Animal feed production
Business Model Description
Build, operate and manage the production of affordable high-quality feed and supply it to farmers.
Expected Impact
Contribute to farmers' income and the general food security and health and wellbeing of the population.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Kenya: Central
- Kenya: Western
- Kenya: Eastern
- Kenya: North Eastern
Sector Classification
Food and Beverage
Development need
According to the Sustainable Development Report, SDG 2 - Zero Hunger is a major challenge in Kenya and the overall score for this goal is stagnating. The COVID-19 crisis contributes to price fluctuations, food insecurity and supply chains disruptions. Food inflation in Kenya reached 10.6% in March 2020, compared with 2.8% in the same month in the previous year.(1)
Policy priority
Policy documents and initiatives such as the Third Medium Term Plan, the Kenyan Vision 2030 and the Agricultural Sector Growth and Transformation Strategy highlight the potential of agriculture for national development. Achieving food security is among Kenya's top four policy priorities according to its 'Big Four Agenda'.
Gender inequalities and marginalization issues
Women constitute almost 80% of agricultural workers in Kenya. Yet, they often do not have any ownership of farming lands or production equipment. They also suffer from an unequal access to relevant agricultural loans.(34)
Investment opportunities introduction
Accounting for 34% of Kenyan gross domestic product (GDP)(2), agriculture is the main employer of the Kenyan population. Total sales in agriculture reached USD 26.5 billion in 2019 and are expected to grow at an average rate of 1.52% in 2020-2025.(3)
Key bottlenecks introduction
Some critical bottlenecks include poor education and management skills among farmers, business atomization, supply chain deficiencies, limited access to capital and inputs, lack of storage and poor handling practices, low access to information and ICT (information and communications technology) services, as well as the aging farming population.
Food and Agriculture
Development need
Kenyan households that are engaged in the agriculture sector contribute 31.4% to the reduction of rural poverty. Agriculture is the largest income source for both poor and non-poor households in rural areas.(4) However, major challenges remain for Kenya's SDG 2 performance, particularly in undernourishment, stunting, cereal yield and nitrogen management.(5)
Gender inequalities and marginalization issues
Women constitute almost 80% of agricultural workers in Kenya. Yet, they often do not have any ownership of farming lands or production equipment. They also suffer from an unequal access to relevant agricultural loans.(34)
Key bottlenecks introduction
Some critical bottlenecks include poor education and management skills among farmers, business atomization, supply chain deficiencies, limited access to capital and inputs, lack of storage and poor handling practices, low access to information and ICT (information and communications technology) services, as well as the aging farming population.
Agricultural Products
Pipeline Opportunity
Animal feed production
Build, operate and manage the production of affordable high-quality feed and supply it to farmers.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
Fodder demand/production (30 metric tons/10 metric tons). Estimated demand for animal products
In 2019, the value of manufactured feed equalled around USD 70 million, and livestock drugs and medicines amounted to USD 26 million.(10)
In 2016, fodder demand was estimated at 30 metric tons (MT), whereas only 10 MT was produced.(11)
The estimated demand for animal products (milk, beef, poultry) will increase by around 175% between 2010 and 2050, whereas egg and pork will rise by 503% and 268% respectively.(12) Therefore, animal inputs production has to rise at a similar pace to cover the expected demand.
Indicative Return
10% - 15%
The benchmark returns from investments in the animal feed sector should fluctuate around 12%.(13) (14)
Investment Timeframe
Medium Term (5–10 years)
The investment timeframe is estimated to be above 5 years, accounting for the capital expenditure required for plant construction.
On the other hand, an example from Bangladesh was analyzed for a 20-year long investment.(15)
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Market - Volatile
Business - Supply Chain Constraints
Market - High Level of Competition
Impact Case
Sustainable Development Need
Due to the large number of small and unregistered feed providers, experts estimated that in 2016 commercial producers provided around 55% of domestic demand, dropping to 45%-50% in 2020. The major reason for this is that home-mix can cost 15%-30% less than commercial feed.(17)
This is most probably connected with the low utilization of available feed production capacity. Only 69% of the 1.1 million tons of estimated capacity is used.(18)
SDG 2 - Zero Hunger is a major challenge and SDG 8 - Decent Work and Economic Growth signals a significant one. Low levels of animal feed contribute to low levels of meat availability and thus low levels of protein and malnutrition.(5)
Gender & Marginalisation
Women constitute almost 80% of agricultural workers in Kenya. Yet, they often do not have any ownership of farming lands or production equipment. They also suffer from an unequal access to relevant agricultural loans.(34)
Expected Development Outcome
Increased volume and quality of meat production, and the mitigation of malnutrition and stunting
Increased incomes for farmers
Prevention of animal illnesses
Gender & Marginalisation
Increased employment opportunities especially for youth and females due to the development of the agricultural sector
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.2.1 Prevalence of stunting (height for age <-2 standard deviation from the median of the World Health Organization (WHO) Child Growth Standards) among children under 5 years of age
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
56.5% (35)
26% of children under 5 (35)
Agricultural value added per worker USD 1,987.13 (35)
0%
0%
By 2030, double the average productivity of food producers
8.2.1 Annual growth rate of real GDP per employed person
8.4.1 Material footprint, material footprint per capita, and material footprint per GDP
2.4% in 2018 (35)
Domestic material consumption per unit of gross domestic product (GDP): 2.76 kg/USD (35)
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Indirectly impacted stakeholders
Corporates
Outcome Risks
Greenhouse gas emissions from animal feed supply chains (19)
Water pollution, air pollution and land degradation caused directly by increased livestock production (20)
Higher demand for crops and arable land for feed production. Feeding an animal requires three times the amount of crops necessary to feed a person.(21)
Water consumption for feed crop production reduces the amount of water available to other ecosystems.(22)
Gender inequality and/or marginalization risk: Any negative environmental outcome will predominantly impact the main source of income for women and rural households, that is farming lands.
Impact Risks
Drop-off risk: The probability that negative impact is no longer mitigated, that is, the effects of over-fishing on aquaculture
Impact Classification
What
Providing inputs for animals such as feed is likely to have a positive impact because it contributes to increasing the production and income of farmers.
Who
Smallholder farmers and animal owners that are aggrieved due to poor access to affordable feed and thus have limited incomes.
Risk
The dominance of cheap and inferior products in the market and the low amount of raw materials can pose risks to business operations of high-quality feed producers.
Impact Thesis
Contribute to farmers' income and the general food security and health and wellbeing of the population.
Enabling Environment
Policy Environment
Third Medium Term Plan of 2018-2022: This plan recommends creating disease free zones and appropriate feed reserves as a precaution against drought.(23)
National Livestock Policy: This policy is the main plan for the subsector which follows the Vision 2030. Because around 80% of land in Kenya is arid or semi-arid, the policy underlines the importance of livestock for livelihood and the food security of local communities.(24)
Agriculture Sector Transformation and Growth Strategy: This strategy targets increasing farmers' productivity and access to inputs. By providing subsidy in a form of e-vouchers, the government wants to allow the farmers to purchase inputs.(6)
Financial Environment
Financial incentives: For many smallholder farmers, accessing credit is a key barrier. The Agricultural Finance Corporation was established to help with providing affordable credit.(29)
Fiscal incentives: Kenya offers value added tax (VAT) exemptions on animal feed.(13) Other incentives include a 2.5% capital deduction on industrial buildings for the first 40 years of operation (30), and a 100% investment deduction for capital expenditures on manufacturing buildings and machinery. This deduction increases to 150% for investments more than USD 2 million outside of Nairobi. (31)
Other incentives: Kenya offers capital allowances to farmers on constructing farm works at the rate of 100% of the cost. A farm work is any structure constructed to enhance the operations of a farm. (32) There is also a wear and tear deduction of 37.5% for heavy machinery, tractors and etc. (Class I) (33)
Regulatory Environment
Fertilizers and Animal Foodstuffs Act (Cap 345): This Act regulates feed production, importation and sale. It provides the general framework and penalties for non-compliance with quality standards.(25)
The Fertilizers and Animal Stuffs Act was amended in 2015 to introduce the Fertilizer and Animal Foodstuffs Board of Kenya. This body is responsible for regulating the sector, importing raw materials, inspecting the quality and licensing manufacturers.(26)
Livestock Bill 2019: This Bill introduced various bodies to regulate the sector.(27)
Standard Act (Cap. 496): The Kenya Bureau of Standards (KEBS) enforces standards of feed, to maintain quality.(28)
In August 2020, KEBS established 24 new standards to facilitate the production of safe and quality products of animal origin.
Marketplace Participants
Private Sector
A Ruhamah Enterprise, Namutec Enterprises, Tamfeeds, Pioneerfeeds
Government
Kenya Bureau of Standards
Multilaterals
International Fund for Agricultural Development (IFAD), Kenya Animal Genetic Resources Center (KAGRC), DOB Equity, FeedTechKenya
Non-Profit
Kenya Meat Commission, (KMC), Kenya Agricultural and Livestock Research Organization (KALRO), Animal Health Industry Training Institutes (AHITIs), Kenya Veterinary Board (KVB)
Target Locations
Kenya: Central
Kenya: Western
Kenya: Eastern
Kenya: North Eastern
References
- (1) World Bank (2020). Kenya Economic Update: Turbulent Times for Growth in Kenya.
- (2) World Bank database, 2020. https://data.worldbank.org/
- (3) ISIC Classification Revision. Comparative Industry Forecast Tables - Agriculture.
- (4) World Bank (2019). Unbundling the Slack in Private Sector Investment: Transforming Agriculture Sector Productivity and Linkages to Poverty Reduction. April 2019 | Edition No. 19.
- (5) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press.
- (6) Ministry of Agriculture (2019). Agricultural Sector Transformation and Growth Strategy: Towards Sustainable Agricultural Transformation and Food Security in Kenya 2019-2029.
- (7) Government of Kenya. National Agriculture Investment Plan (NAIP) 2019-2024. http://extwprlegs1.fao.org/docs/pdf/ken189052.pdf
- (8) World Bank (2020). Kenya Economic Update: Turbulent Times for Growth in Kenya,
- (9) Food and Agriculture Organization of the United Nations. Agriculture Policies Database for Kenya.
- (10) Kenya National Bureau of Statistics (2020). Kenya Economic Survey 2020. https://www.knbs.or.ke/?wpdmpro=economic-survey-2020
- (11) Republic of Kenya (208). Third Medium Term Plan 2018 – 2022 Transforming Lives: Advancing Socio-economic Development Through The 'Big Four'.
- (12) Food and Agriculture Organization of the United Nations (2017). Africa Sustainable Livestock 2050 - Kenya Country Brief. http://www.fao.org/3/a-i7348e.pdf
- (13) Kenya Market Trust (2017). Mapping animal feed manufacturers and ingredient suppliers in Kenya. https://www.kenyamarkets.org/wp-content/uploads/2017/10/Summary-Report-on-Animal-Feed-Millers-and-Ingredient-Suppliers-in-Kenya-2017.pdf
- (14) ABS TCM Ltd. (2013). Study on the Kenyan Animal Feed and Fodder Sub-sector. https://www.dialogkenya.info/docs/RES-KenyaFeedIndustryPolicyRegulatoryIssues--2013.pdf
- (15) Md Monirul, I., Azadul, H.M., Md Akteruzzaman, Tofael, A., Hashem, M., et al. (2019). 'Nutritional Compositions and Sensitivity Analysis of Poultry Feed Mills in Bangladesh through Experimental Economics Approach', Agriculture Research and Technology, 21(2). https://juniperpublishers.com/artoaj/pdf/ARTOAJ.MS.ID.556159.pdf
- (16) Schimmel, H. (2016). Challenges and Opportunities of Animal Feed Processing and Marketing in Ethiopia: AKF Experiences. AKF, N2Africa. https://www.slideshare.net/ILRI/n2-africa-posterakfjan2016
- (17) Agroberichten Buitenland - Ministerie van Landbouw, Natuur en Voedselkwaliteit (2020). Market study with insights into commercial and home-mix animal feed sectors in Kenya. https://www.agroberichtenbuitenland.nl/actueel/nieuws/2020/11/11/market-study-with-insights-into-commercial-and-home-mix-animal-feed-sectors-in-kenya
- (18) Kenya Market Trust (2017). Mapping animal feed manufacturers and ingredient suppliers in Kenya. https://www.kenyamarkets.org/wp-content/uploads/2017/10/Summary-Report-on-Animal-Feed-Millers-and-Ingredient-Suppliers-in-Kenya-2017.pdf
- (19) Food and Agriculture Organization of the United Nations (2016). Environmental Performance of Animal Feeds Supply Chains. Rome: FAO. http://www.fao.org/3/a-i6433e.pdf
- (20) Delgado, C., Narrod, C. and Tiongco, M. (2003). Policy, Technical, And Environmental Determinants And Implications Of The Scaling-Up Of Livestock Production In Four Fast-Growing Developing Countries: A Synthesis. International Food Policy Research Institute. http://www.fao.org/3/x6170e00.htm#Contents
- (21) Lewis, M. (2017). The Negative Environmental Impacts Of The Animal Agriculture Industry And The U.S. Policies In Place To Protect It. New York: Union College. https://digitalworks.union.edu/cgi/viewcontent.cgi?article=1055&context=theses
- (22) Kraham, S. (2017). Environmental Impacts of Industrial Livestock Production. In: Steier, G. and Patel, K. (eds) International Farm Animal, Wildlife and Food Safety Law. Springer, Cham. Springer. https://link.springer.com/chapter/10.1007/978-3-319-18002-1_1#citeas
- (23) Fertilizers and Animal Foodstuffs (Amendment) Act No.20 of 2015. http://kenyalaw.org/kl/fileadmin/pdfdownloads/AmendmentActs/2015/FertilizersandAnimalFoodstuffs_Amendment_ActNo20of2015.pdf
- (24) Ministry of Agriculture, Livestock, Fisheries and Irrigation (2019). Draft National Livestock Policy. https://www.kilimo.go.ke/wp-content/uploads/2019/02/Draft-reviewed-National-Livestock-Policy-February-2019.pdf
- (25) Fertilizers and Animal Foodstuffs Act, Chapter 345, 2012. http://extwprlegs1.fao.org/docs/pdf/ken63334.pdf
- (26) Fertilizers and Animal Foodstuffs (Amendment) Act No.20 of 2015. http://kenyalaw.org/kl/fileadmin/pdfdownloads/AmendmentActs/2015/FertilizersandAnimalFoodstuffs_Amendment_ActNo20of2015.pdf
- (27) Livestock Bill 2019. https://www.kilimo.go.ke/wp-content/uploads/2019/12/Livestock-Bill-10th-December-2019.pdf
- (28) ABS TCM Ltd. (2013). Study on the Kenyan Animal Feed and Fodder Sub-sector. https://www.dialogkenya.info/docs/RES-KenyaFeedIndustryPolicyRegulatoryIssues--2013.pdf
- (29) Ministry of Agriculture, Livestock, Fisheries and Irrigation (2019). Draft National Livestock Policy. https://www.kilimo.go.ke/wp-content/uploads/2019/02/Draft-reviewed-National-Livestock-Policy-February-2019.pdf
- (30) KENIvest. Investment Incentives. http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/
- (31) Kenya Revenue Authority website. https://www.kra.go.ke/en/ngos/incentives-investors-certificate/investing-in-kenya/incentives-investors
- (32) KENIvest. Investment Incentives. http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/
- (33) Kenya Revenue Authority website. https://www.kra.go.ke/en/ngos/incentives-investors-certificate/investing-in-kenya/incentives-investors
- (34) Deutsche Welle (2013). Women take over Kenya's farming sector. https://www.dw.com/en/women-take-over-kenyas-farming-sector/a-16716322
- (35) SDG Tracker (2021). End poverty in all its forms everywhere. https://sdg-tracker.org/no-poverty
- (36) Tamfeeds (2021). About. http://www.tamfeeds.com/about/4594116712#:~:text=As%20the%20very%20first%20company,and%20additives%20in%20East%20Africa.