Animal feed production

Animal feed production

Photo by Shutterstock

Animal feed production

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Beverage
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Food and Agriculture
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
10% - 15% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Medium Term (5–10 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 50 million - USD 100 million
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
USD 500,000 - USD 1 million
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Zero Hunger (SDG 2) Decent Work and Economic Growth (SDG 8)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
No Poverty (SDG 1) Good health and well-being (SDG 3)

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.

Disclaimer

UNDP, the Private Finance for the SDGs, and their affiliates (collectively “UNDP”) do not seek or solicit investment for programmes, projects, or opportunities described on this site (collectively “Programmes”) or any other Programmes, and nothing on this page should constitute a solicitation for investment. The actors listed on this site are not partners of UNDP, and their inclusion should not be construed as an endorsement or recommendation by UNDP for any relationship or investment.

The descriptions on this page are provided for informational purposes only. Only companies and enterprises that appear under the case study tab have been validated and vetted through UNDP programmes such as the Growth Stage Impact Ventures (GSIV), Business Call to Action (BCtA), or through other UN agencies. Even then, under no circumstances should their appearance on this website be construed as an endorsement for any relationship or investment. UNDP assumes no liability for investment losses directly or indirectly resulting from recommendations made, implied, or inferred by its research. Likewise, UNDP assumes no claim to investment gains directly or indirectly resulting from trading profits, investment management, or advisory fees obtained by following investment recommendations made, implied, or inferred by its research.

Investment involves risk, and all investments should be made with the supervision of a professional investment manager or advisor. The materials on the website are not an offer to sell or a solicitation of an offer to buy any investment, security, or commodity, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.

Read More

Country & Regions

Explore the country and target locations of the investment opportunity.
Country
Region
  • Kenya: Central
  • Kenya: Western
  • Kenya: Eastern
  • Kenya: North Eastern
Learn more

Sector Classification

Situate the investment opportunity within sustainability focused sector, subsector and industry classifications.
Sector

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.

Sub Sector

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.

Industry

Agricultural Products

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Animal feed production

Business Model

Build, operate and manage the production of affordable high-quality feed and supply it to farmers.

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

USD 50 million - USD 100 million

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

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

IRR
Describes an expected annual rate of growth of the IOA investment.

10% - 15%

The benchmark returns from investments in the animal feed sector should fluctuate around 12%.(13) (14)

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

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

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

USD 500,000 - USD 1 million

Market Risks & Scale Obstacles

Market - Volatile

Low awareness of the benefits of using concentrated feed among farmers (16)

Business - Supply Chain Constraints

Low availability of dedicated professionals ready to distribute a new product (16)

Market - High Level of Competition

High amount of cheap and low-quality feed on the market, low amount of raw materials for feed production (14)

Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

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

Zero Hunger (SDG 2)
2 - Zero Hunger

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

Current Value

56.5% (35)

26% of children under 5 (35)

Agricultural value added per worker USD 1,987.13 (35)

Target Value

0%

0%

By 2030, double the average productivity of food producers

Decent Work and Economic Growth (SDG 8)
8 - Decent Work and Economic Growth

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

Current Value

2.4% in 2018 (35)

Domestic material consumption per unit of gross domestic product (GDP): 2.76 kg/USD (35)

Target Value

N/A

N/A

Secondary SDGs addressed

No Poverty (SDG 1)
1 - No Poverty
Good health and well-being (SDG 3)
3 - Good Health and Well-Being

Directly impacted stakeholders

People

Animal breeders, farmers working in livestock production, meat consumers, milk producers

Gender inequality and/or marginalization

Women as critical workforce in the sector

Indirectly impacted stakeholders

Corporates

Meat and dairy industry

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

C—Contribute to Solutions

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

Explore policy, regulatory and financial factors relevant for the investment opportunity.

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

Discover examples of public and private stakeholders active in this investment opportunity that were identified through secondary research and consultations.

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

See what country regions are most suitable for the investment opportunity. All references to Kosovo shall be understood to be in the context of the Security Council Resolution 1244 (1999)
country static map
semi-urban

Kenya: Central

The majority of feed for poultry is consumed mostly in central and western Kenya. The central and southern regions of the country are a key area for commercial feed.(17) Currently, feed producers are concentrated around Nairobi and the central part of Kenya due to the central location. But most animals are located in central and western Kenya.(13)
semi-urban

Kenya: Western

The majority of feed for poultry is consumed mostly in central and western Kenya. The central and southern regions of the country are a key area for commercial feed.(17) Currently, feed producers are concentrated around Nairobi and the central part of Kenya due to the central location. But most animals are located in central and western Kenya.(13)
semi-urban

Kenya: Eastern

Additionally, the arid and semi-arid areas (ASAL) are the main geographical locations undersupplied for feed, compared with medium to high rainfall areas.(24) The biggest livestock populations in those areas are located in Turkana, Narok and Garissa.(6)
semi-urban

Kenya: North Eastern

Additionally, the arid and semi-arid areas (ASAL) are the main geographical locations undersupplied for feed, compared with medium to high rainfall areas.(24) The biggest livestock populations in those areas are located in Turkana, Narok and Garissa.(6)

References

See what sources were used to establish the investment opportunity’s data and find resources that could be consulted to explore more.
    • (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.