$35 million investment to boost food security in East Africa

The agricultural sector in Uganda remains a cornerstone of the economy, employing approximately 72% of the population and contributing about 24.1% to the GDP.

The dairy sector alone is valued at US$3.8 billion, with exports bringing in US$106.2 million annually. Milk and dairy products play a crucial role in combating hunger and ensuring food security in the region.

Despite impressive growth, the dairy sector faces challenges such as strong seasonal fluctuations in raw milk supplies, underutilized processing capacity, prevalent informal trade, quality issues limiting international trade, and dependency on demand from key export markets like Kenya. Household consumption of milk is also low, with Ugandans drinking only around 0.5 liters (550 milliliters) per day, significantly below the recommended intake by FAO and WHO.

In response, Uganda’s Dairy Development Authority (DDA) has initiated the Dairy Policy Action Plan, adopted in August 2022. This multi-year plan engages stakeholders to implement policy interventions aimed at boosting consumption, incentivizing production, improving quality, and accessing new markets.

In a significant development aimed at addressing these challenges, Delphos has secured USD 35 million in senior debt financing for Pearl Dairy Farms Ltd, a leading East African dairy processor. The financing, provided by the International Finance Corporation (IFC) and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO), will upgrade Pearl Dairy Farms Ltd's powdered milk plant in Uganda and support the acquisition of a packing facility in Kenya.

This investment is expected to have a substantial impact on both Kenya and Uganda by improving access to the raw milk market for smallholder farmers. Pearl Dairy Farms Ltd's robust Dairy Development Program, supported by IFC, will benefit over 15,000 local farmers by providing training on best practices and data access to enhance productivity and profitability.

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

Delphos Chairman and CEO, Bart Turtelboom, emphasized the broader economic impact, stating, "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 in financing for transactions across the African continent. The financing will not only strengthen food security in the region but also fortify the dairy supply chain against macroeconomic shocks, ultimately contributing to sustainable agricultural development in East Africa.

The proposed deal comes months after Kenya, in March last year, opened doors for the company to invest in local dairy factories. Pearl Dairy Farms Ltd signed a deal with the State-owned financier Kenya Development Corporation to invest jointly in local dairy ventures.

This article originally appeared on Africa News.