Stakeholders should be involved in backward integration policy formulation
Ben Langat is the Managing Director, FrieslandCampina WAMCO Nigeria PLC. In this interview with FEMI ADEKOYA, he talks about Nigeria’s drive towards local milk production and how government can implement policies to aid realisation of set goals.
You began to collect local milk in 2010. 10 years after, what quantity of raw milk are you currently getting per day?
We are collecting about 40,000 litres a day. Our actual storage capacity is 85,000 litres, which means there is still a lot of room for this to increase. Presently, we are in five states – Oyo, Ogun, Osun, Kwara and we have just launched into northern Nigeria with a large project that is going on in Niger state in Bobi grazing reserve. We have a milk collection centre there with plans to engage a third party processor. We are doing full backward integration with the DDP, which is also supported by government through the Central Bank of Nigeria and the Federal Ministry of Agriculture and Rural Development.
In 2016, you set a target of 10 per cent for local raw materials sourcing. What is the current level of local sourcing, especially in the light of CBN’s foreign exchange restriction policy and capacity utilisation at the storage facilities?
We have achieved and surpassed the target we set in 2016 on dairy development. We have even moved beyond just surpassing our target to setting up a complete business line with the Peak Yoghurt. We are committed to helping to grow the economy as the clear leader in the dairy sector; we are training dairy farmers in line with international best practices, improving their livelihood and quality of life, and improving quality of livestock and pasture for better milk yield. We are building and sustaining new ecosystems. The DDP model has proven to be sustainable. We have a factory that is producing yoghurt and is going to need a lot of fresh milk. We still need more and that is why we are building more capacity. Perhaps over the next 12 months, the factory can run at full capacity.
To what extent would you say COVID-19 affected your operations and what are the possible impacts on your 2020 financial projection?
COVID-19 brought about a lot of changes and challenges. We have felt the impact of the coronavirus pandemic in the same manner that every other company has felt it. From the safety point of view, having to take precautions, have people work from home, etc. We have felt all that like everybody else. But we provide essential services being in the business of nutrition. So, we have been allowed to operate throughout this period; our factories have been running, we’ve been working very closely with government to ensure the movement of raw materials coming in and finished products around the country. We have been working together with industries that have similar products, food and pharmaceuticals, and other key essentials.
Our production has been steady; consumers are focusing on real essentials; they are not buying luxury items, dairy is important to a healthy nutrition and lifestyle; more so at this time when a strong immune system is important.
With COVID-19 lockdown challenges, how did you transport raw milk daily?
We experienced some delays and difficulties with enforcement agencies, but we were able to resolve them being categorized among essential services that were granted access. Our capacity to move was reduced by half; our trucks could only move during the day. Security officials required a lot of paperwork. We experienced all of those, but at the end, we resolved it all.
There was a lot of consultation with government; so we had places to reach out to so they eventually allowed the trucks to move.
What measures are you putting in place as a company to mitigate the challenges of COVID-19 as well as enhance productivity and continued growth?
Every day you plan to do something different, and the following day, something new comes up. We review all that we do daily and weekly, and we are ahead of the game. What we try to do is to make sure our people stay safe because at the end of the day, it’s about lives. Within our premises, we have very strict guidelines to follow, in terms of social distancing, wearing face masks, using sanitizers, washing of hands etc. If you come, it is strict protocol to get in here. We have had to let some people work from home. For those who need to work in the office, we have protocol for that. We have also provided for our staff to access medical services when necessary. So far, we have been lucky. We don’t pray for it, but the effects of the pandemic will be here for a long time. Business continuity is key. In terms of workplace psychology we have built around our people, we have designed protocols for different kinds of journeys and we have tried very hard to secure partnerships that ensure business continuity in areas like raw materials, packaging, etc.
While, the pandemic has an effect on logistics and the like, the cows still continue to produce milk daily. So the challenge is how to get the milk down here. The cows and the farmers are in fairly isolated locations, so milk production is not impacted. It’s just the little disruption that we see in the movement of milk. All things considered, we have a stable business and we remain committed to Nigeria and to making quality dairy nutrition available and affordable for all Nigerians.
Since CBN’s restrictions on foreign exchange to dairy import were announced, how has it been accessing forex?
We have felt the impact of COVID-19 on global oil prices. This has significantly affected the sourcing of foreign currency locally to bring in equipment and materials that we need. We are one of the six companies that have been granted access to FOREX and it is because of our steady investment in the dairy development programme, which we have been doing for the past 10 years. The fact that we are expanding and scaling fast in the North doesn’t mean that there is enough raw milk. We need a lot more for production and it will take many more years of committed dairy development.
As regards local milk production, what other policy direction do you expect from government?
I can’t tell what government policies would be, going forward. But I think the intention behind backward integration in any country is always good, and policies are best formulated in a manner that is consultative and allows input from stakeholders so that policies don’t create more pain or difficulty in the country. There is a big difference between backward integration that affects crops that can be grown in a fairly short period of time, like perennial crops that take three to six months to grow, and one that involves life, which needs to be developed like dairy. It takes a long time and it’s a lot more sensitive. Dairy cows need constant attention; you must treat, clean and feed them properly. It takes time.
Is your firm well positioned to support policy making in the dairy sector?
Backward integration policy making will continue and we are committed to it. We want to be part of the consultation process because our company is a big knowledge base for dairy development, not only in Nigeria but globally. This can be leveraged because there is so much we believe that still needs to be done to boost the sector. To accelerate backward Integration, the big challenges that must be tackled head on are insecurity and infrastructure. To get products out of the ports is a nightmare, and the cost of clearing goods are going up by two to three times more. It has been like this over the last year or two because of port congestion and poor infrastructure. In terms of power supply, we have been here for many decades, but still trying to get into the national grid. Supporting companies to bring down the cost of doing business is a very essential thing for government to do. When you ask farmers to go and produce milk, cereal, rice, wheat or whatever, they need to know that once the process of farming starts, all the required infrastructure will be put in place and will work all the way to the point of sale and you will get value for what you produce. That way, the cycle remains sustainable and profitable.
How has the DDP engaged local dairy farmers?
We work with 7000 farmers presently; 950 of them are women and we are targeting to work with a lot more. We have established dairy cooperatives for a sustainable dairy value chain.
What are the most consistent challenges confronting the dairy development programme?
A lot of challenges, having started from scratch. We don’t have quality dairy breeds in the country and have to build stock from very low mother stock. A key part of the DDP effort is in the crossbreeding programme to ensure we build enough dairy stock for farmers. There is the challenge of poor infrastructure. There are also normal challenges of cow diseases, water supply to farms, nomadic lifestyle of pastoralists, etc. So there was a need to educate the farmers on how to improve their feeds, get veterinary support for the cows, all in a bid to improve the milk yield. The challenge around animal husbandry is really getting the right animal that can give the right yield. The cows that are in Nigeria are largely beef cattle. Overtime, they have to be improved. Progress is slow and that is one big challenge.
Are there areas government can help the dairy sector?
There is a lot more that needs to be done to improve infrastructure – road networks, power and water supply in rural locations. Security is also a challenge. Each community comes with its own challenges, like communal clashes over land resources, etc. The biggest challenge that dairy development will face in the north is security in addition to low quality pasture. We are focused on getting the yield per cow up to the right level; it’s still very low. We have traditional beef cows that produce one to two litres per day. But with artificial insemination and crossbreeding, we can get more than 10 litres per cow over time, and that would be a lot better.
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