Pathways to Dairy Net Zero: Promoting Low Carbon and Climate Resilient Livestock Uganda-Market study. Ben Lukuyu, Shakira Janet Nagujja, Francis Wanyoike, Sirak Bahta and Isabelle Baltenweck International Livestock Research Institute October 2023 Acronyms and abbreviations % Percentage AI Artificial Insemination bn billion BCC Bulk collection centre BGFA Beyond the Grid Fund for Africa CAPEX Capital Expenditure CH4 Methane CIAT International Center for Tropical Agriculture COB Clot on Boiling CO2eq Carbon dioxide equivalent CO2 Carbon dioxide CREEC Centre for Research in Energy and Energy conservation DDA Dairy Development Authority DPAP Dairy Action Plan EAC East African Community EADD East African Dairy Development Project EADRAC East Africa Dairy Regulators Authorities Council EASP Energy Access Scale-up Project FAO Food and Agriculture Organization of the United Nations FY Financial Year FOSAs Front Office Services Activities GCF Green Climate Fund GDP Gross domestic product GHG Greenhouse gases GLEAM Global Livestock Environmental Assessment Model GOU Government of Uganda Ha Hectare Hr Hour HI Heifer International IFAD International Fund for Agricultural Development ILRI International Livestock Research Institute KCCA Kampala City Council Authority Kg Kilogram KVA Kilo-volt-amperes Kw Kilo watts L Litre LTD Limited LS Large Scale LGs Local Governments M Million MAAIF Ministry of Agriculture, Animal Industry and Fisheries MCC Milk Collection Centre MEMD Ministry of Energy and Mineral Development ML Millilitre MoLG Ministry of Local Government Mt CO2-eq Metric tons of carbon dioxide equivalent MOU Memorandum of Understanding NAADS National Agricultural Advisory Services Programme NARO National Agricultural Research Organisation NDP National Development Plan N2O Nitrous oxide NGO Non-Government Organization NZAGRC New Zealand Agricultural Greenhouse Gas Research Centre OPEX Operating expenses or expenditure PAYE Pay as You Earn PAY Go Pay as You Go PURE Productive use of renewable energy REA Rural Electrification Agency of Uganda RBF Results-based Financing SACCO Savings and Credit Cooperative Organisation or Society SME Small and Medium Enterprises SMP School Milk Program SNF Solids Not Fat SNG Synthetic Natural Gas SS Smale Scale SWOT Strengths, Weaknesses, Opportunities, and Threats TIDE The Inclusive Dairy Enterprise UAE United Arab Emirates UDB Uganda Development Bank UECCC Uganda Energy Credit Capitalization Company UGIFT Uganda Intergovernmental Fiscal Transfers Program Project for Uganda UGX Uganda Shillings UHT Ultra High Temperature UIRI Uganda Industrial Research Institute UNBS Uganda National Bureau of Standards UNCDF United Nations Capital Development Fund UNDP United Nations Development Programme URA Uganda Revenue Authority USAID/BFS The United States Agency for International Development (USAID)/Bureau for Food Security (BFS) USEA Uganda Solar Energy Association USD United States Dollar WHO World Health Organization WTO World Trade Organization Table of Contents 1 THE PURPOSE OF THE MARKET ASSESSMENT 7 2 METHODOLOGY AND STRUCTURE 9 2.1 Methodology for the market study in Uganda 10 3 POLITICAL ECONOMY AND DAIRY SECTOR CONTEXT 11 3.1 Dairy sector context 11 3.2 Political Economy in dairy sector in Uganda 15 4 DAIRY VALUE CHAIN STRUCTURE, GOVERNANCE 16 4.1 Milk flow through the formal and informal channels in Uganda 16 4.2 Milk collection, storage, and bulking 17 4.2.1 Processing of milk 22 4.2.2 Processed dairy products in Uganda 23 4.2.3 Dairy products exports in Uganda 28 4.2.4 Trend of dairy imports in Uganda 28 4.2.5 SWOT analysis of milk processors in Uganda 29 4.3 Payment schedule for the various actors for the milk 30 4.4 Standards of quality milk 30 4.5 Annual post-harvest losses at different dairy value chain nodes 31 4.6 Milk shed raw milk prices 32 5 INVESTMENTS IN TECHNOLOGY - FOCUS ON COLD CHAIN AND RENEWABLE ENERGY 33 5.1 Emissions from the Dairy sector 33 5.2 Climate smart technologies 34 5.2.1 Farm level 34 5.2.2 Climate smart technologies/ inputs at off farm level (Cooperatives/aggregators) 40 5.2.3 Climate smart technologies/ inputs at off farm level (Processors) 42 5.2.4 Climate smart technologies/ inputs at off farm level (Traders) 45 5.3 Prioritization of adaptation measures by processors and traders in their businesses 47 5.3.1 Prioritization of adaptation measures by processors in their businesses 47 5.3.2 Prioritization of adaptation measures by traders in their businesses 48 5.4 Significant barriers in adopting climate smart technologies in the dairy value chain in Uganda 48 5.5 Supporting enterprises/ Value chain support services 50 6 THE REGULATORY ENVIRONMENT FOR DAIRY DEVELOPMENT 55 6.1 Regulation of the dairy sector 55 6.1.1 Dairy Industry Act 56 6.1.2 Statutory instruments 57 6.1.3 Penalties 57 6.1.4 Standards 57 6.1.5 Enforcement 58 6.1.6 Consequences of non-compliance 58 6.1.7 Rewarding compliance 58 7 CHARACTERISTICS OF THE DOMESTIC CONSUMER MARKET 59 7.1 Consumption And Market Trends (milk vs. processed dairy) in Uganda 59 8 Market Challenges 60 9 Market Opportunities 61 10 CONCLUSIONS AND IMPLICATIONS FOR PADNET INTERVENTION DESIGN AND PIPELINE FOR FINANCING 62 10.1 Conclusions 62 10.2 Implications for PADNET INTERVENTION DESIGN 63 10.3 Pipeline for financing 66 10.3.1 Access to finance 66 10.3.2 Opportunities and constraints of access to finance in Uganda 66 10.3.3 Challenges faced by the banks in retrieving loans 69 10.3.4 The implications for PADNET intervention design from access to finance in the dairy sector in Uganda 69 11 POTENTIAL LINES OF INTERVENTION TO ENSURE UPTAKE AND SCALING OF DESIRED INVESTMENTS 70 11.1 Government infrastructure investment in Uganda’s dairy sector 70 11.2 Government bodies and development partners in Uganda dairy sector 72 11.2.1 Support offered by SNV in the dairy sector in Uganda 72 12 References 75 13 APPENDIX 77 Actors interviewed 77 List of Figures Figure 1: Research Approach 11 Figure 2: Structure and key questions 12 Figure 3: Key questions for analysis 12 Figure 4: Overview of the production trends of the dairy sector (DDA, 2022) 13 Figure 5: Milk production systems in Uganda 14 Figure 6: Milk yield by production system (FAO, 2019) 16 Figure 7: Milk sheds in Uganda (DDA, 2022) 17 Figure : Percentage contribution of milk to national milk production by milk shed (DDA, 2022) 17 Figure 9: Milk flow through the formal and informal marketing channels 20 Figure 10: Distribution of registered MCCs by milk shed (DDA, 2022) 21 Figure 11: Distribution of milk coolers by installed capacity per milk shed (DDA, 2022) 21 Figure 12: Energy and water sources by MCC (Balikowa, 2021) 22 Figure 13: Where processors source their milk 23 Figure 14: Where cooperatives collect their milk 23 Figure 15: Membership in dairy cooperatives (Survey data, 2023) 24 Figure 16: Quantities of milk collected aggregators (Survey data, 2023) 24 Figure 17: Distribution of processing facilities by registration status per milk shed (DDA, 2022) 26 Figure 18: Distribution of small-scale DDA-approved milk cottage businesses per milk shed (DDA, 2022) 27 Figure 19: Percentage of dairy products processed in Uganda 28 Figure 20: Processed products by processors (Survey, 2023) 28 Figure 21: Market share of top processors by product value 29 Figure 22: Market share of raw milk procured by top processors 30 Figure 23: Dairy products processed by the top five processors in Uganda 30 Figure 24: Affiliated processors to cooperatives (Survey findings) 31 Figure 25: Trend of dairy exports over the last eight years in Uganda (DDA, 2022) 32 Figure 26: Exports of dairy products in Uganda (URA, 2021, export and import data) 32 Figure 27: Trend of dairy imports in Uganda (DDA, 2023) 33 Figure 28: Milk shed raw milk prices (January–March FY 2022/2023; DDA, 2022) 36 Figure 29: Share of total emissions by emission source (Survey data, 2023) 37 Figure 30: Potential impact of adoption of different types of improved practices on emission intensity in dairy farms in different production systems relative to baseline (%) 38 Figure 31: Milk flow and trader-cooperative relationship 40 Figure 32: Milk flow and trader-farmer relationship via trader owned MCCs 40 Figure 33: Offerings and partnerships provided to farmers by cooperatives 42 Figure 34: Offerings and partnerships provided to farmers by cooperatives 42 Figure 35: Milk flow and relationship between cooperatives and processors 43 Figure 36: Milk flow via processor owned MCCs 43 Figure 37: Awareness, Usage and investing in CSTs by aggregators (n=5) 45 Figure 38: Primary reasons for currently using in climate smart technologies by cooperatives (n=5) 47 Figure 39: Reasons for cooperatives' interest in investment of climate smart technologies in 1-3 years 47 Figure 40: Awareness, Usage, and Investment in CSTs by processors (n=11) 48 Figure 41: Primary reasons for currently using climate smart technology by processors (n=11) 49 Figure 42: Reasons for processors' interest in investment of climate smart technologies in 1-3 years 50 Figure 43: Awareness, Usage and investing in climate smart technologies by traders (n=6) 51 Figure 44: Primary reasons for traders' using climate smart inputs/technologies 52 Figure 45: Reasons for milk traders' interest in investment of climate smart technologies in 1-3 years 52 Figure 46: Prioritisation of various adaptation measures by large-scale processors (n-11) 53 Figure 47: Prioritisation of various adaptation measures by small-scale processors (n=6) 53 Figure 48: Prioritisation of various adaptation measures by milk traders (n=6) 54 List of Tables Table 1: List of studies and working papers (WP) 8 Table 2: Dairy cattle distribution by production system and region in Uganda 14 Table 3: Cost breakdown for milk production per litre at farm level (DDA, 2023) 16 Table 4: Installed and operating capacity of coolers at cooperative MCCs 22 Table 5: Installed and operating processing capacities per milk shed 24 Table 6: Average ex-factory price of selected dairy products in Uganda 27 Table 7: Cost breakdown for processing a litre of pasteurized milk, UHT milk, and a kg of powdered milk 29 Table 8: SWOT analysis of milk processors in Uganda 31 Table 9: Payment schedule for the various actors for milk in Uganda 32 Table 10: Standards of milk set by DDA 32 Table 11: Annual post-harvest milk losses at different dairy value chain nodes, as percentage of volume 33 Table 12: Interventions at farm level to increase productivity and reduce emissions in the dairy sector 37 Table 13: How Dairy hubs impact farmers in the dairy value chain 39 Table 14: Case study on renewable energy 57 Table 15: Business case by Biogas Solutions Uganda for bioslurry from biodigesters 58 Table : SWOT analysis of milk consumers in Uganda 64 Table : Various sources of finance for companies in renewable energy 71 Table : Various sources of finance to consumers for productive use of renewable energy technologies in Uganda 72 Table : Examples of access to financing climate smart technologies 72 THE PURPOSE OF THE MARKET ASSESSMENT The purpose of the present market analysis, as part of the Feasibility Study (Annex 2 of the Funding Proposal), is to contextualize the intervention rational in terms of market incentives as well as financial and economic feasibility from the perspective of the various value chain stakeholders and their commercial operations in the sector. The Feasibility Study and Funding proposal will be informed by a series of studies and working papers outlined in Table 1 below. Table 1: List of studies and working papers (WP) Feasibility Studies Objective Link to Market Study 1. Typology of production systems. Understand current production systems typology and potential evolution (incl. productivity, economics, challenges). Context of the Value Chain production base. 2. Climate rationale for mitigation: Emissions baseline and business-as-usual pathways. How does the program ensure the reduction of emissions in relative and absolute terms on the farm and across the value chain. Context for the investments needed. 3. Climate rationale for adaptation: Main climate change risks and the climate vulnerability assessments. The impact of climate change on the dairy sector without an intervention. Risks that impact sector performance. 4. Pathway-specific assessment of adaptation and mitigation options at farm/production level. Provide the “menu” of solutions at farm-level that can be promoted by the programme. Investment options and implications at various VC levels. 5. Pathway-specific/production-system specific formulation of interventions at country level. Identify appropriate solutions per country. Country specific investment options. 6. Pasture rehabilitation and management, including forage/fodder. Understand starting point of pasture/rangeland management, assess current practices, and polices, identify barriers to adoption. Context of the Value Chain production base and inputs. 7. Sectoral overview and market / value chain study. Understand starting point of dairy sector (value chain, enablers) Inform design of financing facility (pipeline and feasibility). Provide the financial and economic business rational that would ensure adoption, scalability, and replicability. 8. Design and operationalization of private sector financing facility. Develop design of financing facility and assess feasibility with market study inputs. Appropriate financing for the pipeline. WP on land tenure. Establish key production asset availability and related opportunities and risks Risk assessment. WP on renewable energy. Establish current tech use and potential opportunities and barriers for adoption Technical input, CAPEX and OPEX needs. Cross-cutting climate adaptation and emissions reduction activities through both public and private sector actions are needed that will reduce emissions of methane and other GHG while increasing the milk yields of the sector to provide high quality dairy products and improving food security and livelihoods across the region. Closing the productivity/yield gap is a key entry point for systems transformation and reducing emission intensity. This requires a combination of approaches brought together in system-specific pathways that are tailored to suit different dairy systems, and target groups, within the four countries recognising that livestock in these countries are increasingly vulnerable to climate change impacts. The context and pathways, described in detail in Studies 1-6, include addressing herd mix/genetics; animal health and disease; improving access to affordable quality feed and fodder; consistent adoption of good husbandry practices (including manure management); supported by a Working Paper on increased use and diffusion/adoption of new technologies – both at farmer level (biogas digesters) and processor level (e.g., solar-powered milk chillers, water conservation, recycling); farmer/SME financing, the financing for transition to renewable energy (including carbon credit schemes) and development and access to processed milk market and processors to provide the guaranteed market and broad-based technical support to milk producers. An in-depth understanding of national markets is therefore paramount in being able to gage the capacity and incentive for various stakeholders to bear the cost of adaptation through the adoption of such pathways. Therefore, the market study will identify and analyse the drivers for investment in appropriate technical solutions (as detailed in Study 5 and the WP on Renewable Energy) for different types of actors in the dairy sector and the opportunities for scaling by: Reviewing the political economy and sector context – to provide overview of the national importance and nature of support the sector has received that has shaped its current structure and operations. Reviewing the dairy value chain structure and governance – to identify suitable investment entry points based on good understanding of the structure, nature and dynamics of the sector and its formal and informal value chains. Reviewing current investments in technology (focusing on cold chain and renewable energy) – to understand the level of adoption, interest and potential barriers that may impact PADNET delivery. Reviewing enabling policy environment – to identify the incentives and disincentives that impact pathways adoption, technology upgrade and investment by different types of stakeholders. Reviewing the domestic consumer market – to understand the current and potential demand drivers that can be leveraged to incentivise sector transformation via carbon reduction pathways and technology adoption. METHODOLOGY AND STRUCTURE The market analysis is based on in-depth country study that takes a systems approach to the evaluation of how local food systems can be transformed to deliver the desired impacts. Figure 1 below, outlines the food system components and key transformation enablers that have been considered in the market studies. Figure 1: Research Approach The market analysis is particularly focused on an in-depth understanding of the dairy value chain in Uganda in terms of its nature (formal vs informal) structure of production and post-production activities, presence of regulation with regards to dairy food standards and commercial dynamics that determine incentives or disincentives for investment in upgrades and transformation such as those potentially required by the pathways outlined in PADNET. The market study structure and key questions are presented in Figure 2 below: Figure 2: Structure and key questions The market study will be directly informed by the studies conducted as part of the Feasibility Assessment on production systems and practices (Table 1), which will provide the technical pathways to reduction of sector emissions. These technical solutions will be analysed from the perspective of socio-economic, political, and financial realities within which the dairy sector operates in Uganda. Appropriate solutions and ways forward will be identified on this basis and will directly inform the Financing Proposal and ensure the uptake, scalability, replicability, and sustainability of the intervention. Some of the Key Questions analysed in this Market Study are further summarised in Figure 3 below: Figure 3: Key questions for analysis The structure of the analysis will follow key themes that will be examined in the context of Uganda as well as, where relevant, bring in a regional perspective. Finally, the potential lines of interventions that the Study will suggest will also provide both national and regional level recommendations. Methodology for the market study in Uganda The market assessment study conducted in Uganda draws its foundation from recent research and literature pertaining to the market and the dairy sector. This foundation is further reinforced with data and insights gathered through interviews with key stakeholders in the value chain, as well as expert researchers. These stakeholders include individuals from the Ministry of Agriculture, Animal Industry and Fisheries, members of the Dairy Development Authority (DDA), the chairperson of the Uganda National Dairy Traders Association, the chairperson of the Ntungamo Dairy Farmers Cooperative Union, a representative from the National Alliance of Agriculture Cooperatives, the chairperson of the Uganda Clean Energy Association, a representative from the Ministry of Energy, the UN Capital Development Fund (UNCDF), and the Uganda Development Bank (UDB). Additionally, valuable information was sourced from development organizations such as SNV, Heifer International and Abi Trust. The sample size of the data collected includes: Five cooperatives/aggregators. Six milk traders (informal channel). Eleven processors (five large scale and six small scale). Twelve supporting enterprises (value chain support services). POLITICAL ECONOMY AND DAIRY SECTOR CONTEXT Dairy sector context Figure 4: Overview of the production trends of the dairy sector (DDA, 2022) The structure of the analysis will follow key themes that will be examined in the context of Uganda as well as, where relevant bring in a regional perspective. Finally, the potential lines of interventions that the Study will suggest will also provide both national and regional level recommendations. The dairy sector accounts for 9% of the nation’s agricultural gross domestic product (GDP). It is one of the fastest growing and most organized livestock sub sectors, contributing 50% to livestock GDP (Ssebwami, 2022). The sector contributes to the livelihoods of 1.2 million dairy farming households. In 2019, Uganda had 14 million cattle with approximately 13 million indigenous and about 918,000 exotic cattle. The number of cattle increased by 13.6% from 2015. The annual milk production increased to 3.2 billion litres (L) in 2022 from 2.8 billion L in 2022. This volume was obtained from an estimated 4.14 million heads of milked cows. Each cow was estimated to produce 492.8 litres of milk per lactation (DDA, 2022). As per the data from the Dairy Development Authority (DDA), the current financial year, 2022/23, has seen a total milk production of 3.85 billion litres from a cattle herd of approximately 14 million (Figure 5). This marks a notable increase from the previous year, 2021/22, which had a total milk production of 3.2 billion litres. This increase amounts to a significant growth rate of 19%. This has been attributed to better rains. Figure 5: Milk production systems in Uganda The farming systems in Uganda can be broadly classified into two categories (Figure 5): the traditional system and the commercial system categories (FAO and NZAGRC, 2019). (For in-depth information refer to PADNET feasibility study 1) Traditional System: This system is characterized by small herds of cattle that are primarily managed by family labour, with limited use of purchased inputs. It represents a more subsistence-oriented approach to farming. The system has smallholder extensive, medium holder extensive, agro-pastoral and pastoral systems. Commercial System: In contrast, the commercial system places greater reliance on hired labour and involves a wider range of purchased inputs and services. This system is more market-oriented and aims for increased productivity and profitability. Both the traditional and commercial systems can be further subdivided into various categories (FAO and NZAGRC, 2019). The system has smallholder extensive, medium holder extensive and large-scale producers. There five dairy regions, namely Western, Central, Eastern, Northeastern, and Northern, showcase substantial variations in terms of cattle numbers (Table 2). The Western region is divided into two milk sheds i.e., southwestern, and mid-west. The agro-pastoral system under the traditional dairy system maintains the highest number of cattle herds, representing 53.6% of the total (FAO and NZAGRC, 2019). In contrast, the medium-scale intensive system under the commercial dairy system has the smallest number of cattle herds among these regions. This disparity in cattle numbers reflects the diversity in dairy farming practices and systems across different regions in the country (Table 2). In terms of regional distribution, the Eastern and Western regions have the highest number of cattle, while the Northern region has the fewest cattle (FAO and NZAGRC, 2019). Table 2: Dairy cattle distribution by production system and region in Uganda Region​  ​ Total  (Million head)​  ​ Traditional Dairy systems​ Commercial Dairy systems​ Share by region Small-scale  extensive​ Medium-scale  extensive​ Pastoral​ Agro-pastoral​ Small-scale  intensive​ Medium-scale intensive​ Large-scale  intensive​ Central​ 2.9​ 129,266​ 575,368​ 585,323​ 1,575,047​ 24,411​ 45,307​ 18,268​ 21% Eastern​ 3.0​ 56,354​ 380,384​ 161,512​ 2,398,931​ 16,133​ 22,519​ 4,179​ 22% Northeastern 2.7​ 11,229​ 56,814​ 2,362,731​ 340,761​ 0​ 0​ 0​ 20% Northern​ 2.0​ 42,669​ 185,856​ 142,313​ 1,627,776​ 4,251​ 6,961​ 1,227​ 15% Western​ 3.1​ 204,705​ 791,032​ 536,727​ 1,490,836​ 18,015​ 55,465​ 5,558​ 22% Totals and share of total​ 13.8​ 444,223 (3.2%)​ 1,989,453 (14.3%)​ 3,788,606  (27.3%)​ 7,433,351 (53.6%)​ 61,810 (0.4%)​ 130,252 (0.9%)​                          29,232 (0.2%)​ 100% Source: FAO, 2019 Figure 6: Milk yield by production system (FAO, 2019) In Uganda, the agro-pastoral systems are responsible for producing 53% of the total milk, even though they host approximately 49% of the cattle population (Figure 6). This suggests that the higher milk production in these areas is primarily due to the larger number of cattle rather than significantly higher milk yields per cow. Conversely, in some the pastoral systems, which are home to 41% of the cattle, contribute only 9% of the total milk production (FAO and NZAGRC, 2019). It's important to note that a substantial portion of the cattle in these areas is primarily raised for beef production, which accounts for the lower milk output. In contrast, the semi-intensive systems, encompassing small, medium, and large-scale operations, represent about 10% of the cattle population but contribute 42% of the total milk production as shown in figure 6 (FAO and NZAGRC, 2019). This indicates that these systems achieve a higher milk production per cow, likely attributed to more intensive management and improved feeding practices. Figure 7: Milk sheds in Uganda (DDA, 2022) Figure 8: Percentage contribution of milk to national milk production by milk shed (DDA, 2022) Figure 7 shows the six milksheds in the country namely, Central, Eastern, Northern, Northeastern, Midwestern and Southwestern. The Western region is divided not two milk sheds (Southwestern and Midwestern milksheds). According to Figure 8, the percentage contribution of the milk shed to milk production is as follows; Central (30%), Western (33%), Northern (8%), Northeastern (11%), and Eastern (18%) (DDA, 2022). Most of the milking cows are distributed across the Western and Central regions, representing 57% of the total milking cows and accounting for 61% of the national milk production. On the other hand, the Northern and Karamoja regions collectively have 21% of the milking cows (DDA, 2022). Table 3: Cost breakdown for milk production per litre at farm level (DDA, 2023) Industry average cost (UGX) for milk production per litre Item Wet season Dry season Labour 89.2 136 Feeding 222.7 290.4 Water 5.4 112 Animal health 78.6 142.7 Breeding 8.6 11.4 Transport 5.7 9.3 Extension 42.4 44.9 Total cost/litre 452.6 751 Farm gate price 900 1100 Net profit 447.4 349 The costs of milk production vary depending on the production system, with seasonal fluctuations. On average, production costs are greater during the dry season in comparison to the wet season (Table 3). This disparity is primarily due to the limited availability of water and animal feed resources, resulting in higher costs. Furthermore, labour expenses tend to rise during the dry season. Interestingly, farm gate prices also exhibit a slight increase during the dry season when contrasted with the wet season. Political Economy in dairy sector in Uganda This heading explores the political importance of the dairy sector is in Uganda and how such considerations have shaped the current sector in terms of its investments and production base, as well as national market and regional trade. In Uganda, the government has identified increase in milk production as one of their priorities in their efforts in Agro-industrialisation programme of the National Development Plan III for 2020/21 to 2024/25. Government has supported the dairy sector through regulations that monitor quality of raw milk, consumer safety, favourable taxation, sourcing export markets, industry data management and provision of inputs and services (Komugisha, 2023). In 2022, the government supported a number of dairy cooperatives in the districts of Kiboga, Kamwenge, Kabale, Kamuli and Kyankwanzi with milk processing equipment to aid processing of yoghurt, ghee, and cheese through NAADs (Komugisha, 2023). Industry development partners that are, aBi Development and Heifer International are supporting adoption of technology by funding and donating technologies like sealers, freezers, fodder processing machines, cutting-edge coolers, artificial insemination kits, etc. Government’s interventions to grow the milk processing sector has been through lowering fees charges for companies registering to export dairy products (UGX 200,000) in contrast with higher fees paid by companies applying to import dairy products into Uganda (UGX 2 million), active export market search for dairy products by the government on behalf of dairy processors in other countries and recently, they government agreed to deal with Algeria with export worth US$500m that is, 1.4 billion litres of milk to the North African country (Komugisha, 2023). Similar initiatives are underway involving Uganda and the governments of China, Turkey, Senegal, Zambia, and DR Congo, offering trainings on value addition by DDA through the Dairy Training Institute, including incubation of milk processing businesses, ensuring a tax regime that is conducive for business for dairy processors. For instance, milk processors have not been paying cess (Komugisha, 2023). The government of Uganda established the Dairy Development Authority guided by the Dairy Industry Act of 1998 to increase value addition and quality of dairy in order to enhance its competitiveness (Komugisha,2023). Responsibilities of the Dairy Development Authority (DDA) is to; register and license milk processors and traders, support dairy farmers’ marketing organizations, advise the government on milk standards and coordinates the enforcement of those standards in liaison with the Uganda National Bureau of Standards, control and regulate dairy and dairy-related import and export activities in conformity with the External Trade Act, but without violating the Animal Diseases Act, implement Government policy designed to promote the development of the dairy sector, support various dairy development activities such as dairy extension, dairy breeding, dairy research, dairy training, dairy products development and general market promotion, including promotion of dairy export(s), act as arbitrator in any conflict between dairy companies and processors, coordinate all dairy processing and marketing promotional activities, such as seminars, trade fairs and workshops, consolidate dairy processing and marketing data, advise the Government on research priorities of the dairy subsector and does anything connected with, or necessary for the performance of the foregoing duties. In order to enhance performance of the dairy value chain, the Dairy Development Authority developed the Dairy Policy Action Plan (DPAP) whose objective is to guide policy, planning and investment decisions that will enhance the performance of Uganda's dairy value chain, in alignment with the Agro-Industrialisation Programme, the third National Development Plan (NDP III) and the DDA's five- year Strategic Plan. DAIRY VALUE CHAIN STRUCTURE, GOVERNANCE Milk flow through the formal and informal channels in Uganda Uganda's dairy industry operates through two primary marketing channels which are formal and informal (Figure 9). The formal channel encompasses processed milk and involves registered stakeholders, such as milk collection centres, transporters, and processors. On the other hand, the informal channel deals with raw, unprocessed milk. Remarkably, approximately 82% of the 3.85 billions of raw milk produced annually is what is marketed within both the formal and informal marketing channels (DDA, 2022). 18% is consumed by calves and the producing households at farm level (Figure 9). From the marketed milk, about 34% of the milk goes through the formal channels (milk is processed). These processed products are distributed to retail shops and supermarkets for domestic consumptions and others are exported. Approximately 66% of the total milk production is directed through the informal market channel (Figure 9). This channel comprises bulk transporters, urban bulking centres (wholesale markets), and itinerant urban traders or street vendors. Within this informal market channel, the primary product offered to consumers is unprocessed milk. The informal market connects producers to consumers usually via several retailing hawkers, dairies owned by individual farmers or traders and some consumers buy directly from farmers. Traders usually utilise motorcycles and milk trucks for efficient transportation. Additionally, some traders opt for bicycles to distribute milk to individual buyers from milk collection centres. According to the survey, approximately 80% of consumers directly purchase milk from coolers located at the dairies. The customers in this category consist of both individual buyers who typically purchase 1 to 10 litres of milk per day and wholesale buyers who have refrigeration facilities and buy larger quantities, averaging around 50 to 100 litres of milk daily. The informal markets play a dominant role in the milk trade in Uganda, and they often operate without adhering to the regulatory obligations imposed on formal traders. This situation presents a challenge, as processors are pressured to offer their products at prices that frequently fall below the reference price, mainly to prevent customer attrition and maintain their market share (DDA, 2021). Figure 9: Milk flow through the formal and informal marketing channels Milk collection, storage and bulking Due to the prevalent issue of substandard milk quality within informal markets, farmers have been strongly encouraged to establish cooperatives. These cooperatives facilitate the establishment of milk collection centres (MCCs), enabling farmers to gain access to markets more effectively and reduce postharvest milk losses. Moreover, the cooperatives provide valuable services aimed at enhancing milk quality, thereby addressing the quality concerns associated with the informal market. Traders have also invested in milk collection centres where they can bulk milk collected from farmers. Milk is collected daily from farmers and promptly transported to primary Milk Collection Centres (MCCs), where it is stored in coolers for duration of less than 6 hours. In Uganda, there are 547 registered MCC (mean total storage capacity of 6,718 L) (Figure 10). There are 12 bulking centres across the country with a total capacity of 266,560L and are owned by large-scale processing companies (DDA, 2022). Figure 10: Distribution of registered MCCs by milk shed (DDA, 2022) In the country, the Southwestern milk shed leads with the highest number of MCCs at 327, followed by the Central milk shed, which has 104 MCCs (Figure 10). In contrast, the Northern milk shed has the fewest MCCs, with only 13 MCCs (DDA,2022). Figure 11: Distribution of milk coolers by installed capacity per milk shed (DDA, 2022) The capacity of milk coolers plays a crucial role in determining the amount of milk that can be stored, based on the total daily production. MCCs are equipped with coolers of varying installed capacities, measured in litres. Over time, the number of milk coolers has increased significantly, rising from 355 with a combined capacity of 1.5 million litres in 2016 to 645 in 2022, with a cumulative capacity of 2.08 million litres (Figure 11). In terms of regional distribution, the Southwestern milk shed leads with the highest number of coolers, totalling 405, and these coolers have a combined capacity of 1.3 million litres (Figure 11). The Central milk shed follows with 122 coolers, which have a combined capacity of 0.4 million litres. In contrast, the Northern milk shed lags behind, having the fewest coolers in terms of both quantity and installed capacity. According to Balikowa et al. (2021), 59.5% of MCCs are relying on diesel generators as their primary energy source due to frequent power interruptions (averaging 2.7 times per week) as shown in Figure 12.  Supply of grid power is not reliable, coverage is still low, and the tariffs are high. None of the MCCs utilise renewable energy sources such as solar or biogas for chilling milk. Only 44% of the MCCs have access to piped water, and as high as 79.6% of MCCs must purchase the water they use. The inability to access affordable clean water hampers thorough cleaning of milk coolers and accessories in the MCCs. Figure 12: Energy and water sources by MCC (Balikowa, 2021) At the MCCs, milk is transported either by small milk tanker trucks, which then deliver it to bulk collection centres (BCC) equipped with larger chilling facilities, or by bulk milk tankers that transport the milk directly to processing plants (Nkuingoua et.al., 2022). From the small market survey, Data is from eleven processors surveyed out of 145 processors operating in Uganda (Figure 13). Nine out of elevens processors sourced their milk from traders. Three of the eleven processors source their milk from MCCs. 1 processor picks up milk directly from farmers to MCCs. One processor mentions that milk is brought directly to their processing facility by farmers. Figure 13: Where processors source their milk From the small market survey, five large cooperatives in Kiboga and Mbarara out of over 300 dairy cooperatives in the region were surveyed. All cooperatives mainly collect milk at the cooperative MCCs (Figure 14). All cooperatives mentioned that farmers also deliver milk directly to the cooperative MCCs. Some cooperatives pick milk from the farmers to the MCCs for those farmers that are not able to bring it directly. Figure 14: Where cooperatives collect their milk Based on the results from the market survey. The highest number of member farmers who supply a cooperative milk was 800 farmers and the least was 83 farmers (Figure 15). On average, among the farmers who supply milk to cooperatives (aggregators), approximately 84% are male, while the remaining 16% are female. Figure 15: Membership in dairy cooperatives (Survey data, 2023) During the dry season, milk production significantly declines due to the scarcity of water and feed for the cows (Figure 16). Milk collected depends on the installed capacity of the coolers at the cooperative MCC. From the cooperatives surveyed, the highest milk collected in the wet season is 20,000 litres per day and least was 1,000 litres per day in the dry season. Figure 16: Quantities of milk collected aggregators (Survey data, 2023) From the five surveyed cooperatives, the installed capacity is a total of all the milk coolers owned by the cooperatives (Table 4). The used capacity per day for all the 5 cooperatives surveyed is lower than the installed capacity in the dry season. Some cooperatives still operate less than their installed capacity in the wet season. This indicates that the milk collected from the farmers is still below the installed capacities. Table 4: Installed and operating capacity of coolers at cooperative MCCs Cooperative MCC Installed capacity (litres) Used capacity (Wet season) litres/day Used capacity (Dry season) litres/day A (2 milk coolers) 10000 10000 5000 B (2 milk coolers) 3000 2800 1600 C (3 milk coolers) 13800 2500 1500 D (4 milk coolers) 25000 20000 7000 E (4 milk coolers) 38000 37000 20000 From the market survey, traders mentioned that in Central milkshed, approximately 90% of farmers use both plastic jerry cans and milk cans to transport their milk to MCCs whereas, in Southwestern milkshed, around 90% of farmers exclusively use milk cans for milk transportation to MCCs. Among traders, the predominant choice is milk cans, although some opt for jerry cans, and the larger traders use milk tankers for conveying milk to dairies, cooperatives, and processors. The preference for jerrycans among both farmers and traders in some regions can be attributed to the high costs of the milk cans, the poor roads in the rural areas and therefore jerry cans can easily be sealed tightly, minimizing the risk of milk spillage in case of accidents during transportation. Due to the remote locations of most milk producers and the challenging conditions of rural roads, especially during the rainy season, the quick transportation of raw milk predominantly relies on motorbikes, primarily used by farmers and traders during milk distribution. In contrast, some traders, cooperatives, and small processors use milk tanks or trucks to transport milk cans directly from farmers. Large processors, on the other hand, use insulated trucks to transport raw milk from farmers, cooperatives, and traders equipped with coolers. A typical motorbike can carry approximately 100 litres of raw milk, which is then delivered to collection points situated 10 to 30 kilometres away from the farms. The primary tests conducted on milk at the MCCs involve assessing alcohol content (at an 80% concentration), lactometer readings, and visual observations (platform tests) (DDA,2022). Additionally, when the milk is transported to the bulking centres, a more extensive array of tests, including confirmatory examinations like antibiotic screening, is carried out to determine if the milk meets the required standards for acceptance. According to the market survey, various stakeholders, including traders, processors, and cooperatives, perform at least the platform tests of milk before purchasing it, ensuring its quality by verifying the absence of added water, salts, fats, Solids-Not-Fat (SNF), proteins, lactose, bacteria, and more. These assessments encompass a comprehensive examination of milk density, pH levels, electrical conductivity, temperature, odour (organoleptic properties), and freeze point. Additionally, organoleptic tests, relying on observations and odour analysis, are routinely conducted. Each of these entities possesses essential tools for these evaluations, such as a lactometer for density measurements, an alcohol gun for bacterial inspection, and a thermometer for temperature assessments. Some may also employ specialized milk testing equipment, including a lactose scan, milk analyser, pH meter, refractometer, and other relevant instruments to ensure the highest quality standards are met. At the MCCs, there are various challenges they face, and the key challenges include (DDA, 2022): Inability of MCCs to receive adequate volumes of milk leading to low capacity-utilization of the milk-cooling equipment, particularly during the dry season. This is due to low productivity of animals caused by a shortage of nutritious forage and water particularly in the dry season, and the utilization of low-performance dairy breeds, small number of milk producers in the area either due to a shortage of land for livestock farming or the existence of alternative and better sources of livelihood, Animal health constraints, e.g., foot-and-mouth disease, East Coast fever and tick acaricide resistance. High operating costs e.g., high energy tariffs, particularly grid power and diesel, high cost of transport, labor and other services and possible prohibitive statutory requirements such as the collection of a withholding tax from the milk producers. Bottlenecks in the dairy value chain (such as access to clean water, waste-disposal facilities, reliable and affordable energy). Post-harvest loss and waste of milk along the milk value chain. Processing of milk The country has a total of 145 dairy processing facilities, encompassing large, medium and small-scale operations (Figure 17). These processing facilities are distributed across the five milk sheds. The Southwestern region stands out with the highest number of milk processors. However, out of 145 processors, only 59 are registered and licensed by DDA accounting for 40.6% (Figure 17). Registration of dairy processors is important to ensure that they adhere to the recommended standards and for closer supervision and inspection with 46 out of the total 59 registered processors. Figure 17: Distribution of processing facilities by registration status per milk shed (DDA, 2022) The total national operating capacity for the processors is 2.3 million litres against the installed capacity of 3.4 million litres representing 68.7% (Table 5) (DDA, 2022). Low operating capacity is caused partially by inconsistent milk quality and supply. Majority of the processing plants are in the southwestern and central milk sheds accounting for 62.5% and 37.1% of the installed capacity, respectively.  Table 5: Installed and operating processing capacities per milk shed Milk shed​ Installed capacity (Litres)​ Operating capacity (Litres)​ Southwestern​ 2,107,910​ 1,431,430​ Central​ 1,252,470​ 878,240​ Midwest​ 1,100​ 900​ Northeast​ 4,665​ 3,360​ Northern​ 10,900​ 5,350​ Eastern​ 1,900​ 1,500​ Total​ 3,378,945​ 2,320,780​ It is also important to note that there are growing cottages (home back yard processors) needing constant inspection to ensure compliance (DDA, 2022). A cottage industry is a small-scale manufacturing business that is typically run from home and involves the production of handmade goods.  A total of 126 cottages have been approved for compliance with the dairy standards (Figure 18). Majority of them are in the Central and Southwestern milk sheds representing 42.9% and 27.8% respectively. Mainly process yoghurt, ice cream and cheese. Figure 18: Distribution of small-scale DDA-approved milk cottage businesses per milk shed (DDA, 2022) Processed dairy products in Uganda Typically, one of the primary drivers of profitability for dairy processors is their capacity utilisation. However, in a market characterised by seasonality, capacity utilisation tends to be significantly low (DDA, 2022). During the dry season, some processors are only able to process as little as one-third of the milk they handle during the wet season. Only 34% of the total milk production is integrated into the formal value chain. Within processing plants, milk undergoes a diverse range of processing techniques, yielding a wide array of dairy products. Ultra High Temperature (UHT) milk accounts for highest proportion (62.4%) of all processed products, followed by yoghurt (11.6%) and milk powder (7.1%) (Figure 19). Other products include; Acid casein, Ghee, ice cream, butter, whey protein etc (Figure 19). These products are processed for both local and international consumption. For domestic consumption,the products are channelled through various intermediaries, who then distribute them to retailers. Retailers, in turn, offer these products to consumers in both urban areas and small trading centers (DDA, 2020). Figure 19: Percentage of dairy products processed in Uganda According to the market survey data (Figure 20), Out of eleven surveyed processors, nine of them produce yoghurt. Out of the eleven processors, six were small scale and they mainly produce yoghurt. About three processors specialise in at least one type of dairy product. Only one processor is producing milk powder and sweetened milk. While two processors produce ice cream. Figure 20: Processed products by processors (Survey, 2023) Table 6 shows the ex-factory prices of some products (Prices at the factory). These prices differ from one processor to another and from one season to another due to the different costs of production associated with each processor. The ex-factory price is also dependent on the type of materials required to process the product. The retail prices are higher than the ex-factory prices for these processed products. Cheese is the most expensive product priced at the factory and the least is pasteurized milk. Table 6: Average ex-factory price of selected dairy products in Uganda Product name Average ex-factory price (UGX/kg) Yoghurt 4,386 Full cream milk powder 16,900 UHT long life 2,735 Pasteurized milk 2,200 Cheese 23,711 Butter 11,478 Ghee 13,794 Casein 23,582 Currently the market is dominated by a few large processors, and data from DDA indicates that the top 4 dairy processors hold 83% of the total market share (DDA, 2023). Pearl Dairies has the highest market share (31%), followed by Brookside Dairy Ltd (23%), Jesa farm (16%) and Amos Dairies (13%) (Figure 21). Figure 21: Market share of top processors by product value According to DDA (2023) in terms of market share of raw milk procured, Pearl dairy farms limited procured the highest amount of milk from different sources and the least amount of milk was procured by Rainbow dairies Uganda Limited (Figure 22). Jesa farm dairies procure relatively low milk yet their market share is high because they are quality oriented with high parameters of milk quality during purchase and the premium offered to the sellers is high compared to other processors. They have their own farms where they get their own milk which they use as comparison with the milk they get from other sources. Figure 22: Market share of raw milk procured by top processors The various dairy products produced by the top 5 processors who have the largest market share in the dairy sector are shown in Figure 23. Four processors process mainly UHT milk, yoghurt and Ghee. Three of the processors process butter. One processor processes anhydrous milk fat, acid casein and whey protein which is all exported. Figure 23: Dairy products processed by the top five processors in Uganda From the market survey of the five cooperatives, the common processors they were affiliated to were Pearl Dairies Ltd (by three aggregators) and Jesa Farms Ltd (by two cooperatives) (Figure 24). Other mentioned processors were Lakeside Dairy Ltd, GBK dairy Ltd, Amos Dairy Ltd, Paramount Ltd, Sanatos food factory and Rainbow Dairy Uganda Ltd. Cooperative E sells their milk to Jesa farm Dairy because they give good premiums for the quality milk. Cooperative A mentioned that they supply to four processors for diversification purposes in case the prices fluctuate a lot and inability of one processor purchasing their milk. Figure 24: Affiliated processors to cooperatives (Survey findings) The production costs for powdered milk are significantly higher when compared to pasteurized and UHT milk, which consequently results in a higher price per kilogram for powdered milk (Table 7). Processing UHT milk incurs substantial packaging expenses, primarily due to the need to import packaging materials and the additional burden of a 25% import tax (DDA, 2023). In contrast to the farm-level raw milk price, the prices of processed dairy products are notably elevated. UHT and pasteurized milk are priced at twice the rate of raw milk, while powdered milk commands a price 17 times higher than raw milk. Table 7: Cost breakdown for processing a litre of pasteurized milk, UHT milk, and a kg of powdered milk Industry average costs (Ugx) Item Pasteurized milk UHT milk whole cream milk powder Cost of warm milk at the MCC/litre 883.33 883.33 883.33 Cost of chilling milk at the MCC/litre 102.5 102.5 102.5 Cost of transporting a litre of milk 60.33 60.33 60.33 Total costs chilling + Transport/Litre 1,046.16 1,046.16 1046.16 Total costs chilling + Transport     8,892.36 Cost of processing/litre 831.7 831.7 240 Cost of packaging/litre 68.6 491.7 37.4 Total costs processing/Litre 900.3 1,323.40 277.4 Total costs processing/Kg     2,357.90 Total cost of production/litre or Kg 1,946.46 2,369.56 11,250.26 Ex factory price/litre 2,200 2,735.30 16,900 Estimated profit/litre/Kg 254 366.00 5,649.74   Export costs     Cost of exporting to EAC (Kampala- Mombasa)/Litre   $0.15   Cost of exporting a Kg to EAC (Kampala- Mombasa)     $0.08 Cost of exporting a Kg to UAE (Kampala- Dubai)     $0.11 Cost of exporting a Kg to Asia (Kampala- Japan)     $0.14 Price of powder on world market/Kg     $3.21 Source: Survey data, 2023 Dairy products exports in Uganda The trend in dairy exports has been consistently on the rise over time in the last eight years, with the exception of the fiscal year 2020/21, during which there was a noticeable drop in exports due to the impact of the COVID-19 pandemic (Figure 25). However, in the most recent financial year, FY 2021/22, there was an increase compared to the previous year. Uganda exports dairy product to 16 countries e.g., Kenya, South Sudan, Somalia, USA, Oman, etc. Main products are milk powder, butter, cheese, yoghurt, UHT & acid casein. Export of powdered milk to Algeria starting October 2023. Figure 25: Trend of dairy exports over the last eight years in Uganda (DDA, 2022) From the Dairy products exported between 2010 to 2020, UHT milk products consistently constituted the most significant portion, accounting for 60% to 90% of the total basket of exported dairy products (Figure 26) (URA,2021). Powdered milk is the second most dairy product exported followed by butter. Figure 26: Exports of dairy products in Uganda (URA, 2021, export and import data) Trend of dairy imports in Uganda Trend of dairy imports has been decreasing overtime due to increased domestic processing. The import value as at 2022 was 4.10 million USD (Figure 27). Uganda imports several dairy products from a total of 36 countries e.g Rwanda, Kenya, Netherland, Poland, UAE etc. The main products imported included infant formula, ice cream, milk powder, yoghurt and cheese (DDA, 2022). Figure 27: Trend of dairy imports in Uganda (DDA, 2023) SWOT analysis of milk processors in Uganda There are various weaknesses and threats that have been documented from the SWOT analysis of milk processors in Uganda (Table 8). The common weaknesses that were also mentioned during key informant interviews were high competition from the informal market and adulteration/contamination of milk. The most mentioned threats were seasonal fluctuations in milk supply, high costs of production e.g., power, high cost of machinery and financing. The strengths mentioned were government commitment to agro processing, Increased number of processors, and growth of the cottage industry. While the most mentioned opportunities were increased milk production, Steadily growing demand for the products (local, regional, and international), and ability to reach far markets. Table 8: SWOT analysis of milk processors in Uganda Strength  Weaknesses Government commitment to agro processing Increased number of processors Growth of the cottage industry Existence of processors association Improved access to machinery for milk processing Existence of enabling regulatory and legal framework. (DDA and UNBS) Improved shelf life of milk products High competition from the informal market Weak enforcement of laws and regulations Limited rural distribution channels Low staffing of dairy experts Policy gaps Adulteration of milk Opportunities Threats  Increased milk production Growing industrial linkages Steadily growing demand for the products (local, regional, and international) Ability to reach far markets Untapped market in some regions Competition from imports VAT on imported packaging materials Counterfeit products Non-tariff barriers Seasonal fluctuations in milk supply High costs of production e.g., power High cost of machinery and financing Inflation and exchange rate fluctuation Low milk product consumption Competition from the informal market Competition from other substitutes Milk adulteration Source: Dairy Development Authority (DDA), Strategic plan II FY 2020/2021 – 2024/2025 Payment schedule for the various actors for the milk This usually depends on the agreement between the parties (could be formal or informal agreement). Table 9 shows the different common payment schedules in Uganda. Table 9: Payment schedule for the various actors for milk in Uganda Actor relationships  Payment modes  Trader to farmer  Daily or weekly payment  Cooperative to farmer  After 15 days (2 weeks) Traders to transporters Daily or weekly payment  Processor to cooperative  After 15 days (2 weeks) Processor to trader-  Weekly payment  Hotels/institutions to cooperatives or traders  Daily or weekly payment Standards of quality milk These specifications are what DDA has set for good quality raw milk (Table 10). Milk is poor quality if it does not meet these specifications. However, different processors have different specifications (although following the ones set by DDA) depending on the products that they are going to process. The cooperatives follow the specifications set by the affiliated processors. Table 10: Standards of milk set by DDA Parameter US EAS 67:2019 Raw milk specification Added water, % 0.0 Freezing point, degrees Celsius -0.525 - 0.550 Density, g/ml (20 degrees Celsius) 1.028 - 1.034 SNF, % Min 8.5 Fat, % Min 3.25 Formalin (LoD;0.005ppm) Absent Neutralizers (LoD; 0.05%) Absent Alcohol,75%, v/v Negative Annual post-harvest losses at different dairy value chain nodes The total post-harvest milk losses at all value chain nodes are 24.7% in the dairy sector in Uganda (DDA, 2022b). The mean annual milk loss at MCCs stands at 13.6%, with notable seasonal fluctuations (7.7% during the dry season and 19.5% in the wet season) (Table 11). The primary cause for this loss is the rejection of milk by processing plants, typically attributed to issues of poor quality (milk is poor quality if it does not meet the specifications in Table 10) e.g., from use of plastic milk cans or other reasons (e.g., adulteration) and inadequate market options. Additional contributing factors include wastage during measuring and testing processes, as well as challenges related to milk transportation in the wet season. While there is a scarcity of bulking centres throughout the country, they too experience losses, amounting to 7.09% of the volume they handle annually, driven by similar factors identified for MCCs. Table 11: Annual post-harvest milk losses at different dairy value chain nodes, as percentage of volume Stage​ Value chain node​ Causes for milk losses Annual post-harvest loss (% of volume)​ 1​ Farm level​ Poor access to markets 0.96%​ 2​ Milk collection​ Milk rejected, due to low quality (e.g., use of plastic milk cans) or other reasons (e.g., adulteration) 13.60%​ 3​ Milk bulking​ Milk rejected, due to aggregation and limited milk testing before bulking 7.09%​ 4​ Bulk transport​ Milk spillage, poor quality 0.86%​ 5​ Processing plants (medium size)​ Milk spillage, poor quality 2.01%​ 6​ Processing plants (large)​ Milk spillage, poor quality 0.20%​ Concurrently, bulk transporters involved in the transportation of raw milk from MCCs to processing facilities incur milk losses, as milk is often rejected at the processing plant due to quality issues (Table 11) (DDA, 2022b). Spillages during loading and unloading, as well as during measuring and testing procedures are also common causes of loss in this stage of the supply chain. Crucially, the financial burden of these milk losses is borne by producer cooperative societies, unions, processing companies, and wholesale traders involved in the milk trade. At the higher levels of the value chain, medium-sized and large processors primarily suffer milk losses due to spillage during the offloading of milk delivered in milk tankers and milk cans, followed by the rejection of milk due to quality concerns (Table 11). Milk shed raw milk prices Milk prices keep changing depending on the season. They are higher in the dry season and lower in the wet season. But also, the milk prices differ by milk shed. They are higher in milk deficit milk sheds and lower in milk surplus milk sheds. As at the quarter of January–March FY 2022/2023, farm gate and retail prices, were higher in the North-Eastern milk shed, followed by the Northern milk shed because they are milk deficit milksheds (Figure 28). On the other hand, the lowest farm gate and retail prices were found in the Southwestern milk shed and the Midwestern milk shed because they are milk surplus milksheds. From the market survey, it was noted that milk prices exhibit fluctuations based on the season. Wet seasons generally witness higher volumes of milk production, resulting in lower prices, averaging around UGX 900 for traders, UGX 1000 for processors, and UGX 800 for cooperatives. In contrast, dry spells are associated with a decrease in milk production and, consequently, higher milk prices, averaging around UGX 1500 for traders, UGX 1800 for processors, and UGX 1300 for cooperatives. However, for farmers registered in a cooperative that typically operates an MCC, payments can be reduced by UGX 150-300 due to deductions for transport, MCC administration costs, and sometimes capital investments like tractor procurement (Nakiganda and Ahmed, 2014). Figure 28: Milk shed raw milk prices (January–March FY 2022/2023; DDA, 2022) For farm gate prices, the highest prices were recorded in the Northeastern milk shed, followed by the Northern milk shed (Figure 28). On the other hand, the lowest farm gate prices were found in the South-western milk shed, with the Midwestern milk shed similarly reporting lower farm gate prices. According to the results in the survey, milk prices exhibit fluctuations based on the season. Wet seasons generally witness higher volumes of milk production, resulting in lower prices, per litre averaging around UGX 900 for traders, UGX 1000 for processors, and UGX 800 for cooperatives. In contrast, dry spells are associated with a decrease in milk production and, consequently, higher milk prices, per litre averaging around UGX 1500 for traders, UGX 1800 for processors, and UGX 1300 for cooperatives. However, for farmers registered in a cooperative that typically operates an MCC, payments can be reduced by UGX 150-300 due to deductions for transport, MCC administration costs and sometimes capital investments like tractor procurement (Nakiganda and Ahmed, 2014). INVESTMENTS IN TECHNOLOGY - FOCUS ON COLD CHAIN AND RENEWABLE ENERGY Emissions from the Dairy sector The dairy cattle sector in Uganda is responsible for the emission of about 19.1 million tons CO2eq (FAO and NZAGRC, 2019). More than two-thirds of the total emissions are concentrated in three regions with the highest share of the national dairy herd: Eastern (24%), Western (23%), and Central Province (22%). The GHG emissions profile is dominated by methane (98.6%); nitrous oxide (N2O) and carbon dioxide (CO2) contribute 1.3 and 0.1% of the total emissions, respectively. Figure 29 shows that approximately 79% of the emissions arise from methane produced by the rumination of cows (Enteric fermentation) and 19.7% from the management of stored manure (FAO and NZAGRC, 2019). Emissions arising from other sources make a negligible contribution to overall emissions (FAO and NZAGRC, 2019). Figure 29: Share of total emissions by emission source (Survey data, 2023) Across the various production systems, CH4 emission intensity can be reduced by 1.5% to 27% through adoption of different types of productivity improvement interventions (as shown in Figure 30). This reduction in CH4 emission intensity corresponds to a 2 to 40% increase in milk productivity (FAO and NZAGRC, 2019). For most of the interventions, the potential reduction in emission intensities is highest in small scale commercial, medium scale extensive, pastoral and agro-pastoral systems. Further analysis indicated that adoption of combinations of interventions aimed at improving feed availability and quality water availability, genetic potential and herd health can potentially result in a reduction of 5 to 52 % in methane emission intensity relative to the baseline. Figure 30: Potential impact of adoption of different types of improved practices on emission intensity in dairy farms in different production systems relative to baseline (%) Climate smart technologies There are various climate smart technologies/inputs that are available for every actor to adopt and in turn reduce green gas emissions in the dairy sector in Uganda. The preservation of milk quality and reduction of post-harvest losses are achieved through the utilization of cold chain infrastructure, which ensures that milk is maintained at an ideal temperature to preserve its nutritional and taste characteristics (Komugisha, 2023). Additionally, at the farm level, food-grade (aluminium) milk cans are used for milk preservation. Traders have also invested in milk coolers at milk collection centers, transport the milk in insulated trucks and coolers to points of sale in order to maintain milk quality. Significant enhancements in milk collection and consolidation have been realized, the continuous investments are made by various stakeholders, including the government, dairy cooperatives, traders, processors, and private individuals in cold chain facilities (Komugisha, 2023). Such investments play a crucial role in reducing post-harvest losses and ensuring the overall quality of milk. Farm level There are different interventions that would increase productivity on farm and reduce greenhouse gas emissions e.g., interventions to improve dairy genetics, Improve feeding and nutrition, water management, cattle management, waste management among others (Table 12). These are high impact priority interventions at farm level. Table 12: Interventions at farm level to increase productivity and reduce emissions in the dairy sector Production systems Impact Interventions Traditional production system Commercial production system Productivity Adaptation Mitigation Improved dairy genetics Artificial insemination ** *     higher producing livestock breeds ** *   Improved feeding and nutrition High yield forages * ** **   Precision feeding, Use of Toxin binders, concentrate feeds **   **   Production and supply of hay and silage * ** * Water management Water harvesting systems ** **   Cattle management Drugs and vaccines **     Solar Energy PV/Solar energy * * ** Bio energy anaerobic biodigesters * * **   Bio-slurry ** * ** Access to finance Agri fintech **     **Direct Impact, * Indirect impact There are significant barriers to farmers adopting productivity enhancing interventions namely. Farmers may not be aware of the technologies or inputs that can enhance productivity while also being climate smart. Information dissemination can be challenging, particularly in remote or rural areas. Farmers might lack the necessary knowledge and skills to implement these solutions effectively. Climate smart technologies require high upfront investment, with farmers yet the price of milk is low most especially in the wet season. Farmer mainly get loans from SACCOs for basic needs like for school fees, hospital bills and not for increasing productivity at the farm. Business case of costs and benefits of using the interventions is limited. Farmers recognise the importance of some technologies like water harvesting but hesitate to embrace these practices due to the substantial initial investment required, with economic advantages only realized over time. Farmer engagement models for driving adoption From the market survey, there were 3 relationships that were identified between farmers and various actors in the Dairy value chain in Uganda. Trader – farmer partnership: In this model, traders assist farmers through interest-free loans and advances that are repaid when the farmers sell their milk. Others extend support to farmers by offering training sessions on proper milk handling and hygiene. Traders also pay on time. Some traders own MCCs where farmers bring their milk. Figure 31: Milk flow and trader-cooperative relationship Figure 32: Milk flow and trader-farmer relationship via trader owned MCCs Cooperative owned MCCs: This is a key farmer service delivery model, play a pivotal role in supporting farmers in various ways, primarily in terms of transportation and the collective sale of milk on behalf of farmers. These cooperatives also serve as aggregation point for production inputs and services, market access, financial services, tractor hiring services, tent and chair hiring for functions etc. They pay farmers every 2 weeks for the milk collected daily. One cooperative (Dwaniro coop society) has some extra services it offers farmers for example a Food Store to offers items like maize meal to farmers during the dry season; Demo Garden to show farmers how to grow food crops; Veterinary and Extension Services; Salt for Cows; Fuel Station; Garage for motorcycle repair. Cooperatives are interested in implementing solar systems to power their milk collection centers (MCCs), but they face a significant hurdle due to the high installation costs. Dwaniro Cooperative, has successfully installed solar panels in one of their MCCs (8000 L capacity). They received support from Heifer International. Key pillars of dairy cooperatives are Organizing farmers & strengthening farmer organizations; Linking farmers to improved affordable production technologies; Genetics (AI), Feeds and feeding, Animal health care; Linking farmers to markets; farmer managed milk collection centers, bulk marketing, support to farmer groups to negotiate and sign milk supply contract with buyers; Building the capacity of farmers, service providers and stimulating businesses in the dairy hubs (Table 13). Table 13: How Dairy hubs impact farmers in the dairy value chain From the market survey, the 5 cooperatives surveyed mentioned the different offerings to the dairy farmers. Majority of cooperatives provide access/ facilitate farmers access to inputs, technical assistance, and extension services (Figure 33 and 34). Majority of cooperatives would like to offer access to artificial insemination to the farmers in future. All cooperatives surveyed are providing / facilitating market access to the farmers. Figure 33: Offerings and partnerships provided to farmers by cooperatives Figure 34: Offerings and partnerships provided to farmers by cooperatives Processors – farmer partnership: (e.g., Narka Dairies Ltd) provides multifaceted support to farmers, including training in disease control, artificial insemination, and proper milk handling. They also facilitate farmers' access to veterinary services, connect them with financial institutions like SACCOs, offer advances that align with milk sales, ensure timely payments (although not always guaranteed as they often prioritize product sales) and collaborate with some cooperatives. They engage in advocacy efforts to secure grants for coolers, as well as training in milk production and feed management from the government on behalf of farmers. Processors provide pasture seeds at cheaper prices and farmers pay using the milk produced. Figure 35: Milk flow and relationship between cooperatives and processors Figure 36: Milk flow via processor owned MCCs There are several barriers to scaling supply chain relationships faced across the different models/value chain actors. Some that were mentioned during the key informant interviews and the market survey include: Access to capital or funds to enable the support by various actors to farmers e.g lack of funds to include input shops at MCCs for good quality products to farmers; providing advance payments to farmers and use of milk check off system. Failure for on-time payments to farmers by traders and cooperatives in some seasons because of lack of funds. Access to quality, affordable inputs, and services necessary for operations (e.g., drugs, vaccines, feeds, milk cans). Poor road infrastructure limit access to some services e.g., extension services to farmers that are deep down in the villages. The limited ratio of extension workers to the number of farmers they reach presents a significant obstacle to expanding support to a larger farmer base. Additionally, the unavailability of these extension workers to deliver essential services to farmers further compounds the issue. Certain processors may be inclined to collaborate with farmers due to political factors, as a dominant large processor holds a significant share of the market. The intense competition among these major processors results in one of them offering higher milk prices to farmers, dissuading farmers from engaging with other processors. The volatile nature of milk prices offered by processors poses a challenge for cooperatives in persuading certain farmers to become members of their cooperative. Farmers' production of low-quality milk, coupled with low milk production, most especially in the dry season, is a significant concern. Climate smart technologies/ inputs at off farm level (Cooperatives/aggregators) Figure 37 presents a comparison of Cooperative MCCs' awareness of various climate-smart technologies, their expressed interest in investing in these technologies, and the actual investment and utilization of these technologies. For instance, all of the surveyed cooperatives confirmed the use of stainless steel/aluminum cans at the MCCs. It's worth noting that while all the cooperatives mentioned that farmers are aware of aluminum cans for milk transportation, not all farmers are utilizing these cans due to their high cost. Some farmers still opt for plastic jerry cans as a more affordable means to transport milk from their farms. Additionally, all the cooperatives reported the current use of milk cooler tanks to maintain milk quality at the MCCs before it is transported to processing plants as shown in Figure 37. However, it is important to mention that during dry seasons when milk supply is low, the MCCs often operate below their installed capacities, reflecting the seasonal fluctuations in milk production and supply. Majority of the aggregators are aware and are keeping records and transacting digitally. The few who are not using are willing to invest in technology. All the cooperatives in the survey employ a comprehensive milk testing protocol upon the arrival of milk from the farmers, as indicated in figure 37. Due to the stringent quality standards set by processors, these cooperatives conduct a series of particular tests to ensure the milk's high quality, free from any adulteration, including water, salts, fats, SNF (Solid Not Fat), proteins, lactose, bacteria, and more. These tests encompass a range of parameters, including the evaluation of milk density, pH levels, conductivity, temperature, odor, and freeze point. Organoleptic tests, which rely on sensory observations and smell, are also a part of the testing regimen. To facilitate these tests, the cooperatives are equipped with essential tools, such as a lactometer for measuring density, an alcohol gun for bacterial inspection, and a thermometer for assessing temperature. In some cases, additional specialized milk testing equipment, such as a lactose scan, milk analyzer, pH meter, refractometer, and other devices, may be utilized to ensure the utmost precision and accuracy in assessing milk quality. Although some cooperatives only do the platform tests (Clot on boiling (COB), Alcohol test, milk temperature and density), some other cooperatives do confirmatory tests that encompass a broader range of assessments (Resazurin tests check the microbial load in milk, acidity tests, antibiotic tests, PH determination, butter fat content tests, etc.) to verify that the quality of the milk aligns with the specific standards and requirements set forth by the processor, ensuring the highest level of milk quality is consistently maintained. Figure 37: Awareness, Usage and investing in CSTs by aggregators (n=5) As depicted in Figure 37, the majority of cooperatives are strongly inclined towards making strategic investments in climate-smart technologies. Firstly, there is a notable enthusiasm for acquiring refrigerated trucks which are designed to transport milk while preserving its required low temperatures, thus ensuring the milk's freshness and quality during transit. Secondly, they are inclined towards embracing solar-powered coolers attached to bicycles for the purpose of milk transportation from farms. This innovative approach not only promises enhanced efficiency but also reduces the environmental impact of milk distribution. Thirdly, cooperatives are considering a shift towards full electrification of their MCC, driven by solar energy. This move seeks to replace the current reliance on costly diesel generators for operating cooling tanks, a practice that incurs substantial fuel expenses and poses environmental challenges. The cooperative's eagerness to invest in these technologies underscores their commitment to sustainability, reducing their environmental footprint, and simultaneously improving the efficiency of milk transportation and storage, especially in areas where grid power may be unavailable. Dwaniro Cooperative has successfully installed solar panels in one of their MCCs with the support of Heifer International, demonstrating a commitment to sustainable energy solutions (Table 14). All the cooperatives surveyed have stated that they are presently employing climate-smart technologies such as milk collection and transportation equipment, testing and preservation inputs, and digital solutions, as it is imperative for the continued operation of their business, as indicated in the Figure 38. The majority also acknowledge that they are presently utilizing milk collection and transportation equipment and testing and preservation inputs because they received advice from experts, partners, and/or the government like DDA, SNV, and Heifer international among others to make these investments. Some cooperatives have mentioned that their adoption of climate-smart technologies is due to the demonstrable evidence that these technologies help reduce environmental impact and combat climate change. Additionally, one cooperative has opted to power their MCC with solar energy, thanks to financial incentives they received (Figure 38). Figure 38: Primary reasons for currently using in climate smart technologies by cooperatives (n=5) A significant portion of the cooperatives surveyed is inclined to explore investments in various climate-smart technologies in the upcoming period, especially if these technologies prove to be cost-effective and if financial incentives are available, as indicated in Figure 39. Among them, approximately 60% of the cooperatives express a keen interest in investing in climate-smart infrastructure, such as solar electrification motivated by the potential of this technology to decrease their reliance on conventional utilities, thereby mitigating operational risks. Furthermore, the majority of the cooperatives, around 80%, express a strong desire to invest in digital solutions, provided there is clear evidence that implementing these solutions can enhance the profitability of their business (Figure 39). Figure 39: Reasons for cooperatives' interest in investment of climate smart technologies in 1-3 years Climate smart technologies/ inputs at off farm level (Processors) As depicted in Figure 40, a majority of the surveyed processors (eight out of eleven) utilize cooling tanks to store milk at their processing facilities. The remaining two processors, who expressed no interest in investing in cooling tanks for their facilities, fall into the category of small-scale processors primarily engaged in pasteurizing milk for yogurt production, and they handle relatively modest quantities of milk, approximately 200 litres per day. These processors opt to pasteurize the milk immediately upon its arrival at the facility. They are involved in water bath pasteurization. Some small-scale processors have cited space constraints at the processing facilities as a key factor preventing them from making investments in cooling tanks. All processors demonstrate awareness of the importance of testing the milk they acquire before processing it (Figure 40). Small-scale processors primarily conduct platform tests, which encompass assessments like Clot on boiling (COB), Alcohol test, milk temperature measurement, and density checks on the milk they purchase. In contrast, large processors adhere to a more comprehensive testing regimen, which includes both platform tests and confirmatory tests. These confirmatory tests encompass evaluations such as the Resazurin test (which examines the microbial load in milk), acidity tests, antibiotic testing, pH determination, butterfat content analysis and more tests depending on what the milk is going to be processed into. Figure 40: Awareness, Usage, and Investment in CSTs by processors (n=11) All processors surveyed are aware of the potential of solar and other renewable energy equipment for their processing facilities (Figure 40). A notable number (nine out of eleven) of them express a strong interest in investing in this technology within the next 1-3 years. Interestingly, among the industry's larger processors, there is a prevailing sense of doubt regarding the practicality of harnessing solar panels to generate the necessary kilowatts to fully power their processing plants, especially for systems requiring a three-phase configuration. Instead, they tend to view solar energy as more suited for lighting purposes rather than being the primary energy source for their processing operations. Some of these larger processors suggested Synthetic Natural Gas (SNG) as a cleaner energy alternative for their processing facilities, albeit they acknowledge its expense and dependence on imports from desert regions, which adds to the overall costs. In a separate aspect, approximately five of the processors express a keen interest in investing in energy-efficient equipment at their processing facilities within the next one-three years. About eight of processors surveyed are aware of the concept of recyclable packaging, and approximately six of them demonstrate a strong inclination to invest in such packaging for their products within the upcoming one-three years (Figure 40). Processors commonly employ recyclable packaging for yogurt and ice cream; however, this packaging is designed for one-time use and cannot be reutilized for milk products. Some processors raise concerns about the suitability of recyclable packaging, particularly glass bottles, for milk and milk products. They emphasize that milk is a highly sensitive product prone to bacterial contamination, rendering the use of recyclable packaging unsafe. Therefore, they mention while the packaging can be recycled for other products, it is not deemed appropriate for the repackaging of milk and milk-related items due to these safety concerns. Eight of the processors surveyed express a strong interest in making investments in wastewater treatment within the forthcoming 1-3 years (Figure 40). The driving force behind this interest is the acidic nature of milk and its significant potential for environmental contamination. Processors have identified that outsourcing wastewater treatment to external companies can be cost-prohibitive, further emphasizing the need for on-site wastewater treatment facilities. The processors mentioned various reasons for using some technologies at their facilities (Figure 41). A substantial majority of processors (91%) have reported that they are presently implementing climate-smart technologies, including cooling tanks, milk testing equipment, and refrigerated trucks because of the essential nature of these technologies for the continued operation of their businesses. Figure 41: Primary reasons for currently using climate smart technology by processors (n=11) Processors surveyed also mentioned various reasons for their investment in various climate smart technologies in the next 1-3 years (Figure 42). The majority of processors express a keen interest in investing in climate-smart technologies, provided they are cost-effective and are inclined to invest if financial incentives are available. There is a widespread concern among processors regarding the substantial initial investment required for climate-smart inputs and technologies, for example solar energy installation. It is evident that a shift in mindset is necessary to promote the adoption of these technologies, as they hold the potential for significant benefits but often entail high upfront costs. Figure 42: Reasons for processors' interest in investment of climate smart technologies in 1-3 years Climate smart technologies/ inputs at off farm level (Traders) In the survey of traders (n=6), it was revealed that they are well-informed about and actively utilise stainless steel cans for milk collection from farmers, as well as for milk distribution to other traders, as illustrated in Figure 43. In addition, they employ milk testing equipment to assess the quality of the milk they procure. Their testing procedures encompass fundamental platform tests and employ essential tools such as a lactometer for measuring density, an alcohol gun for bacterial inspection and a thermometer for temperature evaluation. Interestingly, all traders are aware about digital record keeping but few are using the technology. However, about five of these traders express a strong interest in implementing digital record-keeping in the near future (Figure 43). Currently, many of them rely on manual bookkeeping for recording milk sales, purchases, and other pertinent business information. This practice is seen as risky, as it leaves them vulnerable to data loss or theft in case the physical books are misplaced or stolen. Figure 43: Awareness, Usage and investing in climate smart technologies by traders (n=6) All traders are using non degradable material for packaging milk, but most are willing to invest in recyclable packaging (Figure 43). Furthermore, all traders are aware of solar technology but none of them are using it. Four of these traders are eager to embark on a journey towards full electrification of energy sources, particularly by harnessing solar power at both their milk outlets and milk collection c. Presently, they rely on diesel generators to power the cooling tanks at the collection centres, while grid electricity and generators come into play during power outages at their milk outlets. Remarkably, many of these traders (Figure 43), seem unaware of electrified tricycles and motorbikes but are showing a strong interest in investing in these electric-powered vehicles in the near future. Their rationale revolves around the belief that these vehicles would offer a more practical means of transportation, especially in rural areas characterized by poorly maintained roads, as they go about collecting milk from local farms. Approximately 67% of traders attribute their adoption or investment in milk collection and transportation equipment to recommendations from the Dairy Development Authority (DDA) and other experts (Figure 44). This mandate from the DDA is an essential prerequisite for engaging in milk trading. A similar rationale applies to the utilization of quality testing and preservation tools, such as milk testing equipment. Additionally, 50% of traders highlight that they opt for cold chain facilities like milk coolers due to their positive impact on maintaining milk quality and the evident return on investment associated with these equipment (Figure 44). Figure 44: Primary reasons for traders' using climate smart inputs/technologies The majority of traders are interested in investing in climate-smart technologies in the near term if they are cost efficient, profitability in using them, effective training is provided in using the inputs and there is a financial incentive to invest (Figure 45). Furthermore, they are keen on these investments if the technologies can reduce their reliance on conventional utilities, particularly in the case of climate-smart infrastructure like solar power. Figure 45: Reasons for milk traders' interest in investment of climate smart technologies in 1-3 years Prioritization of adaptation measures by processors and traders in their businesses Prioritization of adaptation measures by processors in their businesses According to the survey, there were six large processors and five small scale processors interviewed. Half of the large-scale processors are prioritizing small-scale farmer’s productivity to scale up milk collection (Figure 46). Just one large processor is prioritizing support to small-scale farmers in adoption of climate smart technologies in the near term. Almost all large processors surveyed mention prioritizing reduction of greenhouse gas emissions and increase in climate resilience in current operations in the long term (4-5 years) (Figure 46). Figure 46: Prioritisation of various adaptation measures by large-scale processors (n-11) The survey findings indicate that nearly all small-scale processors are giving high priority to increasing climate resilience in their current operations in the near term, as reflected in Figure 47. However, it's worth noting that only two out of six small-scale processors are prioritizing the improvement of small-scale farmers' productivity, as well supporting their adoption of climate-smart inputs and technologies in the near term. Figure 47: Prioritisation of various adaptation measures by small-scale processors (n=6) Prioritization of adaptation measures by traders in their businesses The survey findings indicate that nearly all milk traders are giving high priority to supporting small holder farmers to increase productivity to scale up milk collection in the near term, as reflected in Figure 48. Half of the traders are giving priority in the near term to supporting small scale farmers in adoption of climate smart technologies and inputs. This is because traders have so many farmers who bring milk to their collection centers and thus interact more with farmers. Interestingly, most of the traders are giving high priority to increasing climate resilience in their current operations in the near term. It's worth noting that half of the traders surveyed are prioritizing reduction in greenhouse gas emissions in the near term. Figure 48: Prioritisation of various adaptation measures by milk traders (n=6) Significant barriers in adopting climate smart technologies in the dairy value chain in Uganda There are various barriers in adopting climate smart technologies in the dairy value chain that have been documented by (CIAT; BFS/USAID. 2017.; UNDP 2017). Lack of access to financial services and risk transfer mechanisms, such as credit, insurance, and savings, that can help them invest in climate smart practices and cope with climate shocks. Limited availability and quality of climate information and advisory services, such as weather forecasts, early warning systems, and extension support, that can help them make informed decisions and adopt appropriate technologies. Low prices of milk not motivating (the cost of input tend to be higher than the revenue from the outputs). High costs and low returns of some climate smart technologies, such as biogas digesters, irrigation systems, and improved breeds that can deter farmers from adopting them or limit their scalability. Low awareness and knowledge of the benefits and potential of climate smart agriculture among farmers, policy makers, and other stakeholders, that can hinder the adoption and promotion of climate smart practices. Institutional and policy gaps and challenges, such as weak coordination, inadequate incentives, and conflicting mandates that can affect the implementation and mainstreaming of climate smart agriculture in the dairy sector. From the survey of the processors and cooperatives, there are various barriers to adoption of climate smart inputs/ technologies that were mentioned. These include: The high upfront costs associated with climate-smart technologies, such as solar systems, refrigerated trucks, energy-efficient equipment, water purification systems, and gas boilers, pose a significant financial barrier for many processors and cooperatives. Investing in a cooling tank of 100,000 litres is about USD 150,000. A used insulated truck is about USD 20,000 to USD 40,000 depending on size. There were some concerns about solar energy being inconsistent in regions where there are months with insufficient sunlight to effectively charge solar panels, affecting the reliability of these systems. Also, poor quality batteries to charge the solar panels are available of the market. There is a prevailing sense of doubt by large scale processors regarding the practicality of harnessing solar panels to generate the necessary kilowatts to fully power their processing plants, especially for systems requiring a 3-phase configuration. Farmers within cooperatives have raised concerns about the exorbitant costs of stainless-steel milk cans, which, unfortunately, are currently of subpar quality. This issue becomes more challenging to address as milk prices remain low. Many farmers are hesitant to invest in these cans because they perceive that they are not making a profit from milk production. Furthermore, farmers have lamented that during the wet season, when the roads are impassable, the fragility of these low-quality milk cans becomes a significant problem, resulting in substantial damage. Some small-scale processors stated they were constrained by space to install climate-smart technologies such as rainwater tanks, water purification systems, and waste treatment facilities. The places they work from are rented and small, which restricts their ability to implement certain technologies. Some small-scale processors, like Mackies, located at government incubation centers like Uganda Industrial Research Institute (UIRI) and Makerere University, are unable to switch to climate-smart technologies because they do not own the equipment. Instead, they rent or share these technologies with other processors, which can affect processing volumes due to scheduling constraints. In some cases, certain inputs needed for heating water during the pasteurization of milk in large-scale processing plants, such as coal and coffee husks, are not readily accessible. This scarcity can disrupt the operations of processors who depend on these resources. As a result, many processors resort to using firewood as an alternative input because it is more readily available but not climate smart. A small-scale processor, REAL LTD, has made a deliberate decision not to adopt certain climate technologies that reduce the need for manual labor, such as digital bookkeeping and pasteurization machines. The reasoning behind this choice is that the company's core mission is to offer employment opportunities to women who have experienced domestic violence. To fulfill this objective, the processor exclusively employs manual technologies at their plant, ensuring that these women have job opportunities and a source of income. From the survey, the milk traders also mentioned various barriers to scaling up of climate smart inputs/ technologies. High upfront costs of climate-smart technologies like electric motorcycles, solar-powered coolers, and full electrification of energy sources using solar making their adoption challenging. The inadequate road infrastructure in rural areas, where milk collection from various farms takes place, can impede the effective utilization of certain technologies such as electric motorcycles and cars. Traders have pointed out that some climate-smart technologies, like refrigerated trucks, encounter issues related to the availability of spare parts. This can significantly impact the maintenance and repair of these technologies, serving as a barrier to their adoption. Traders had concerns regarding the ability of solar energy technologies to generate the required kilowatts to power cooling systems consistently. Certain traders exhibit a preference for manual bookkeeping methods over computer-based systems when conducting transactions. Their rationale behind this preference is the belief that computers can be time-consuming. However, it's worth noting that some traders requested effective training on how to utilize digital recording systems to efficiently manage their financial data. Poor quality milk cans are accessible in the market, and they are being sold to traders and farmers. These substandard cans are susceptible to damage when they are dropped, resulting in difficulties in milk handling and transportation. Consequently, this situation acts as a discouraging factor for both traders and farmers, deterring them from making investments in such milk cans. Supporting enterprises/ Value chain support services In the dairy sector, there are various inputs, equipment, and digital solutions available that can enhance productivity, facilitate climate adaptation, and contribute to the mitigation of greenhouse gas (GHG) emissions. Nonetheless, the landscape for the provision of these products and services in Uganda remains significantly weak. The dairy sector in Uganda is expected to continue depending on imports for specific industrial and productivity-enhancing inputs and equipment. The government is poised to assume a pivotal role in scaling up research and development dependent solutions and plays a crucial role in creating a supportive ecosystem that fosters the growth of local businesses within the sector. By assessing impact and growth potential, decision-makers can make informed choices about which enterprise types are best positioned for scale-up, ultimately contributing to the growth and development of the dairy sector in Uganda. There were various enterprises that support the dairy sector that were surveyed. These include: Feed: Tunga Ltd promotes precision feeding by formulating/manufacture feed that suits an animal’s genetic ability and additives (toxin binders) all of which reduce feed wastage within the animal. Impact potential: Potential to reduce emissions from the animals but also increases income for the farmer due to optimal utilization of feeds. Growth potential: To expand their presence in the livestock sector they offer free nutrition training, feed testing services, feed formulation, and feed preservation to farmers. In the 3 years’ time, the company seeks to establish regional hubs within the country. Each hub would comprise storage units for the products from the factory; product vending station; farmer training rooms, and mini laboratories for testing farmer feeds. Barriers to scale: High cost of the main feed ingredients (maize and soybean) thus cost of their products has gone up has led to reduced demand.; Low milk costs make farmers to reconsider on whether to continue with the concentrates as it doesn’t make economic sense; The animal feed bill that doesn’t seem to regulate the animal feeds industry is a big challenge for their successful operations. Processing machinery: Hola Diaries Ltd have assembled a container processing plant which uses in built electricity heater system unlike commonly used boilers that use diesel or wood which most dairy processing companies in Uganda use. Impact potential: The unit cuts down energy costs by 50% through a heat regeneration process were incoming cold milk cools the outgoing pasteurized milk and this in turn heats the cool milk. Growth potential: Currently conducting pilot studies on solar milk coolers that would eventually be scaled out. The company is planning to promote distribution of milk dispensing machines in schools and hospitals for pasteurized milk reducing cost of packaging. Envisions having this kind of container processing plant distributed across milk producing regions in Uganda operated as a franchise under different dairy cooperatives or individual farmers. The company also looks into assembling and designing other small space fit technology for cheese processing Barriers to scale: High upfront costs as the spare parts are imported from Netherlands. Would need financing to assemble a container fit processing plant in various cooperative owned MCCs. Dairy cold chain equipment: Snowman Supply Ltd supplies equipment including coolers, large and small cans, milking cans, milk meter and cream separator machine. Imports these milk equipments into the country. Impact potential: The company also offers individuals in milk processing training to make yoghurt and ice cream. Growth potential: Subsidize milk cans for the small-scale farmers because they are not supported, and the milk prices keep fluctuating for them to afford the cans. Barriers to scale: Initial business model was providing of coolers and milk value addition equipment to cooperatives and to individual farmers on credit, but the low return rates of the credit offered to the farmers through equipment, forced the company cash on sale model; Taxes levied on some commonly used equipment in milk production e.g., Milk cans has led increment in pricing of those equipment. This has seen more farmers and traders shying away from buying these cans and resorting to the use of jerrycans in transportation of milk. Renewable energy: Solar today Ltd seeks to fill the gap in electricity access by using solar for majority of the rural population. Provides equipment for lighting as well as sale and promotion of solar heaters, solar milk coolers. The company works in partnership with financial institutions (Equity, Centenary, Post bank and microfinance) which enabled their customers to get their solar products under a loan system. Impact potential: Key solution for reducing GHG emissions and energy costs, especially for cooperatives, traders, and processors; reduces reliance on traditional utilities and increases profitability. Growth potential: The demand for the different solar products has grown over the last 10 years. Working with cooperative society to provide them with solar coolers because they are already available, and demand is increasing. There is a need to subsidize the services so that they are affordable. Company is designing solar that doesn’t need batteries to power equipment. Barriers to scale: The initial investment costs (CapEx) are often very costly as compared to the operational expenses (OpEx); Pay back of products given on credit limits the company from scaling; Poor quality solar products on the market makes potential customers biased over solar products; Tax levies on solar spare parts. Pasture seeds: Syova seeds is an affiliate of East African Seed company which availing to livestock farmers with seeds for propagation of high-quality forages. Impact potential: Potential to increase milk yield by up to ~50% due to improved nutrition (with proper and holistic animal management/nutrition). Growth potential: They have embarked on campaigns to sensitize farmers about the cultivation of the new feeds together with silage making. They have demo plots propagated with the improved forages which farmers can access for learning purposes during field-days which they organize every year. Besides direct sales to farmers, they supply agro-dealer shops which in turn sell to farmers. They would wish to increase the volume and range of forage seeds to include varieties that can be grazed including Kikuyu grass, Brachiaria, Mukuna and calliandra among others. They intend to increase their promotional campaigns. Barriers to scale: Low demand for the improved feeds among local farmers; Due to slow turnover of seed stocks for the new forage varieties sometimes the germination rate deteriorates; Farmer complain about high prices of seeds; Unreliable rainfall. Cooling systems: Wamala Engineers offer solar powered small and large cooling systems. Small coolers are for individual farmers while the large cooling systems target farmer cooperatives. Give the small coolers on credit and the farmers pay back in 2 years. Impact potential: Cooling systems powered by solar instead of using diesel generators most especially for areas where availability of national grid /hydroelectricity is low. Growth potential: Reach cooperatives in western Uganda to adopt the large solar powered coolers. Barriers to scale: Change of farmer mindset; Affordability (Financial capability); Limited market for the small cooling system; Need of funding on the company side since the systems are to be given out on credit; Taxes levied on the equipment (each machine is taxed 2 million). Artificial Insemination: Worldwide Sire deal in Artificial insemination and imports semen from the US. Mobilize a few inseminators whom we work along with. Beef semen include breeds like Argus (Red and black), Simmental and Dual purpose include Brown Swiss while dairy include the Friesians. Import semen twice a year for each shipment of 10,000 straws. Impact potential: Better breeds of dairy cattle increase milk production by six litres per day compared to local breeds. Growth potential: Establish a facility to offer artificial insemination in western Uganda by end of year. This will bring AI services nearer to dairy farmers. Barriers to scale: The liquid nitrogen price keeps fluctuating, and a small can will require 10 litres which will last for two weeks; High costs of transportation and sanitization; when it’s hot, they tend to have less cases of insemination; Technical labor shortage; Competition for nitrogen facilities. Sometimes the Makerere University facility can break down and the one of Entebbe favors government hospitals, Additional services like synchronization. It’s still low because we deal with small farmers. The hormones are also expensive, a bottle costing UGX 200,000. Wastewater Management: David and Shirtliff supply water related equipment and installation like water pumps, boreholes, solar water pumps, irrigation, swimming pool and wastewater management. Impact potential: wastewater management reduces negative effect on the environment. Growth potential: They have installed solar water pumps and wastewater management to various actors and want to expand to other countries. Barriers to scale: Taxes (Solar panels and batteries are not taxed but pumps have an 18% VAT so it makes it expensive); Lack of information as the client can’t provide it all so need to pilot the area which is expensive; Competition because companies are coming up where some have left the entity, and they try to do their work like us. Biodigester providers: Biodigesters reduce on-farm emissions from manure, provide access to energy and enable access to organic fertilizers promoting more environmentally friendly and efficient agricultural practices. Biogas solutions Uganda is an implementing partner of the Africa biodigester component. It builds the capacity of Biogas Enterprises (BEs) and is responsible for the demand and supply of the biodigesters. Impact potential: Use of an average biodigester can on average reduce carbon emissions by 4 tonnes per year per animal and reduce cutting of tress by 1.7 tonnes (~0.3 Ha) per year by that household. Growth potential: Already installed 10,000 units in Uganda, expanding to reach more households. Barriers to scale: Awareness of the technology is still low; Poor quality locally made products by the biogas enterprises. From the information from the survey and key informant interviews. Priority must be given to enterprises that provide the following technologies since various actors had high interest to invest in them in the shorter term (1-3 years). Farmers Artificial insemination of improved breeds High yield forages Precision feeding, concentrate feeds and toxin binders Water harvesting systems PV/Solar energy Biodigesters Agri fintech Solar milk coolers (Small) Aggregators Full solar electrification at the MCCs Solar powered coolers Refrigerated trucks Processors Wastewater treatment Recyclable packaging Energy efficient equipment Traders Digital record keeping systems Electrified motor bikes Recyclable packaging Full solar electrification at MCCs and milk outlets Solar powered coolers 5.5.1 Case study on Renewable energy THE REGULATORY ENVIRONMENT FOR DAIRY DEVELOPMENT Regulation of the dairy sector The regulation, standards and enforcement of milk production in Uganda serve the primary objectives of ensuring consumer safety, enhancing public health, and promoting the production of high-quality dairy products that can compete effectively on the international market (DDA, 2022). The authority responsible for overseeing and regulating the dairy industry in Uganda is the Dairy Development Authority (DDA) which derives its authority from key legislative instruments, including the Dairy Industry Act of 1998, and Statutory Instruments such as the Dairy (Marketing & Processing of Milk & Milk Products) of 2003, which has been subsequently amended in 2006. DDA creates enabling environment (policy and regulations) for the dairy sector through the following policies: Dairy Act (1998) Dairy regulation under amendment Dairy strategy (NDP III) Other general laws that support the livestock industry Animal Disease Act Vet Practitioners Bill Animal Breeding Act Animal Feeds Policy National Agriculture Policy (2016) Livestock Identification and traceability systems law Dairy Industry Act The Dairy Development Authority, established under the Dairy Industry Act of 1998, is responsible for registering and licensing dairy stakeholders and developing quality standards. Nationwide enforcement includes inspections of dairy handling sites, import/export shipments, milk transport equipment, and product testing. Non-compliance consequences range from license revocation to product confiscation, premises closure, and legal prosecution. This stringent enforcement encourages farmers to adhere to safety and quality regulations, presenting an opportunity for the production of competitive dairy products meeting international standards (Komugisha, 2023; DDA, 2022b). Objective of the Authority is to: Raise incomes and standards of living of small-scale farmers through increased and continuous returns in dairy farming. Achieve and maintain self-sufficiency in milk and dairy products and to export any surplus. Promote dairy productivity with the use of available cost- effective technology & breeding to foster its sustainability. Establish liberal but harmonised dairy markets and promote competition in milk collection, processing and marketing. Regulate and control the market for milk and dairy products and promote production and competition there in. Improve human resource capacity for the development of the dairy sector. The Authority therefore: Registers and licenses milk processors and traders. Supports dairy farmers` marketing groups, Registers dairy farmers groups, Advises government on milk standards and co-ordinate enforcement of those standards in liaison with UNBS. Controls and regulates dairy and dairy related import & export activities in conformity with the External trade Act, but without violating the Animal Diseases Act. Implements Government policy designed to promote the development of the dairy sector. Supports various dairy development activities (dairy extension, breeding, training, product development and marketing promotions). Acts as an arbitrator in any conflict between dairy stakeholders. Pools dairy processing and marketing data. Advises Government on research priorities of the dairy sector. It also gives guidance on: Regulations of the Marketing and Processing of dairy products. Statutory instruments The Dairy (Marketing and Processing of Milk and Milk Products, 2003 & as amended in 2006), Regulations (DDA, 2014). These apply to all milk & milk products produced in or brought into Uganda for purposes of marketing, processing, or export, but do not apply to milk and milk products brought into Uganda for only transit purposes. The regulations give guidance on: Registration to deal in milk and milk products or dairy equipment. Inspection and quality control. Permit and Quality Certificates. Cess on processed milk/milk products/imported dairy products and levy on raw milk. Requirements to be met by an applicant, who wants to process, control a store, cooler/ freezer milk selling outlet and milk transporter. Provides application form for: Registration to process/market, operates a factory/store, transport, deal in dairy equipment Registration to import of milk and milk products. Registration to export milk and milk products. Pre-shipment inspection and transport permit. Certificates to be issued: Registration certificates. Transport Permit According to the survey, traders, processors, and cooperatives must hold valid licenses to engage in milk trading and processing activities. These licenses are obtained through the DDA, which mandates an annual fee of Ugandan Shillings 75,000 per cooler, Ugandan Shillings 200,000 per truck owned, and Ugandan Shillings 30,000 per deep freezer. Additionally, the city council imposes an average annual trading license fee of Ugandan Shillings 280,000, and the Uganda Revenue Authority (URA) levies an annual Pay as You Earn (PAYE) charge of Ugandan Shillings 800,000. Penalties If traders in milk and dairy products without registration/license from the Authority commit an offence, the regulations stipulate various penalties (DDA, 2014). Standards Dairy standards exist & they have been harmonised at East Africa Community level to facilitate trade within the region and beyond. The custodian of the standards is Uganda National Bureau of Standards (UNBS). The dairy standards are compulsory meaning that they are mandatory (DDA, 2014). The dairy standards include: Raw cow milk US EAS 67:2006 Butter US EAS 22:2006 Cheese US CODEX STANDARD A 6:2003 Evaporated milk US CODEX STANDARD A 3:1999 Fermented milks US CODEX STANDARD 243:2003 Flavoured yoghurt and products heat treated after fermentation US 22 CS 11:1993 Infant formula US CODEX STANDARD 72:1981 Infant formula US 4 CS 72:1993 Sweetened condensed milk US EAS 87:2006 Whole milk powder, partly skimmed milk powder US 8 CS 5:1993 Milk based baby foods US EAS 79:2000 Milk powder dried whole milk skimmed US EAS 49:2006 UHT Milk US EAS 49:2006 Dairy Ice and Ice creams US EAS 70:2006 Whey powder US CODEX STANDARD A 15:2003 Yoghurt US EAS 33:2006 Yoghurt & sweetened yoghurt US 21CS 11:1993 Enforcement An enforcement operation is a systematic effort aimed at ensuring strict adherence to dairy standards and regulations (DDA, 2022b). These operations are organized to uphold dairy laws and regulations by identifying, deterring, re-educating, or penalizing individuals who violate the standards and regulations governing the dairy industry. Farmers, traders, and processors are non-compliant with dairy standards through adulteration with water & chemicals, bacteriological contamination, spoilage, expiry, mislabelling, less volumes etc. Enforcement of dairy standards & regulation involves operations against non-conformities in the following areas (DDA,2014). Processing/trading milk without registration certificates issued by DDA, Adulteration of milk with chemicals/water/other substances. Removal of cream (butter fat) from raw milk & offering it for sell as whole. Source of information for Dairy Development Authority (DDA): Surveillance/inspection by DDA Customer complaints National Dairy Laboratory results DDA works in collaboration with: Uganda Police KCCA and Municipal Councils Local Government Uganda National Bureau of Standards (UNBS) Courts Dairy Regulatory Councils in EAC i.e., East Africa Dairy Regulatory Authorities Council (EADRAC) Consequences of non-compliance The dairy standards include: Registration licenses can be withdrawn/revoked. The dairy premises can be closed down/affected processing lines suspended/closed. Noncomplying milk/dairy products can be recalled from the market, confiscated/ destroyed. An arrest can be carried out by the police & culprits can be taken to courts of law and prosecuted. Rewarding compliance Examples of rewarding compliance include: DDA has been rewarding complying and excelling dairy stakeholders through the Annual National Dairy Awards Events. The 1st National Dairy Awards event was held in March 2013 and the 2nd took place in April 2014; where most of the dairy stakeholders participated (DDA, 2014). Awarded categories include dairy farmers, primary dairy cooperatives, milk collection centres, milk transporting companies, milk processors and exporters. Challenges the DDA faces in regulating the dairy sector (milk production and processing) (DDA,2022c) Inadequate funding and staff to carry our inspections and enforce regulations - e.g., the authority was unable to conduct activities lineup in the current year due to lack of funds. Partly due to: There is a court injunction on levy collection, and this frustrated the Authority’s effort to mobilize revenues close to UGX 14 billion Cess suspension and non-compensation of Cess amounting to approximately UGX 16 billion annually Enforcement of dairy laws is weak due to insufficient personnel and infrastructure. Farmers continue to use inappropriate milk containers because the authority lacking capacity to ensure or enforce use of proper milk containers. There are no regional laboratories that can support inspection services and make quick decisions. The National laboratory lacks equipment and reagents needed to performance some analyses hence samples are taken to Nairobi for analysis. Reduces efficiency of regulation. A poor culture of self-regulation among the local dairy value chain actors. Regulating informal sector is difficult which affects the quality of milk sold. Traders tend to buy any good and poor-quality milk that has been rejected by cooperatives and processors. Courts have banned unprocessed milk. The government is supporting self-regulation. Inefficient coordination between MAAIF and DDA CHARACTERISTICS OF THE DOMESTIC CONSUMER MARKET Consumption And Market Trends (milk vs. processed dairy) in Uganda Milk per capita consumption in Uganda has significantly improved in past years. Consumption increased from 60L in 2015 to about 63.8L in 2019; but consumption is still lower than the annual recommended amount of by WHO of 200L per person (Ariong and Otikal,2021). Most of the milk consumed especially in rural areas is in raw form, however, the dairy products mainly consumed in urban areas are of pasteurized milk, UHT, yoghurt and other products. Purchase of raw milk from outlets is also common. Locally made products like bongo (Lala/mala) are consumed a lot in the rural areas. The Government’s target is to have each person consuming at least 200L of milk annually through various awareness campaigns e.g., School Milk Program and World’s June dairy month etc. Table 18: SWOT analysis of milk consumers in Uganda Strength  Weaknesses Enabling legal framework on consumer protection Inadequate promotion of milk consumption Weak enforcement of the laws Lack of reliable market information Knowledge gap on consumer protection rights and dietary values. Poor surveillance Opportunities Threats  Milk consumption campaigns Wide range of dairy products Feedback from consumers Better distribution Adulteration of milk Counterfeit dairy products Policy changes Irregular supply of milk High prices of processed dairy products Competition from other substitutes Source: Dairy Development Authority (DDA), Strategic plan II FY 2020/2021 – 2024/2025 Factors favouring consumption of raw milk compared to processed milk in Uganda: The cost of processed milk is relatively expensive to low-income population. The culture of drinking milk has generally not been inculcated in the society. Consumers have a negative attitude towards pasteurized milk (they think the milk has chemicals in it and some nutrients have been removed) and it is also expensive that is, in the wet season, pasteurized milk is 3000UGX/litre and raw milk is 1,500 UGX/L. In dry season, 4000 UGX/L and raw milk is 2,000 UGX/L. Raw milk is easily marketed compared to processed milk. Raw milk can be given to consumers on credit as there is a personal relationship between consumers and traders which is not the case for processed milk. Supermarkets cannot give pasteurized milk on credit to consumers. Limited access to processed milk by most of the population most especially in the rural areas. Market Challenges Poor quality milk and the informal value chain According to the Dairy Development Authority (DDA), approximately 66% of total milk production in Uganda is marketed as unprocessed milk through the informal sector. The informal market primarily involves the supply of fresh raw milk and traditionally processed products, such as traditionally soured milk like 'Bongo.' In this sector, traditional handling and processing methods are prevalent, as opposed to modern practices. Key participants in the informal market channel consist of hawkers, transporters, and street vendors. Notably, the informal value chain often relies on unorthodox practices, including transporting raw milk in unhygienic plastic containers over longer distances and leaving it unchilled for extended periods (Balikowa, 2011). At milk collection centres within this informal chain, only a limited number of basic tests (platform tests) are conducted, which may not provide conclusive results. Moreover, milk is routinely subjected to adulteration, with common practices involving the addition of water and bactericidal chemicals (Komugisha, 2023). In the informal marketing chain, some traders do not prioritize the assessment of milk quality. Conversely, the formal marketing chain lacks incentives for farmers to enhance milk quality, such as the absence of price premiums for high-quality raw milk. Additionally, there is limited consumer awareness regarding the importance of milk quality. Inefficient and Ineffective Formal Milk Market Channels Formal markets are affected by logistical problems that is, they incur logistical cost of collecting small quantities of milk from scattered locations. They also operate under capacity and at high costs (Komugisha,2023). Competition within the dairy sector has intensified with the emergence of new processing companies. The formal markets are also affected by milk and dairy market liberalization and WTO agreements which encourages dumping of cheap milk on local market. Consumer preferences in Uganda primarily involve the consumption of raw milk in various forms, including warm and cold after boiling, as well as in beverages like tea, coffee, and cocoa (Ssekawojwa 2014). Unboiled milk and fermented milk products are also commonly consumed. However, the consumption of processed dairy products, such as ghee, yoghurt, butter, cheese, and ice cream, remains relatively low (TechnoServe,2008). Inadequate/weak policy and regulatory framework The Dairy Development Authority faces challenges with limited human and financial resources, impacting its ability to effectively regulate traders and processors (Komugisha,2023). Additionally, the absence of strong farmer and processor institutions makes self-regulation difficult, and out-dated laws further complicate the regulatory landscape. Consumption Consumption of milk in Uganda is still lower (63.8L in 2019) than the annual recommended amount of by WHO of 200L per person compared to neighbouring Kenya’s 100 litres (Ariong and Otikal, 2021). Accessibility of processed products in the rural areas Lack of access to processed milk especially in rural areas due to absence of supermarkets and cold chain facilities / infrastructure needed for milk marketing. Market Opportunities Campaigns done in Uganda to enhance market opportunities for milk include: The SNV TIDE project supporting processors to ensure milk reaches the deficit areas. School milk programs being supported by SNV and parents with processors subsidizing the prices of products sold. The pilot School Milk Program (SMP) The School Milk Program started in 2016 by SNV in Southwestern Uganda (Bushenyi, Isingiro, Kiruhura, Mbarara, Ntungamo and Sheema districts) as a national pilot. The key activity is to increase demand for safe milk, improve nutrition in children. There has been reported a higher attendance of children in school. Parents have testified that their children are now more attentive in class (SNV,2022). The school milk programs are good marketing outlets for cooperatives and processors. It was a parent-led school feeding program on cost sharing basis. The processors exhibit their products at the schools. The parents and the school decide who to buy from depending on the price and product preferred. This was an initiative of the SNV’s The Inclusive Dairy Enterprise Project (TIDE) project funded through the Embassy of The Netherlands. From an initial target of 5,000 children, the SMP was adopted by 942 schools with about 320,000 school children receiving milk mixed with porridge. Over 27,000L of milk was supplied daily. 59 nursery schools with 6,000 children embraced drinking yoghurt twice a week. The yoghurt was supplied by women's groups (SNV, 2022). The current School Milk Program (SMP) This was a continuation of pilot phase of SMP through SNV’s TIDE-II project that started in 2020 and ends 2023 and has been funded by the Dutch Government. This is an advanced version of the school feeding program started with a target to add 500,000 children from 610 schools within Kampala but have so far reached a total of 120,000 children in Kampala. They have been able to reach 1,000,000 children and are able to reach 800,000 children per day. They have been able to reach 2,200 schools in South-Western Uganda (SNV, 2022). The key activity is to increase milk consumption in children. They have improved feeding in children where milk is mixed in porridge and given to children. There has been reported a higher attendance of children in school. Parents have testified that their children are now more attentive in class. The SMP is parent led where the parents pay for the milk their children consume at school. The SNV just facilitates in linking the parents to the milk suppliers then to the school. The school milk programs are good marketing outlets for cooperatives and processors. The cooperatives provide milk, and the processors provide yoghurt to schools at subsidised prices. The processors exhibit their products at the schools. The parents and the school decide who to buy from depending on the price and product preferred. SNV negotiates for a subsidized price for the products lower than the prices sold in shops. The processors benefit from easy access to market (SNV, 2022). The parent-led school milk project/Yoba for Life was extended to 14 districts from the original seven in TIDE-1. Processor-led school milk is pilot project in three districts in Kampala Metropolitan (SNV,2022b). Three strategies are being looked at by the government; Parent-led within private institutions, government-led within government-aided schools and in between, processors give a special package at a subsidised rate. Members include FAO, UN food agency, SNV and milk processors (Amos Dairy Ltd, Pearl Dairy farms Ltd, Brookside and JESA farm Dairy Ltd). CONCLUSIONS AND IMPLICATIONS FOR PADNET INTERVENTION DESIGN AND PIPELINE FOR FINANCING Conclusions In conclusion, Uganda's dairy industry manifests as a complex ecosystem, characterized by a dual-channel structure that mirrors the coexistence of formal and informal markets. The formal and informal markets coexist while the informal market representing a significant portion of the market, thrives on flexibility thrives on flexibility and challenges processors to maintain competitive pricing. The industry faces formidable challenges, notably in the Milk Collection Centers (MCCs), where issues like inadequate milk supply, high operating costs, and insufficient infrastructure hinder operational efficiency. Regional disparities in dairy processing and the emerging cottage industry underscore the diverse landscape of Uganda's dairy sector. The dominance of a few major processors, such as Pearl Dairies and Brookside Dairy, in the market share highlights concentration challenges. Despite these challenges, Uganda's dairy sector exhibits resilience, with increasing dairy exports to countries like Kenya, South Sudan, and the USA. Dairy imports are on the decline due to enhanced domestic processing capabilities. However, the industry grapples with fluctuating milk prices influenced by seasonal variations and deductions for transport and administrative costs for farmers in cooperatives. Further insights into the dairy industry underscore the significance of climate-smart technologies in preserving milk quality, reducing post-harvest losses, and mitigating environmental impact. While there is a collective interest among cooperatives, processors, and traders, barriers such as limited access to financial services, doubts about technology feasibility, and institutional gaps pose challenges. Nevertheless, there is a growing emphasis on sustainability, evident in the interest in solar electrification, renewable energy and climate-smart practices, indicating a trajectory towards a more resilient and environmentally conscious dairy industry in Uganda. Reasons for investing in climate-smart technologies vary but converge on the overarching goals of improving efficiency, preserving milk quality, and reducing environmental impact. Cooperatives, processors and traders are interested in investing in climate smart technologies if they are cost-effective, profitable, come with effective training, and provision of financial incentives, particularly for technologies like solar energy. Business priorities in this landscape of the dairy sector by the traders and processors are shaped by a dual commitment to profitability and sustainability. Major processors prioritize reducing greenhouse gas emissions and increasing climate resilience in the long term. Small-scale processors, while focusing on increased climate resilience, also emphasise improving small-scale farmer productivity. Traders, intimately connected with farmers, prioritise supporting smallholder farmers to enhance productivity, scale up milk collection, and adopt climate-smart technologies. The emphasis on reducing greenhouse gas emissions and increasing climate resilience underscores the industry's recognition of the urgent need for sustainable practices. Implications for PADNET INTERVENTION DESIGN From the supply chain relationships between farmers, traders, cooperatives and processors, the implications for PADNET intervention design include: To expand coverage in rural areas and enhance the delivery of extension services as well as to bolster financial literacy, a greater number of highly skilled extension officers is needed. To ensure the provision of access to quality, affordable inputs, and services, it is essential to both offer standardized input products and regulate the input dealers. Access to cost-effective financing via partnerships with commercial banks and development institutions is a vital component in enabling processors, cooperatives, and traders to secure ample working capital for the establishment of check-off systems and the extension of credit to farmers. Create or support government or private extension service agencies that will be responsible for delivering services to dairy farmers. These agencies should be staffed with trained professionals. Facilitate the sharing of market information with farmers, enabling them to make informed decisions about pricing and production. Ensure that there is a regulatory framework in place that promotes competition while safeguarding the interests of both farmers and processors. Regulations should be designed to prevent anticompetitive practices and ensure fair treatment. Establish and enforce regulations and standards for dairy equipment like milk cans, covering design, materials, manufacturing, and performance specifications. Ensure that these regulations align with international standards. From the awareness, usage, and investment of climate smart technologies by farmers, traders, cooperatives and processors, the implications for PADNET intervention design include: Climate-smart technologies have high upfront costs, and even when affordable financing is accessible, Governments and international organizations can provide subsidies or grants to farmers, aggregators and processors encourage their widespread adoption. Government of Uganda can impose regulations or incentives that encourage the adoption of climate-smart technologies and sustainable practices in the dairy sector. Financial institutions can offer low-interest loans specifically designed for the purchase of climate-smart technologies. These loans should have favourable terms and longer repayment periods to make them more accessible. Conduct awareness campaigns to inform farmers and value chain actors about the long-term benefits of climate-smart technologies and their contribution to environmental sustainability. Continuously monitor the performance and impact of climate-smart technologies. Share success stories and results to motivate others to adopt these practices. Encourage cooperatives and associations among dairy farmers and value chain actors to pool resources and negotiate better deals with technology suppliers. Help farmers and value chain actors access better markets, where they can sell dairy products at higher prices. This added income can offset the initial costs of climate-smart technology. Capacity building of technicians to enable efficient maintenance and service of the technologies is needed. This should be accompanied by aftersales services by the suppliers of the technologies to farmers, cooperatives, and processors. From the value chain support enterprises, the implications for PADNET intervention design include: The pricing for end-consumer products by supporting enterprises is affected by the availability and cost of essential raw materials or inputs required for manufacturing and distribution. These raw materials are imported and not locally made. Import levy is for renewable energy products but not spare parts. There’s is need for better import products for these products and spare parts. There is need for capacity building for technicians for proper maintenance and servicing of the technologies e.g., solar systems, biodigesters. Proper regulation of the sector is needed to prevent poor quality products on the market. The lack of awareness of various technologies by farmers, aggregators and processors calls for enterprises that aim to assist a widely dispersed customer base to allocate resources toward establishing sales and distribution channels or forming strategic partnerships. Additionally, they should offer after-sales support to ensure the continued utilization of their products or services and maximize the benefits for their customers. Obtaining affordable financing with favourable terms is a pivotal factor for scaling enterprises, particularly when dealing with substantial upfront costs. This financing is essential to address various needs, including working capital to cover payment gaps and offer upstream funding, and CAPEX for expanding production and operations. Subsidies and tax incentives are essential and can stimulate the adoption of technologies by enhancing their affordability. Enhancing the conducive business environment through the implementation of investor-friendly policies, which involve reducing investment obstacles, streamlining approval procedures, and providing legal and financial safeguards, is vital in promoting the expansion of regional enterprises into Uganda. From access to finance in the dairy sector, the implications for PADNET intervention design include: Implement risk-sharing mechanisms, such as loan guarantees or insurance products, to reduce the perceived risk for financial institutions, making them more willing to offer affordable loans. The government can support in access to finance in the dairy sector through providing subsidies and grants to dairy farmers, aggregators, traders, and processors to reduce their borrowing costs. The government can also implement interest rate caps to ensure that dairy sector borrowers have access to affordable interest rates. Establish specialized financing programs dedicated to the dairy sector to provide loans with lower interest rates and longer repayment terms tailored to the specific needs of dairy farmers and other actors. Collaborative initiatives with financial institutions and dairy sector associations like traders’ associations, farmers union, processors associations to create tailored financial products for the dairy sector. Encourage public-private partnerships to increase the availability of affordable credit to dairy stakeholders. Establish databases and information-sharing platforms that track the financial performance of dairy sector stakeholders. This data can help lenders assess creditworthiness more accurately. Educate dairy sector stakeholders about the available financing options, support programs, and how to access them. From access to finance in the Dairy sector, the implications for PADNET intervention design include: The government should continue investing in cold chain infrastructure actively investing in the rehabilitation of dilapidated milk collection centers in the different milk sheds. The government should remove the import levy on some milk equipment like the milk cans to reduce the cost of these cans and increase access to them. For those cans locally made, the government should regulate the market to ensure good quality milk cans produced. Develop enduring demand destinations for processed dairy that promote sustainability through nutrition awareness campaigns, public, consumption awareness, subsidies allocated to consumers to support their financial needs. The government should continue to train and certify milk traders to ensure milk quality and proper milk handling for safety of the consumers. Regulation of the informal milk channel to ensure milk quality and safety through frequent training and certification of the actors involved in that channel. Improve the data infrastructure through investments in a data commons and internet access to enhance sector comprehension, guide informed stakeholder initiatives, and enable optimal decision-making. The government should enable access to extension services by the dairy farmers to ensure improved milk production. Development of infrastructure e.g., the roads, access to electricity in the rural areas where milk production is based. There are import tax exemptions on all renewable energy technologies but there is need to Implement specific government incentive programs to enhance the affordability of climate-smart technologies throughout the dairy value chain, facilitating quicker adoption. Pipeline for financing Access to finance A limited portion, less than 10%, of dairy farmers have the opportunity to access financial support from both government and private commercial banks (Kiirya,2019). Instead, dairy farmers primarily rely on Savings and Credit Cooperative Organizations (SACCOs) for financial assistance, encompassing loans, insurance, and advice. However, the overall level of financial support available through SACCOs remains modest, primarily due to imbalances in supply and demand. Dairy farmers often exhibit disinterest in seeking credit from commercial banks due to several contributing factors. These factors include the scarcity of accessible information, the inability to provide the necessary collateral security, and informal management practices within the dairy farming sector. Simultaneously, financial institutions struggle to design attractive financial products for dairy farmers (Kiirya, 2019). From various key informant interviews, the following is what was mentioned on access to finance in the dairy sector. Farmers obtain loans from SACCOs because the requirements needed are milk produced and being a member of the cooperative. Cooperatives primarily opt to borrow from microfinance institutions rather than commercial banks due to the more favourable terms, including lower interest rates, and the ease of accessibility, thanks to the simplified requirements for obtaining loans. Cooperatives highlight that farmers who obtain loans from SACCOs primarily allocate the funds towards covering educational expenses and medical bills, rather than utilising them for investments in milk production. This preference arises from the inadequate prices they receive for their milk, which deters them from making investments to enhance milk production, such as acquiring milk cans. Certain cooperatives serve as guarantors for large farmers, enabling them to secure loans from commercial banks or micro-finance institutions. Milk traders assert that financial institutions lack suitable offerings for them to access funding. They argue that these institutions are unaware of the worth of cooling tanks, insulated trucks, and other dairy equipment crucial to their business, despite the potential for using these assets as collateral for loans. Opportunities and constraints of access to finance in Uganda The Agricultural Credit Facility offered by the Bank of Uganda provides an avenue for medium- and long-term loans at a maximum interest rate of 10% per annum. However, this facility is exclusively open to commercial banks, and its utilization, particularly in the context of dairy farming, remains quite limited. This is often attributed to commercial banks' risk aversion towards agricultural ventures (Kiirya ,2019). Savings and Credit Cooperative Organizations (SACCOs), while not able to directly access this facility, present an opportunity to facilitate the flow of much-needed investment for agricultural transformation in Uganda (Kiirya,2019). One way to capitalize on this potential is to establish a collaborative approach, where commercial banks partner with SACCOs under an agency arrangement. This arrangement would enable SACCOs to gain access to additional credit, thus fostering increased financial support for the agricultural sector, including dairy farming. In the past the Uganda Development Bank (UDB) has supported actors in the dairy value chain including dairy farmers (through cooperative societies) and also dairy processors to purchase of new machinery/equipment (key informant interview with UDB). The interest rate charged for loans by the bank are highly subsidized (10- 12%) which farmers pay even when they borrow through cooperative societies. The bank has a climate finance facility (UDB brochure, n.d) specifically created to mobilise capital from both domestic and external sources targeting both private and public entities and directed towards low carbon and resilient investments. There are various sources of finance for companies dealing in renewable energy in Uganda (Table 19) (Centre for Research in Energy and Energy Conservation (CREEC), GOGLA and Ugandan Solar Energy Association (USEA) 2023). Table 19: Various sources of finance for companies in renewable energy Actor Solar financing projects Government •The Government has launched the Energy Access Scale-up Project (EASP) with the World Bank Is implemented by Ministry of Energy and Mineral Development (MEMD) and Uganda Energy Credit Capitalization Company (UECCC) with Productive use of renewable energy (PURE) as one of the key areas of focus. •The Micro-irrigation scheme under the Uganda Intergovernmental Fiscal Transfers Program Project for Uganda (UGIFT) has supported several Solar Powered Irrigation companies to reach farmers. Donors (Grants and RBFs) •GIZ EnDev has developed results-based financing (RBF) schemes supporting the market-based expansion of Productive use of renewable energy (PURE), with a focus on solar water pumping for agriculture. CLASP has recently launched a PURE RBF (with support from GEAPP in several countries including Uganda). •The Beyond the Grid Fund for Africa (BGFA) has launched its second financing window in Uganda, with Productive use of renewable energy (PURE) as one of the target areas. • The Universal Energy Facility has launched, targeting Productive use of renewable energy (PURE) and mini grids Debt •Impact debt financers like SIMA have the Energy Access Relief fund which continues to provide debt to companies including Productive use of renewable energy (PURE) companies Investors •Angel investors, impact investors and venture capitalists and impact investors are increasingly taking an interest in Productive use of renewable energy (PURE) in Uganda. These include Frontier Energy Fund, Renewable Energy Challenge Fund, Climate Investor One, Solar Energy Foundation, Solar Aid, etc. There is also Productive use of renewable energy technology financing available to consumers in Uganda (Table 20) (Centre for Research in Energy and Energy Conservation (CREEC), GOGLA and Ugandan Solar Energy Association (USEA 2023). Table 20 : Various sources of finance to consumers for productive use of renewable energy technologies in Uganda PAYGo Finance •Pay-as-you-go (PAYGo) consumer financing allows customers to pay for a Productive use of renewable energy (PURE) product in instalments over time, until they own it outright. Usually, PAYGo asset providers also require an initial downpayment for the product at the time or sale Loans •Equi-Green loans launched by Equity Bank can be used to buy Productive use of renewable energy (PURE) assets • MoUs between Productive use of renewable energy (PURE) technology companies and FIs to provide consumer financing e.g., Solar Today and Rwanyamahembe SACCO to supply solar coolers to farmers End-user subsidies • Government initiatives have been launched such as the Micro-irrigation scheme which provides up to 75% of the cost price of a Solar Powered Irrigation System (SPIS), with the purchaser paying the remaining 25%. • Appliance financing schemes including in mini-grid schemes e.g., the scheme run in the mini-grid villages operated by Winch in Lamwo with support from GIZ where part of the appliance cost is subsidized, and the rest is paid by the customer. Own financing •Investing business earnings to attain Productive use of renewable energy (PURE) e.g., farmers using earnings or savings to purchase solar water pumps. Another example of access to financing for climate smart technologies from some of the entities interviewed during the market survey is shown in Table 21. Table 21: Examples of access to financing climate smart technologies The Ntungamo Dairy Farmers’ Union Biogas solutions Uganda When investing in the cooling facilities at the Union bulking centre. They were supported by aBi who paid half of the costs of the cooling facility and the farmers paid for the half. They got a loan from a microfinance called Pride microfinance at a rate of 25%. This rate was so high that farmers could not afford it. SNV helped to pay half of the interest and the farmers paid the rest. The Union mentions that they are aware of Uganda Development Bank loans, but it is a recent credit facility. However, getting these loans is a bit hard. Farmers borrow money from the SACCOs for things like school fees, medical bills and not to increase production in their farms. Biogas solutions is an enterprise that supports installing biodigesters for biogas. They initially gave SACCOs interest free loans such that they give their members loans to adopt the biodigesters. They signed an MOU with SACCOs to give members loans at an interest of 18% from 36% that was the ongoing interest rate. However, there were high default rates of 24%. The SACCOs had to be reminded all the time to ask the members to pay back the loans yet they had adopted the technology The SACCOs did not understand the biogas technology and thus did not follow up on how farmers were using them. On a positive note, 300$ on fuel was saved, crop yield increased by 30% because of use of the bio slurry. Challenges faced by the banks in retrieving loans Banks and financial institutions often face various challenges when it comes to retrieving loans from borrowers. Some of the common challenges include: Climate Change Impacts: Climate change-related occurrences such as disease outbreaks and droughts can significantly affect the ability of borrowers, especially farmers, to repay their loans. These unpredictable events can lead to crop and livestock losses, reducing income and repayment capacity. Informal Milk Marketing: The informal nature of milk marketing in the dairy industry can create challenges for banks in monitoring and verifying the income generated by borrowers. Informal markets can be less transparent and may not provide adequate documentation for loan repayment. Unreliable Dairy Markets: Dairy markets can be highly volatile, with fluctuations in milk prices. During times of surplus milk production, processors (who sometimes act as cartels) may refuse to accept all deliveries from farmers, leading to financial stress for farmers who depend on that income to repay loans. Lack of Recognised Breeders: The absence of recognized breeders who can guarantee the price and quality of animals purchased using bank financing can increase the risk for both borrowers and lenders. Without quality assurance, it becomes harder to predict the value of collateral. Non-Tariff Barriers: In the livestock and livestock commodities trade, non-tariff barriers, such as complex regulations and border controls, can hinder cross-border trade between Uganda and neighbouring countries. These barriers can affect the profitability of livestock-related businesses and, consequently, loan repayment. High Illiteracy Levels: High levels of illiteracy among farmers can make it challenging for them to understand loan agreements, manage financial resources effectively, and navigate the banking system. This can lead to misunderstandings and difficulties in loan management. The implications for PADNET intervention design from access to finance in the dairy sector in Uganda Implement risk-sharing mechanisms, such as loan guarantees or insurance products, to reduce the perceived risk for financial institutions, making them more willing to offer affordable loans. The government can support in access to finance in the dairy sector through providing subsidies and grants to dairy farmers, aggregators, traders and processors to reduce their borrowing costs. The government can also implement interest rate caps to ensure that dairy sector borrowers have access to affordable interest rates. Establish specialized financing programs dedicated to the dairy sector to provide loans with lower interest rates and longer repayment terms tailored to the specific needs of dairy farmers and other actors. Collaborative initiatives with financial institutions and dairy sector associations like traders’ associations, farmers union, processors associations to create tailored financial products for the dairy sector. Encourage public-private partnerships to increase the availability of affordable credit to dairy stakeholders. Establish databases and information-sharing platforms that track the financial performance of dairy sector stakeholders. This data can help lenders assess creditworthiness more accurately. Educate dairy sector stakeholders about the available financing options by increasing their awareness, support programs and how to access them. POTENTIAL LINES OF INTERVENTION TO ENSURE UPTAKE AND SCALING OF DESIRED INVESTMENTS To support the uptake and scaling of desired investments, particularly in the agriculture and dairy sectors, governments can implement various interventions. These initiatives can include: Subsidising Milk Packaging Material: By government reducing the cost of milk packaging materials through subsidies, they will be able to make milk production more affordable for dairy farmers and encourage their greater participation in the industry. No Tax on Processing Equipment: Exempting processing equipment from taxes lowers the financial burden on dairy processors and promotes investment in modern processing technologies, which can improve product quality and efficiency. Training and certification of milk traders: Certify milk traders who adhere to the established standards of milk. Provide more education and training to milk traders on proper sanitation and handling of milk and promote good hygiene practices. Conduct regular inspections of milk collection, and distribution points to ensure compliance with quality standards and implement a system for regular testing of milk samples to ensure they meet quality and safety standards. Low Fees/Low Levies for Export Permits: Lower export permit fees and levies can make it easier for dairy exporters to access international markets, promoting the growth of the sector and increasing export opportunities. Support for Access to External Markets: Government support for accessing external markets can open up new opportunities for dairy products, boost exports, and enhance the competitiveness of the dairy industry. Rehabilitation of MCCs: Investing in the rehabilitation of market collection centres can improve the infrastructure for milk collection and storage, reducing post-harvest losses and ensuring better product quality. Training on Climate-Smart Technologies: Training farmers on climate-smart technologies is essential for improving resilience and sustainability in dairy farming, especially in the face of changing climatic conditions. Subsidised Milking Cans: Offering milking cans at subsidized prices can benefit smallholder farmers by providing them with essential equipment for milk collection, improving hygiene, and milk quality. Provision of Milking Machines and Chaff Cutters: Providing milking machines and chaff cutters can modernize dairy farming practices, increase productivity, and reduce labour demands. Mobile Lab for Testing Milk: The procurement of a mobile lab for testing milk ensures product quality and safety, which is crucial for both domestic and export markets. Enabling Environment through Policies and Regulations: The various laws, regulations, and policies including the Dairy Act (1998), Dairy regulation under amendment, Dairy strategy (NDP III), Animal Disease Act, Vet practitioners Bill, Animal Breeding Act, Animal Feeds Policy, National Agriculture Policy (2016), and Livestock Identification and traceability systems law create a supportive framework for the dairy sector's growth and development. Government infrastructure investment in Uganda’s dairy sector The Government of Uganda has shown significant commitment to supporting and furthering the dairy industry. Notably, it has allocated funds for the development of the dairy sector, primarily through the efforts of the Dairy Development Authority. In 2022, the government allocated a substantial amount of 2.5 billion Ugandan Shillings for the procurement of milk-processing plants in various districts (Komugisha, 2023). Additionally, the government, through the DDA, has been actively investing in the rehabilitation of dilapidated milk collection canters that were previously managed by the Dairy Corporation (DDA, 2022c). This investment has significantly enhanced milk collection and bulking processes. Multiple stakeholders, including the government, are continually investing in cold chain infrastructure, a critical component in the dairy industry. These investments in cold chain infrastructure are crucial for mitigating post-harvest losses and maintaining the quality of milk throughout the supply chain (Komugisha, 2023). Access to finances: Government has supported access to finance through different bodies that provide either grants or loans. Some government facilities available are; Agricultural Credit facility, Abi Trust, National Agriculture Advisory Services (NAADS), Saving and Credit Cooperative Organisations (SACCOs), Uganda Cooperative Union – through Uganda micro finance support centre, Uganda Development Bank (UDB), Commercial agricultural bank, and Agricultural insurance facility to back up loan (AI consortium group of insurance). Support from government. Extension services: Extension services provided to dairy farmers in Uganda encompass a range of support, including training and access to essential resources and services. Dairy cooperatives play a significant role by offering various services, such as credit provision, milk marketing, the supply of veterinary inputs, farmer training, connecting farmers to markets and other stakeholders along the agricultural value chain, and providing information, skills, and technologies (Komugisha,2023). Cooperatives have their extension workers who are sent to farmers at village levels and these services are not limited to member farmers only. Farmers do not pay for the services offered by these extension officers; however, they pay for the drugs and sometimes fuel. Distribution of extension officers is not in line with requirements across districts, and extension officers in districts with high population of dairy cows. There has been a revival of the Entebbe Dairy training school which helps in skilling of dairy stakeholders in value addition and enhancing milk quality (DDA,2022). Generally, extension services are demand driven that is, the farmer has to call the veterinary doctors and extension workers to their farms whenever they have an issue. Most of these farmers are self-taught vet doctors because most of them prefer to buy drugs from vet shops and administer themselves. There are some large commercial farmers who hire veterinary doctors and are on pay rolls. Electricity: Access has remained low despite recent government initiatives. Dairy processors and cooperative MCCs face unreliable power supply and often switch to diesel generators which are expensive than on-grid electricity. Roads: Road network in rural areas is highly under-developed, leading to costly logistics. Data commons and internet access: Government that is, MAAIF, UNBS and DDA have mandate on data in the dairy industry. Poor data recording systems and practices, resulting in low visibility and out-dated key figures in reports (e.g., milk production, milk imports, milk consumption, etc.). Internet accessibility in rural areas is very low. According to the government, there is no data on production and consumer forecasts. There is always a delay in the release of the national cattle census which makes it difficult to plan and make forecasts. There is also no digitisation of data yet. Agri fintech/farming mobile apps: Smartphones and farming mobile apps are continuously being adopted by dairy farmers in Uganda to improve their daily operations. Some of the apps developed for Ugandan dairy farmers include the Emata app that assists farmers in obtaining affordable credit, feed and drugs as well as informing them about milk prices (Komugisha, 2023). Others include ‘Feed Calculator’ for mixing feeds cheaply with over 50,000 downloads as of 2020, ‘Jaguza Farm’ which is an AI app that uses machine learning & Tensor Flow to among other things, record milking, detect heat and estimate output, EzyFarm which links farmers to purchasers, traders and service providers reaching 100,000 downloads in 2020 and ‘Agro-Market Day’ that strives to eliminate middlemen by relaying information regarding markets instantaneously. These technologies will enable the dairy industry to grow through high-yielding farming and production practices that increase revenues for stakeholders in the industry (Komugisha, 2023). Climate smart incentives: In terms of climate Smart incentives, government had provided subsidies on Solar equipment, biogas interventions (promoting awareness) and development of a Dairy Nationally Appropriate Mitigation Action (NAMA) which ensures low-carbon development in the dairy sector through the introduction of climate-smart agricultural practices and to bring the dairy production sector of Uganda onto a low carbon and more resilient path (Arnaoudov et al., 2017). Government bodies and development partners in Uganda dairy sector Several government stakeholders and NGOs are actively engaged in the Uganda dairy sector. These include Ministry of Agriculture, Animal Industry and Fisheries (MAAIF), Dairy Development Authority (DDA), National Agricultural Advisory Services (NAADs), Local governments (LGs), Uganda National Bureau of Standard (UNBS), National Agricultural Research Organisation (NARO), Ministry of Local Government (MoLG), Ministry of Works and Transport (MoWT), Ministry of Energy and Mineral Development (MEMD). In the attainment of its broad objectives, DDA works closely with the Ministry of Agriculture, Trade, The National Animal Genetic Resources Centre, and Data Bank (NAGRC & DB), NAADS, NARO and UNBS. MAAIF being the mother ministry provides policy guidance in the dairy sub sector as well as advocating for resources. Ministry of Trade helps in promotes marketing of dairy products locally and externally to boost dairy exports. Other Agencies supported in improving dairy breeds, regulation and research in the dairy Industry that has enhanced dairy production and productivity and safety of dairy products (Komugisha, 2023). The key development partners include SNV TIDE Project, abi-Trust, EADD/Heifer International and Send a Cow in implementing the National Dairy. Heifer International and abi-Trust supported dairy farmers with milk chilling equipment and improved breeds. Send a Cow has supported the dairy Industry by increasing milk yields per cow per day to 8.6 litres per day from the National average of 7.1 litres in the Eastern and Northern regions. Other development partners include: The International Livestock Research Institute (ILRI), Techno Serve, Feed the Future, USAID and SNV. Support offered by SNV in the dairy sector in Uganda According to the key informant interviews, SNV has supported the Dairy sector in Uganda in various ways. Capacity building of cooperatives SNV works with cooperatives through Agriterra, and agency from Netherlands which provides capacity building to cooperatives in the developing world. They carry out amalgamation of cooperatives to form unions at each district to focus on advocacy, lobbying for taxes and policies. At the moment they are working with 139 cooperatives and want to unionize them. They provide the following services: Training on governance, accounting, digitalization, and extension work. The extension worker is paid salary during the 1st year only. Financial management in cooperatives by encouraging them to digitalize record keeping. They are 8 large SACCOs that at different he cooperatives that are able to lend large sums of money e.g., ugx 10.5 billion. These SACCOs do not ask for collateral as long as the farmer has been providing good quality milk and evidence given through computers the amount of milk the farmer produces. Business development: They ensure that a cooperative is a hub (one stop centre) for farmers. Extension services: The cooperatives employ an extension worker who provides extension services to farmers, but they are paid by the cooperative. Business at the farm: Farmer is supported to do their business right through visits and demos. Hire tent: Cooperatives are requested to buy tents so as to hire them out to farmers at a fee for parties and funerals. They categorise cooperatives and those that want to carryout processing is linked to proper suppliers e.g., vans, processing machines. Some of the cooperatives are processing yoghurt and cheese. SNV have introduced a youth program (succession plan) where they include youths as board members and members so that they contribute to the cooperative and at farm levels such they also involved in milk production. This is also called a sustainability plan and it is working. Loyalty and training schemes to farmers: Agriterra trains farmers to be loyal and committed so that they have ownership and periodic investments in the shareholding of the cooperatives. They make sure that cooperative has number of products or services to provide to members to motivate them to sell their milk to cooperatives. They create regional business development events where farmers and services providers make MOUs between each other so as to ensure farmers have access to different services. Water purifiers in schools SNV has supported the adoption of water purifiers in schools to enable easy access of water in schools. They fund 50% of the cost of obtaining the purifiers and the other 50% is paid by the schools. This has been done in western Uganda. Energy saving work stoves SNV has also been involved in implementing energy saving cook stoves to reduce use of wood in farming households. SNV funds 50% of the cost of the energy saving stoves and the parents pay 50% of the cost. Climate smart inputs According to SNV, people are aware of climate smart technologies however, it is a matter of priority, and most people are struggling to survive in business. SNV provide training farmers at a cost of ugx 20,000 to cater for their refreshments. They are trained on growing pasture for animals, use of computers so as to carry out digital record keeping, how to use digital transaction e.g., banks during transactions. A demo plot of 8 different improved pasture varieties was done. Farmers are trained to grow these pastures from which those who can grow them can sell to the other farmers. The model used by SNV is farmer market oriented where farmers also pay a fee to access the various services and not giving farmers services or inputs for free which is not sustainable. Priorities of SNV to reduce gas emissions in production Encourage farmers to give cows 65% of improved pastures. Practice zero grazing to reduce movement of the animals. They have software on balanced nutrition, better food rationing and balanced feeding which eventually increases productivity of the cows and reduces emission by 60%. Improved manure handling by making compost so as to reduce emission. There is more bulking of milk using coolers by farmers to reduce spoilage and they have organized transporters who pick the milk. There are eight young people who have been trained by SNV who train farmers on: Rainwater harvesting (SNV has supported farmers in rainwater harvesting equipment of 5,000 to 10,000 litre tanks but the farmers incur 50% of the cost). How to use of solar systems for electrification at farm level (SNV connects farmers to service providers and the farmers pay 50 % of the cost). Solar project at MCC SNV is working with Feed the Future and USAID to install Solar at MCCs. Solar is used to power coolers but need batteries that last for 6 years. However, the SNV personnel are partially doubtful the solar electrification will be long term. In the project, about 130 coolers have been distributed to various cooperatives in South-western Uganda. Technicians who are members of the cooperatives are sent to Netherlands for training by SNV who in turn repair and do maintenance of these coolers. Use of ice bank system is more feasible because it uses solar to cool the water to ice which then cools the milk Energy saving bicycles called Byson bicycles which cost UGX 280,000 have been introduced by SNV to transport milk to schools, and milk centres from farmers. They have a 5-year guarantee. They have bicycle gears which help on bad roads and are to carry four cans during transportation. These bicycles have been introduced in Kabale and Fort portal and want to introduce more (50 bicycles) by the end of the year. Milk quality testing: SNV has also distributed milk analysers which run on solar for testing milk at MCCs and a few traders. These analyzers are calibrated by the Dairy development Authority (DDA) and Cleotech LTD in Kampala does the repair and maintenance of the analysers. Also, antibiotic strips have been distributed to MCCs to test antibiotics in milk. They first distribute 100% before up scaling and 50% after up scaling. SNV works with DDA during roadblocks to test antibiotics of milk transported by traders. SNV pays DDA in terms of reagents used for milk testing and fuel to carryout activities that ensure good quality milk. Solar powered fridges with stand-by generators were introduced at farm level. These farmers are organized in village milk marketing groups and SNV has provided with three cans for the milk collected which they place in the solar powered fridge. They are required to buy more milk cans on their own. These village groups are linked to SACCOs and also given a stand-by generator to back up the solar.2 2 References Arnaoudov, V., Lukuyu, B., & Caguioa, R. (2017). Nationally appropriate mitigation action on climate smart dairy livestock value chains in Uganda. Balikowa, D., Otikal,K. & Mpiira, A.S. (2021). Performance of milk collection centers in Uganda. “Facilitating evidence-based policy dialogue on performance of the dairy value chain”. Balikowa, D. (2011). Dairy Development in Uganda, A Review of Uganda’s Dairy Industry. Ministry of Agriculture Animal Industry and Fisheries (MAAIF), Food and Agriculture Organization of the United Nations, and Dairy Development Authority (DDA). Available from: http://www.fao.org/3/a-aq292e.pdf. Centre for Research in Energy and Energy Conservation (CREEC), GOGLA and Ugandan Solar Energy Association (USEA)2023: Uganda Productive Use of Renewable Energy Market Assessment: Dairy Development Authority (DDA), (2023). Quarter III, Statistical brief. January – March 2023. FY 2022/2023. Dairy Development Authority (DDA), (2022). Ministry of Agriculture, Animal Industry and Fisheries (MAAIF). (2022). Statistical abstract FY 2021/2022. Dairy Development Authority (DDA). (2022b). DAIRY POLICY ACTION PLAN | Enhancing the Performance of Uganda’s Dairy Value Chain. Dairy Development Authority (DDA). (2022c). Uganda’s 60 Independence Anniversary. DAIRY SECTOR SOUVENIR MAGAZINE. Dairy Development Authority (DDA). (2021). Annual report FY 2020- 2021. Dairy Subsector and DDA Performance Highlights Dairy Development Authority (DDA), (2014). Milk regulations, standards & enforcement. FAO and New Zealand Agricultural Greenhouse Gas Research Centre (NZAGRC), 2019. Options for low emission development in the Uganda dairy sector - reducing enteric methane for food security and livelihoods. Rome, p. 39 pp. Komugisha, J.R. (2023). Dairy Industry in Uganda 2022-2023. https://www.researchtecglobal.com/report/dairy-industry-in-uganda-2022-2023. Kiirya, J. (2019). Uganda Dairy sector transformation: where is the financial sector? https://www.independent.co.ug/financial-support-missing-in-thriving-uganda-dairy-sector/ Nkuingoua Nana, J.C., Pernechele, V., Meilland, T., Munyuka Ariong, R. & Otikal, K. 2022. Analysing milk price incentives to strengthen policies for dairy production and exports in Uganda. Technical note. Monitoring and Analysing Food and Agriculture Policies (MAFAP). Rome, FAO. https://doi.org/10.4060/cc3804en. Richard M. Ariong & Kenneth Otikal, (2022). Milk consumption in Uganda. DDA Ssebwami, J. (2022). "Milk production jumps to 2.8 billion litres". PML Daily. Kampala, Uganda. https://naads.or.ug/milk-coolers/ (accessed on 27/7/2023) 11:45am. Ssekawojwa, E. (2014). Enhancing smallholder dairy farmers’ marketing opportunities in Uganda. SNV. (2022). Case study consumer strategies: The Inclusive Dairy Enterprise - phase II (TIDEII). SNV. (2022b). Deepening and Scaling-up Dairy Sector Transformation. TIDE factsheet. https://www.monitor.co.ug/uganda/news/national/government-revives-mandatory-milk-plan-for-schools-4268042(June 2023); https://www.newvision.co.ug/category/news/govt-urges-parents-to-feed-children-milk-at-s-142731.   https://www.tetralaval.com/sustainability/food-for-development/technical-assistance-programme APPENDIX Actors interviewed Surveyed respondents: Traders 1st classification 2nd classification Name Date Traders Large scale trader, aggregator and transporter Abesiga Mukama 21/09/2023 Medium scale trader, aggregator and transporter God's grace 21/09/2023 Medium scale trader Family Dairies 21/09/2023 Small scale trader of processed milk by boiling Kyaterekera dairies 21/09/2023 Farmer and small scale trader Emburara dairies 27/09/2023 Large scale trader, aggregator and transporter Sibyangu dairies limited branch Kiboga 29/09/2023 Surveyed respondents: Processors 1st classification 2nd classification Name Date Processor Large scale processor GBK ltd 26/09/2023 Large scale processor  Lakeside dairy Ug ltd 26/09/2023 Large scale processor Brookside/fresh dairy 25/09/2023 Large scale processor Rainbow Dairy 22/09/2023 Large scale processor Kooke enterprise 28/09/2023 Small scale processor Mackyies ltd 25/09/2023 Small scale processor Narka dairies 25/09/2023 Small scale processor  Greenland dairies ltd  25/09/2023 Small scale processor REAL ltd 25/09/2023 Small scale processor  Jublin farm dairies  27/09/2023 Small scale processor Hola Fresh milk 22/09/2023 Surveyed respondents: Supporting enterprises 1st classification 2nd classification Name Date Supporting enterprises Solar providers Solar today 26/09/2023 Pasture seed U farm 26/09/2023 Energy efficient processing equipment and processor Indigo/Hola Fresh milk 27/09/2023 Trainer of dairy farmers in climate resilience Mutanoga based in Rushere 27/09/2023 Pasture seed Syova 25/09/2023 Dairy farming equipment supplier Snowman 25/09/2023 Artificial Insemination Worldwide sires 26/09/2023 Dairy feed concentrates Tunga 28/09/2023 Solar milk coolers Wamala energies 27/09/2023 Water and energy Davis and Shirtliff 28/09/2023 Waste recycling and Large processor FIDO FIDO Industries 28/09/2023 Surveyed respondents: Cooperative 1st classification Name Date Cooperatives Abesigana Dairies farmers' Cooperative society  26/09/2023 Kashaka Dairy farmers cooperative society  27/09/2023 Nyamitsingo Dairy cooperative society 27/09/2023 Ddwaniro Dairy and livestock farmer coop society 29/09/2023 Kiboga livestock farmer coop society 29/09/2023 Surveyed respondents: NGOs, Bank and government agencies 1st classification Name Date Regulatory bodies DDA 28/09/2023 MAAIF 26/9/2023 Financial institution UDB 27/09/2023 Development organizations SNV 28/09/2023 Heifer International 27/09/2023 ABi  27/09/2023 Other stakeholders UNCDF 10/10/2023 Uganda National Dairy Traders Association 6/10/2023 Ministry of Energy 6/10/2023 Ntungamo Dairy Farmers' Union 12/10/2023 Uganda Clean Energy Association 6/10/2023 National Alliances of Agriculture Cooperatives in Uganda 7/10/2023