Animal feed production and distribution
Animal feed production and distribution
Business Model Description
Establish and upscale production and distribution of animal feed (powdering and blending raw materials and nutrients) adapted to local context and needs, as well as supply products and inputs to farmers through pay-as-you-go or harvest-based loans.
Expected Impact
Enable quality animal products, which contribute to agricultural productivity and nutritional improvements.
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
- Uganda: South Western
- Uganda: Karamoja
- Uganda: Central
- Uganda: East Central
- Uganda: Acholi
Sector Classification
Food and Beverage
Development need
70% of Ugandans are employed in agriculture (IX), and the sector constitutes approximately a quarter of gross domestic product (GDP) and a large proportion of exports (III). The agriculture sector is marred by low levels of productivity and output, mainly caused by poor agricultural practices as well as the impacts of climate change.(VII)
Policy priority
The government supports the development of the agriculture sector, emphasising agro-industrialisation in the Third National Development Plan 2020/21 – 2024/25.(IV) The Vision 2040 recognises agriculture as one of the key pillars for the country's development and acknowledges the need for innovation and integration of the sector.(X)
Investment opportunities introduction
Approximately 80% of Uganda's land is arable, however only 35% is currently being cultivated. Agricultural development is predicted to contribute to domestic wealth creation and increased employment.(IV)
Key bottlenecks introduction
The Agriculture Sector Strategic Plan 2015/16 - 2019/20 provides a detailed analysis of opportunities and challenges in agriculture, emphasising agro-processing, innovation, improvement of skills and establishment of market linkages, which will help transform the sector towards industrialisation and higher value adding.(IV)
Agricultural Products
Pipeline Opportunity
Animal feed production and distribution
Establish and upscale production and distribution of animal feed (powdering and blending raw materials and nutrients) adapted to local context and needs, as well as supply products and inputs to farmers through pay-as-you-go or harvest-based loans.
Business Case
Market Size and Environment
< USD 50 million
Estimated demand of 986,000 metric tons (MT) of animal feed in 2020 (25)
In 2018, Uganda imported preparations used for animal feeding worth almost USD 22 million and with a net weight of nearly 43,000 tons.(4) This indicates a large opportunity to substitute imports with domestic production.
Demand for animal feed in Uganda is estimated to have reached 986,000 metric tons in 2020.(25)
Indicative Return
10% - 15%
The benchmark returns from investment in the animal feed sector fluctuate around 12%, according to research by the Ministry for Agriculture.(30)
This result is confirmed by a 2017 Report about other emerging markets and the factors that affect the profitability of animal feed companies. The results show the return on asset can reach up to 12%.(31)
Investment Timeframe
Short Term (0–5 years)
According to a recent Ugandan case study, the payback period was estimated at 6 months.(19) However, it is likely that if large-scale or more specialized feed is considered, the investment timeframe may reach 5 or more years.
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Market - Highly Regulated
Competition from low quality producers
Business - Business Model Unproven
Impact Case
Sustainable Development Need
At 2017, 41% of Uganda's population was malnourished.(1)
Currently, the agricultural sector is experiencing major constraints, including feed-food competition between farmers and animals, seasonal food shortages and high costs of commercially prepared feed.(26)
The majority of households producing protein-rich foods tend to sell it rather than consume it.(2) Approximately 73% of the population is unable to afford a nutritious diet, given the high cost of protein-rich foods arising from limited availability and affordability of inputs.(2)
Gender & Marginalisation
The prevalence of stunting in children under 5 years of age was high at 28.9% in 2016. The prevalence of wasting in children under 5 years of age was 3.6% in the same year.(1)
53% of children are anaemic and therefore unlikely to reach their full mental and physical potential.(2) The prevalence of anaemia is also high for women at 32%, resulting in deteriorated health.(2)
The proportion of dietary costs of adolescent girls and pregnant and lactating women (42% and 32% respectively) are the highest of all household members. Improving affordability of nutritious food is therefore imperative for improving girls' and women's health in Uganda.(2)
Expected Development Outcome
Increased agricultural productivity
Reduced malnutrition, stunting and hunger due to increased supply of protein-rich animal products; improved trade balance due to import substitution
Improved quality of animal products (meat, dairy) due to high quality feeds
Gender & Marginalisation
Increased agricultural productivity is expected to positively impact women, as critical workforce, and children, as recipients of improved quality animal products.
Primary SDGs addressed
2.1.1 Prevalence of undernourishment
2.2.3 Prevalence of anaemia in women aged 15 to 49 years, by pregnancy status (percentage)
2.3.1 Volume of production per labour unit by classes of farming/pastoral/forestry enterprise size
2.3.2 Average income of small-scale food producers, by sex and indigenous status
9.2.1 Manufacturing value added as a proportion of GDP and per capita
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Indirectly impacted stakeholders
People
Planet
Corporates
Public sector
Outcome Risks
Animal feed supply chains contribute to increased greenhouse gas emissions.(2) The demand for crops and arable land will increase due to feed production.(6)
The use of feed additives affects feed efficiency and thus animal and environmental performance.(7)
Increased livestock production may cause water pollution, air pollution and land degradation.(8)
Crops (making up a significant proportion of feed inputs) not being directed to human consumption - feeding an animal requires three times the amount of crops necessary to feed a human.(6)
Impact Classification
What
Investments in animal feed production and distribution are targeted to improve the agricultural productivity and alleviate hunger as well as undernutrition challenges in Uganda.
Risk
Negative environmental impacts may occur. High competition from poor quality products, underdeveloped distribution network and affordability of the product.
Impact Thesis
Enable quality animal products, which contribute to agricultural productivity and nutritional improvements.
Enabling Environment
Policy Environment
Agriculture Sector Strategic Plan 2015/16-2019/20: This plan recognises the need to improve accessibility of quality feeds, which is currently a major challenge for farmers.(10)
The National Animal Feeds Policy 2005: This policy presents the scope of government's support to the animal feed segment, as well as its general overview, opportunities and challenges.(12)
Industrial Policy for Economic Transformation in Uganda: This policy identifies animal feed as a bottleneck that hampers agricultural growth. It also recognises the need to upgrade production processes.(13)
National Agriculture Policy 2013: This policy sets out targets for agricultural development including an increase in the incomes of livestock farming households through improved feeding practices.(14)
Financial Environment
Fiscal incentives: Various tax and value added tax (VAT) exemptions apply, such as on income derived by an agro-processor who uses plant and machinery that has not previously been used in Uganda or veterinary chemicals when imported by dealers under the VAT Act.
Regulatory Environment
Dairy cattle feed premix - Specification: This document lists the requirements for compounded dairy cattle feed premix used in animal feeds.(15)
The Uganda Free Zones Act 2014: This Act regulates establishing, developing, managing, marketing, maintaining, supervising and controlling free zones.(17)
National Standards and Quality Policy 2012: This policy provides the framework for standardising and maintaining the high quality of products.(18)
Ministry of Agriculture, Animal Industry and Fisheries is responsible for policymaking in Uganda's agriculture sector, setting development objectives and preparing sector development strategies and programs.(23)
The Ministry of Trade, Industry and Cooperatives governs investment-related matters and industrial activities in Uganda.(24)
Marketplace Participants
Private Sector
Concfeed International, Conversion Feeds Uganda, AFGRI Animal Feeds, Astral Foods, Premier Feed Mills, Quantum Foods, Wadi Group
Government
Ministry of Agriculture, Animal Industry and Fisheries
Multilaterals
United Nations International Children's Emergency Fund (UNICEF), Food and Agriculture Organization of the United Nations (FAO), World Food Program (WFP), International Fund for Agricultural Development (IFAD)
Non-Profit
African Development Bank (AfDB), Uganda Development Bank, European Investment Bank (EIB)
Target Locations
Uganda: South Western
Uganda: Karamoja
Uganda: Central
Uganda: East Central
Uganda: Acholi
References
- (I) 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. (II) United Nations Development Programme (2019). Briefing note for countries on the 2019 Statistical Update: Uganda. (II) Ministry of Agriculture, Animal Industry and Fisheries. Agricultural sector potential in Uganda. https://www.agriculture.go.ug/agricultural-sector-potential/ (IV) National Planning Authority. National Development Plan III (NDPIII) 2020/21 – 2024/25. (V) Fowler, M. and Rauschendorfer, J. (2019). Agroindustrialisation in Uganda. https://www.theigc.org/wp-content/uploads/2019/11/Fowler-and-Rauschendorfer-2019-working-paper.pdf (VI) Rakotoarisoa, M.A., Iafrate, M. and Paschali, M. (2011). Why Has Africa Become a Net Food Importer? http://www.fao.org/fileadmin/templates/est/PUBLICATIONS/Books/AFRICA_STUDY_BOOK_REVISED_low_res.pdf (VII) Government of Uganda. Uganda Green Growth Development Strategy (UGGDS) 2017/18 – 2030/31. (VIII) United Nations Development Programme (2019). Inequalities in Human Development in the 21st Century. Briefing note for countries on the 2019 Human Development Report. Uganda. (IX) World Bank (2018). Making Farming More Productive and Profitable for Ugandan Farmers.https://www.worldbank.org/en/country/uganda/publication/making-farming-more-productive-and-profitable-for-ugandan-farmers (X) Government of Uganda. Uganda Vision 2040. https://consultations.worldbank.org/sites/default/files/materials/consultation-template/materials/vision20204011.pdf
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- (2) World Food Programme (2019). Fill the Nutrient Gap Uganda. https://docs.wfp.org/api/documents/WFP-0000108062/download/
- (3) Food and Agriculture Organization of the United Nations (2019). The future of livestock in Uganda. Opportunities and challenges in the face of uncertainty. Rome. http://www.fao.org/3/ca5420en/ca5420en.pdf
- (4) UN Comtrade database. https://comtrade.un.org/data/
- (5) 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
- (6) 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
- (7) 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
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- (10) Ministry of Agriculture, Animal Industry and Fisheries. Agriculture Sector Strategic Plan 2015/16-2019/20.
- (11) Uganda Revenue Authority (2019). A tax incentives guide for investors in Uganda. https://www.ebiz.go.ug/wp-content/uploads/2020/03/TAX_INCENTIVES_GUIDE_FOR_INVESTORS_IN_UGANDA_October_2019.pdf
- (12) Ministry of Agriculture, Animal Industry and Fisheries (2005). National Animal Feeds Policy. https://www.agriculture.go.ug/wp-content/uploads/2019/04/Animal-Feeds-Policy-September-2004.pdf]
- (13) Konrad Adenauer Stiftung (2020). Industrial Policy for Economic Transformation in Uganda. https://www.kas.de/documents/280229/9581001/CDA_KAS+Reality+Check+12_Industrial+Policy+for+Economic+Transformation+in+Uganda.pdf/34cdb812-3de4-87e2-7281-0256682ba53f?t=1594904315863
- (14) Ministry of Agriculture, Animal Industry and Fisheries (2013). National Agriculture Policy. https://www.agriculture.go.ug/wp-content/uploads/2019/04/National-Agriculture-Policy-1.pdf
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- (16) Government of Uganda. Companies Act 2012. https://ulii.org/ug/legislation/act/2015/1-4
- (17) Government of Uganda. Free Zones Act 2014 (No. 5 of 2014). https://www.ilo.org/dyn/natlex/docs/ELECTRONIC/96870/114656/F-592265241/UGA96870.pdf
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- (23) Ministry of Agriculture, Animal Industry and Fisheries. About Us. https://www.agriculture.go.ug/the-ministry/
- (24) Ministry of Trade, Industry and Cooperatives. Background and Mandate. http://www.mtic.go.ug/background-and-mandate/
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