Dairy Production
Dairy Production
Business Model Description
Set up a dairy processing plant and its accessories for collection, processing and pasteurization of raw milk into fresh and sour milk for supply to the local retail market.
Expected Impact
Contribute to food and nutrition security, and alleviate poverty, including stunting in children.
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
- Lesotho: Countrywide
Sector Classification
Food and Beverage
Development need
According to Lesotho Food and Nutrition Policy 2016 - 2025, a consumption study in Berea and Thaba-Tseka districts, shows that Basotho diets are monotonous with little animal protein. Poor segments of the population continue to carry the burden of malnutrition in all its forms, and perpetuates the cycle of poverty, morbidity and mortality, leading to reduced life spans (15).
Policy priority
Through the Food and Nutrition Policy, government seeks to provide sufficient budgets for nutrition programmes and posting of well-qualified staff at national and district levels, including forging partnerships between government and industry to finalize regulatory framework and standards of fortification of foods with micronutrients (15).
Gender inequalities and marginalization issues
According to CNAP, poor road infrastructure negatively affect accessibility, implying weak social protection for vulnerable groups including the orphans, disabled, women, children and the elderly who still go without food due to poverty (1).
Investment opportunities introduction
Lesotho has ample opportunity to be competitive in agricultural exports. The climate and high altitude provide a comparative advantage and help minimize animal diseases and promote animal health (1).
Key bottlenecks introduction
Insurance instruments are lacking to cover and mitigate production risks related to weather conditions, pests and diseases (1).
Food and Agriculture
Development need
Lesotho dairy industry is currently dominated by imports from South Africa (1). 95% of dairy products are imported and increasing by 6%, annually. The industry offers over 50 product lines, but only 2 lines (fresh and sour milk) are currently produced (6).
Policy priority
Government has declared the dairy industry a priority for food security, and several initiatives are underway to stimulate dairy development, including training and capacity building of dairy farmers (1).
Gender inequalities and marginalization issues
Of the eight most common stocks (cattle, sheep, goat, donkey, horse, mule, pig and poultry), six are largely owned by men, while women mostly own just two stocks, pigs and poultry (5).
Investment opportunities introduction
Dairy industry has investment opportunities as only 2 products are produced (fresh and sour milk) out of over 50 product lines (6).
Key bottlenecks introduction
Lack of supply of fodder for animal feed in Lesotho is the major challenge (7).
Meat, Poultry and Dairy
Pipeline Opportunity
Dairy Production
Set up a dairy processing plant and its accessories for collection, processing and pasteurization of raw milk into fresh and sour milk for supply to the local retail market.
Business Case
Market Size and Environment
< USD 50 million
Lesotho imports more than 22 million litters of long-life (UHT) milk and only 1.9 million litters are produced locally. Lesotho Dairy Products produces only 2 out of more than 50 dairy product lines. A litter of UHT is M12 (22 million * 12 = M 264 million) (USD 14.6 million) (6, 8).
67.76 million litters of milk are imported and 20.63 million litters are local production (16, 17).
Indicative Return
10% - 15%
Milk production capacity of dairy farmers in Lesotho is very low and currently supply only 10% of required milk, which results in the processing plant using only 40% of its capacity, and has resulted in Lesotho Dairy Products achieving < 5% ROI (8).
Increase in the value of local dairy products made it possible for Parmalat Eswatini, a dairy company in Eswatini leasing a milk processing plant in Matsapha since 1999, to record ROI of 10% - 15% (16, 17).
Investment Timeframe
Long Term (10+ years)
Sustained shortages in the supply chain constraints regarding low milk input quantities have seen Lesotho Dairy Products achieve ROI of < 5% over more than 10 years (8).
Over the 5 year period, there has been an increase in the level of dairy farming system, including creative marketing strategies, and Parmalat Eswatini has been able to achieve within five years (16, 17).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - High Level of Competition
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
Lesotho has high food and nutrition insecurity caused, among others, by low agricultural productivity and nutrition insensitive production, poverty and heavy reliance on food imports, estimated at 80% of total food consumed in the country (1).
Gender & Marginalisation
Low productivity of Lesotho's agriculture has consistently depressed incomes in the sector leading to chronic food insecurity, malnutrition and stunting; primarily affecting women, children and vulnerable groups from poor households (2).
Food and Nutrition Policy lists inadequate nutrition counselling at health facilities and at community level as a supply-side challenge, particularly for children, which contributes to childhood deaths - malnutrition is the second highest cause of childhood deaths at 16% (15).
Expected Development Outcome
Dairy production has the potential to contribute to food and nutrition security thereby reducing food imports and poverty, and contributing to economic growth.
Gender & Marginalisation
Dairy production can help preserve incomes in the sector, provide food security, nutrition and alleviate stunting, particularly for women, children and vulnerable groups from poor households.
Dairy production has the potential to improve access and security of nutrition for children under the age of and can contribute to reduction of childhood deaths from the current 33.4% to 23% by 2025 (15).
Primary SDGs addressed
1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)
National poverty rate 49.7% (2018); Urban 24.7% and rural 67.8% (3).
Reduced by 50% by 2030 (2).
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
2.1.1 Prevalence of undernourishment
Prevalence of stunting 31.8% as at 2022 (22).
Prevalence of undernourishment 34.7% at 2020 (22).
Achieve 23% by 2025 (15).
By 2030, end all forms of malnutrition (23).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Outcome Risks
Milk is a naturally good place for bacteria to thrive, poor hygiene in the handling of dairy equipment and cooling facilities can affect the quality of milk with implications for human health (19).
Impact Risks
Feed is an indispensable input in animal rearing. But lack of feed has been a challenge in Lesotho and can affect the sustainability of dairy production (1).
Livestock subsector has a setback of stock theft, which has been a problem in Lesotho for decades, and could have negative implications for dairy farming (1).
Impact Classification
What
Dairy production contributes to food and nutrition access, including to poverty and empowerment of households.
Risk
Shortages of animal feed and stock theft can undermine milk production and, therefore, sustainability of dairy production.
Contribution
Dairy production contributes to food and nutrition security, including creating jobs and economic growth.
Impact Thesis
Contribute to food and nutrition security, and alleviate poverty, including stunting in children.
Enabling Environment
Policy Environment
Comprehensive National Agriculture Policy (2022 - 2026) recognize that sustainable agricultural production can be optimized by the participation of the private sector and articulate measures for doing this (1).
National Strategic Development Plan (2018/19 - 2022/23) identifies agriculture as a priority sector for food security and employment creation, and proposes several policy actions, including a list of investment opportunities to turn around the sector (2).
Export Diversification of Lesotho: Products and New Markets 2019 provides a list of potential export products and export destinations, which are an important guide to investors for investment opportunities (12).
Financial Environment
Fiscal incentives: Company Income Tax rate on agricultural output is 10% compared to 25% standard rate. Seeds and fertilizer subsidy of 60% facilitates in-house production of animal feed for dairy production plants (20, 21).
Financial support: Lesotho Dairy Products is the only milk processing plant in the country and receives grants from government for its operating capital. This is meant to help grow the dairy industry in the country as one of the priorities in the agriculture sector (8).
Other incentives: Lesotho National Dairy Board and Lesotho Agricultural College signed an MOU in 2022 where the college provides technical support in training, research and outreach, particularly to the dairy farmers, for improvement and success of the dairy industry in the country (6).
Other incentives: Through CNAP, government plans to bear the cost of establishing Agricultural Cluster Service Enterprises that cover dairy industry to direct funds and other resources to building groups of smallholder farmers. It involves creating horizontal and vertical linkages between local agricultural enterprises and enhancing value-chains (1, 24).
Regulatory Environment
Legal Notice No. 246 of 1991 established Lesotho National Dairy Board (LNDB), as a body corporate to promote, regulate, approve and issue permits to distribute or deal in dairy products (14).
Agricultural Marketing Act 26 of 1967 objective is to control and improve the production, preparation, processing and marketing of agricultural products and the marketing of agricultural (13).
Marketplace Participants
Private Sector
Lesotho Dairy Products, U-Save, Pick'n'Pay, ShopRite, Lesotho Dairy Farmers Association, Lesotho National Farmers Association, Molelloa Diary Products.
Government
Lesotho National Dairy Board, Ministry of Agriculture and Food Security, Ministry of Trade and Industry, Ministry of Finance and Development Planning, Lesotho National Development Corporation, Basotho Enterprises Development Corporation.
Multilaterals
United Nations Development Programme, Food and Agriculture Organization, International Food and Agricultural Development, United Nations.
Non-Profit
Development Peace Education, Lesotho Council of Non-Governmental Organization, Rural Self-Help Association.
Target Locations
Lesotho: Countrywide
References
- (1) Government of Lesotho, Comprehensive National Agriculture Policy, 2022 - 2026
- (2) Government of Lesotho, National Strategic Development Plan, 2018/19 - 2022/23
- (3) Government of Lesotho, Lesotho Poverty Trends and Profile, 2019
- (4) Clear Center, How Dairy Milk Has Improved its Environmental and Climate Impact, 2022. https://clear.ucdavis.edu/explainers/how-dairy-milk-has-improved-its-environmental-and-climate-impact
- (5) Government of Lesotho, Livestock Statistics, 2018/19
- (6) SDG Investor Map Lesotho National Dairy Board Consultations, July 2023
- (7) Tsepiso Rantso, et al, The Contribution of Lesotho Dairy Products to the Livelihoods of Dairy Farm Households in Maseru and Berea Districts in Lesotho - 2020. https://journals.sagepub.com/doi/10.1177/0973005220930383?icid=int.sj-abstract.similar-articles.1#:~:text=counteract%20foreign%20competition.-,Challenges%20Hindering%20the%20Performance%20of%20the%20Dairy%20Industry%20in%20Lesotho,livestock%20on%20the%20communal%20land.
- (8) SDG Investor Map Lesotho Dairy Products Stakeholder Consultation, September, 2023
- (9) Gender equality and decent employment in thedairy sub-sector – Evidence from Kenya. https://www.fao.org/3/i6649e/i6649e.pdf
- (10) Safety and Quality of Milk and Milk Products in Senegal—A Review 2022. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9656659/
- (11) Statista, Dairy Products & Eggs - Lesotho, 2023. https://fr.statista.com/outlook/cmo/food/dairy-products-eggs/lesotho#revenue
- (12) Export Diversification of Lesotho: Products and New Markets, 2019
- (13) Government of Lesotho, Agricultural Marketing Act 26 of 1967
- (14) Government of Lesotho, Legal Notice No. 246 of 1991
- (15) Government of Lesotho, Lesotho Food and Nutrition Policy, 2016 - 2025
- (16) Eswatini Dairy Board. http://www.dairyboard.co.sz/download/OVERVIEW.pdf
- (17) Eswatini Dairy Board. http://www.dairyboard.co.sz/dairy-dev.php
- (18) UNICEF, Country Office Annual Report 2021
- (19) Jacoby Dairy Product Merchants, Key Factors Affecting Milk Production and Quality. https://www.jacoby.com/key-factors-affecting-milk-production-quality/
- (20) Government of Lesotho, Budget Speech 2023/24
- (21) Revenue Services Lesotho. https://www.rsl.org.ls/tax-rates
- (22) United Nations, Sustainable Development Report 2023
- (23) United Nations, Sustainable Development Atlas 2023
- (24) Farmers Pride International, ABC Farming Strategy, 2021. https://www.farmersprideinternational.org/agri-based-clusters#:~:text=The%20cluster%20development%20approach%20in%20agriculture%20and%20agri%2Dbased%20industries,linkages%20between%20local%20agricultural%20enterprises.