone through unprecedented growth from the times of acute milk scarcity in the 1970s to the times of milk powder re-constitution in the 1980s to meet liquid milk demand, to the times of self-sufficiency in the early 2000s and to the current times of raw milk surplus.
Uganda currently produces 5.3 billion litres of raw milk with marketed milk of 3.85billion against the national consumption demand of 800 million liters in 2023,” and he adds: “In the last 10 years, the value of milk and milk products exported from Uganda has increased astronomically from $5 million in 2008 to $130 million in 2017 to $131.5 million in 2019/20 and to the current value of $264.5 million. At this rate, Uganda is poised to become the largest dairy exporter in Africa and the sector is slowly edging its way into Uganda’s top exports, next to coffee.
The International Food Policy Research Institute (IFPRI) agrees; concluding in one report that Uganda’s dairy sector is on the cusp of significant change, with innovations aimed at improving milk quality and creating a market that rewards superior products.
One factor that may prove telling in gaining a niche in the Algerian market is pricing. The New Zealanders are losing ground because of it. According to SNV, a Dutch not-for-profit organization that has been closely involved with Uganda’s dairy development program, the country’s pasture-based dairy farming system gives Uganda a competitive advantage.
SNV says even under its current relatively inefficient production practices, Uganda’s cost of production is considered to be significantly lower than in other countries. This is an opportunity for Ugandan exporters to explore a competitive pricing strategy to win over the Algerians.
Sources say the delays in implementing the Algerian deal, have been more to do with ‘culture differences’ rather than intent, making the bureaucracy more cumbersome. However one can never discount the unfortunate habit of bureaucrats to shuffle documents across their desks, purely for the sake of exerting their self-importance. Reassuringly, the DDA has confirmed Ugandan milk has passed Algeria’s conformity procedures.
As the UAE deals with fruits, this is another exciting test for Ugandan business people to use to raise their profile in a truly competitive market. Earlier this year, the new Algerian Ambassador to Uganda Mohamed Khelifi said: “My message to Ugandan exporters is that they have to be more aggressive because the political will is there. They have to come to Algeria to sell their product.”