Uganda’s Dairy Sector Strengthened by Major Investment to Boost Production and Quality

Uganda’s agriculture industry, a cornerstone of the nation’s economy, employs approximately 72% of the workforce and contributes around 24.1% to the GDP. The dairy sector alone is valued at US$3.8 billion, generating US$106.2 million in annual exports. Milk and dairy products play a crucial role in preventing hunger and ensuring food security in the region.

Despite significant growth, the dairy industry faces numerous challenges, including seasonal fluctuations in raw milk supply, underutilized processing capacity, prevalent informal trade, quality issues restricting international trade, and heavy reliance on export markets like Kenya. Domestic milk consumption remains low, with Ugandans consuming about 550 milliliters per day, far below the FAO and WHO’s recommended intake.

In response, Uganda’s Dairy Development Authority (DDA) launched the Dairy Policy Action Plan in August 2022. This multi-year plan aims to boost milk consumption, enhance production, improve quality, and expand market access through targeted policy interventions.

A significant development in addressing these challenges is Pearl Dairy Farms Ltd., a leading East African dairy processor, securing USD 35 million in senior debt financing from Delphos. This investment, supported by the International Finance Corporation (IFC) and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO), will enable Pearl Dairy Farms Ltd. to upgrade its powdered milk plant in Uganda and acquire a packing facility in Kenya.

The investment is expected to significantly enhance access to the raw milk market for smallholder farmers, impacting both Kenya and Uganda. Pearl Dairy Farms Ltd.’s extensive Dairy Development Program, funded by the IFC, benefits over 15,000 local farmers by providing training on best practices and data access to boost productivity and profitability.

“This facility is a critical milestone for Pearl Dairy Farms Ltd and demonstrates our commitment to driving excellence and growth in the dairy sector,” said Amit Sagar, CEO of Pearl Dairy Farms Ltd. “With IFC and FMO’s support, we are poised to scale our impact, empower more smallholder farmers, enhance food security, and foster sustainable growth.”

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Delphos Chairman and CEO, Bart Turtelboom, highlighted the broader economic impact: “Pearl Dairy Farms Ltd exemplifies how investment in modernizing the dairy value chain creates significant economic returns for communities and countries. IFC and FMO’s financing will enable Pearl Dairy Farms Ltd to expand across the continent, achieving inclusive growth and substantial economic benefits.” Delphos has raised over US$4.7 billion for transactions across Africa, supporting sustainable agricultural development and bolstering food security in East Africa.

In March last year, Kenya approved Pearl Dairy Farms Ltd. to invest in local dairy factories, paving the way for this deal. Additionally, Pearl Dairy Farms Ltd. and the state-owned financier Kenya Development Corporation signed an agreement to jointly invest in regional dairy projects.

This strategic investment aims to transform the dairy sector, improve market dynamics, and ensure long-term food security in the region, benefiting both smallholder farmers and the broader economy.