Literature review: nature, impact, and challenges of dairy industries

Literature review: nature, impact, and challenges of dairy industries

2.1 Introduction

This chapter contains an analysis relevant to the literature of the study. It entails the nature, impact, and challenges of dairy industries, especially in rural development.

2.2 Empirical review of literature

Agriculture plays a significant role in rural landscapes, which is the basis of rural development. Agro industries thrive in rural areas which are founded on agricultural economic activities as an aspect of rural development. Dairy industries are a significant contributor to rural development in Githunguri Sub County in Kiambu County. The dairy industry is one of the most significant contributors to GDP through processing industries. Dairy industry activities contribute to 14% of GDP and 3% annual growth in the economy. The rural areas are the sources of raw materials that are used in agro-industries. Dairy industries involve the use of technology-based equipment during the collection, storage, and cooling activities. It is a sustainable and suitable technology which have been efficient in moving industrial activities from traditional to automated systems. As part of industrialization, the dairy industry is central to economic growth in developing economies. It is in the processing sector of the GDP by using technology, raw materials, and labor. In the recent past, these industries have evolved from SACCOs to large cooperatives, which are governed by development policies. In facilitating the activities, the industry has faced myriad challenges, such as inadequate financing from the government. Also, there have been political influences during startup, which affected the ability to steady up. However, the business environment and anticipation of a change in the rural areas have been supportive of the growth.

2.3 Nature and activities of dairy industries

Equidst (1997), in his study of systems of Innovation Technologies, concluded that institutions play a vital role in shaping the way knowledge, innovation, and investment run. According to FAO (2011), in their report on dairy industry developments in Kenya, concludes there are many players in the industry. They provide services and inputs such as agro-vets, breeding services providers and veterinary services, facilitators, and developmental organizations. The key institutions in the country consist of regulators, input suppliers, service providers, market agents, research and development organizations, farmers and their groups/organizations, non-governmental organizations (NGOs), community-based organizations (CBOs), and development partners. There are two main categories: large scale and small-scale.  The differences between the two dairy systems are in their sizes of operation, level of management, and use of inputs. Small-scale farmers are the majority in the industry. According to a survey done by SDP(small dairy project), they make up to 70% of the total market production. There are about 30 milk processors units in the country, with two of them producing more than 60% of the full milk. Other licensed small milk processors include cottage dairies, producers, mini dairies and cooling plants, cooperatives, retailers, and informal traders.

In Ethiopia, there exist a dairy marketing system where dairy products are channeled through for production. This theory was put forward by Mohammed et al. (2004), in their study of  Dairy Development in Ethiopia. They further states that the market has been expanding in the last decade with a private milk processor. There has been increasing involvement of private businesses in collecting, packing and distributing milk. The total proportion of the distributions is done by the dairy development enterprise owned by the government.

Brahme and Dandekar (1977), in his thesis on the role of industries in rural developments in Lupar and Sugao, identified that switching from a small scale farmer to extensive providers of significant raw materials is the basis of rural development.  It becomes the hub from which industrialization and economic growths emerge. Rural areas were identified with the makeshift business regarding the exchange trade. The perception has been passed by time, whereby considerations of investments are directed towards rural areas. Industries have been established in the agricultural land, whereby rather than the cost of transporting the raw materials, manufacturers are opting to develop the industry at the source. Also, due to increasing demands by the industries, farmers have been contracted towards agriculture that provides raw materials throughout the year. An example of such development is in Maharashtra state, which is a dry area. The area has land under irrigation that comprises of 23%, which is enhanced by minor dams. These dams are washed away by the long rains as they drain in more water. They are well constructed to ensure water percolation is limited. As a result, the area has undergone significant commercialization in agricultural produce. Previously the area did not produce sufficient grain for the people, but the irrigated land has ensured that surplus is available. The area has cyclical migration whereby the senior adults are moving back in the area while the younger men move to the cities seeking employment. In return, women are in the lands carrying out cultivation activities. Those in the town provide the capital necessary for purchasing inputs.

A journal, “Socioeconomic Impacts of Dairy Cooperative,” published by Balak Chaudhary and Mukul Upadhya (2013), states that dairy farming is an essential factor of rural livelihood. The cooperative approach relies on this concept for gaining a common point with farmers. The cooperative has a critical role for the organization, harmonizing, and being helpful to farmers.  The journal state that there is a creation of opportunities through sharing socio-economic impact in the cooperatives. Cooperatives help in education to the farmers and creating health sanitation awareness. Through organizations, women are empowered to participate in farming. A book ‘cultural and Human factors in rural Development Girl M.(2008) writes that dairy farming is the man’s economic activity in many rural areas.

. 2.5 Impact of dairy industries on rural development

Dairy industries have employed a large number of people, especially women and youths, ensuring that the locals have a source of income. Belhekar and Soumyakant (2016), in their study in India, identified the dairy industry as one of the crucial agro-based industries in the country. The country they noted is one of the largest producers of milk, with about 13% of the total of the world. Therefore, the country industry plays a significant role in alleviating poverty and creating employment, mostly in rural regions. Progress in the dairy industry will have a lot of social and economic impact on its people. There will be improved food aid and security, improved infrastructure, which will contribute hugely to balanced development in all rural areas.

The significant rural development can be attributed to its meaning “mobilization and allocation of local resources which are linkages towards improved welfare and productive services in the rural sector.” It encompasses the use of essential skills and capability in the implementation of the resources in the area for continued development (Michoma, 1980). Herani (2009) discovered that all agro-based industries are essential to a country’s economy. He classified the impacts on employment, especially in rural areas, increasing industrial products, improving infrastructure, earning the country’s foreign exchange during imports, and wealth distribution. The study also identified that small capital could be invested in the industry and make capita.

Mohammed (1986), in the study of the contribution of the sugar industry in rural development, Kwale county identified that the sectors require personnel along the supply chain to provide the raw materials. They are mainly sourced from the farmers’ gate processed and are supplied to the final consumers. The area has received an industrial revolution that has led to rural development. The community around and bordering counties provide a market for the products and also creates employment.

26 Challenges faced by dairy industries on rural development

Herani (2016), in the thesis importance of the agro-based Industry of Tharparkar, found that implementation of technology in the area regarding dairy production is on a low profile, which affects efficiency. Milk adulteration takes place due to the use of manual labor, especially in milking, which has a high prevalence of transfer contaminants. These result in the loss of large quantities of milk, which are direct losses of income to the farmer.

Waithaka (1990), in the study of factors affecting the growth of the industrial sector in Nakuru, identified that the structural technology required in the dairy industry at the production point is limited since the growth of the latter is absent or insufficient.The supporting that can ensure production through technology is incapable due to inadequate funding from both the private sectors and government agencies. The financial aid supposed to be granted to such development is too little to cater to growth needs.

A study by Ndicu (2015) on efficiency Analysis of Agro-processing industries in Kenya identified that KCC a parastatal in operation since the early of the country was for closure. Mismanagement of funds almost led to the closure of the industry around the country. The rural development stagnates, requiring intervention through related sectors, which also become affected. Tesfaye (1995), in his study in Ethiopia on An analysis of cooperativisation approach to agricultural development in Ethiopia, found that cooperatives were failing due to top forced membership and also the formation of these organizations in a hurry without feasibility assessment.

Michoma (1980) argues that economic recession affects the agro-industries through an increase in the price of inputs. When the cost of the agricultural inputs increases, the charge is transferred to agro-industries through the best bidder for the products, which is produced in low quantities. Once the outputs are in the market, consumers are affected hence becomes a cycle for the best market player for the product. The government towards protecting local industries is affected by the importation of similar goods which have low prices. The impact leads to closure of the latter since consumers’ purchase is determined by the income. The locally produced goods remain unsold to expiry hence have to be destroyed, leading to loss.

According to a report by FAO  on dairy development in Kenya, the challenges echoed were as follows.

• There is a lack of organization of dairy farmers collectively leading to ineffective cooperative societies
• There is poorly trained staff at all levels
• Poor quality feeding regimes
• The fluctuation of milk prices
• Small-scale farmers lack dairy production skills
• Poor infrastructure

Access to credit and market are some of the challenges affecting the dairy sector in Gitunguri, according to a study by Wanjiku (2015) on factors influencing the growth of small-scale dairy. Poor infrastructure, lack of electricity, and water are some of the limitations on the growth of the dairy industry, mainly smallholders. Financial investment is essential for the growth of smallholder’s diary. Therefore, the challenges are in approaching financial institutions to give credit to farmers.

Research gaps

The existing literature on rural industries tends to concentrate on the numbers of the physical buildings in an area and their output rather than the social and economic impact on the people. There is shadowing of the real picture of the rural industry through physical assessment; hence, there needs to look into the effects on the people in these areas.

References

Ayeyemi, L. (2013). Industrial development in Developing countries: Case Study for Nigerian Small and Medium Businesses. Thesis.

Brahme, H. D. (1977). Role of industries in Rural Development. Rural Area development.

Fatah, L. (2003). The potentials Of Agro Industries for growth Promotion and Equality In Indonesia. Lambung Mangkurat University.

Herani, G. M. (2016). Importance of the agro-based Industry of Tharparkar. Research Gate.

Michoma, J. G. (1980). The Role of Agro-based Industries in Rural Development. Thesis.

Mohamed, J. S. (1986). The growth and Contribution of the Sugar Industry in Rural development. A case study for Ramisi Kwale. Thesis.

Ndicu, S. (2015). Efficiency Analysis of Agro-processing industries in Kenya. Chaudhary, B. and Upadhyaya, M. (2013), Socio-economic Impacts of Dairy cooperative. Economic Journal of Development Issues.

Muriuki .H.G 2011 Dairy Development in Kenya. Food and Agricultural Organization of the United Nations. Retrieved December 1, 2019, from http://www.fao.org/3/a-al745e.pdf

Giri M. (2008), Cultural and Human Factors in Rural Development Corporation Milk Collection Activity on Income Rural Milk Product

Research Project.

Tisimia, V. K. (2014). Growth of Small agro-processing firms and their influence on employment creation, Tanzania. Thesis.

Waithaka, M. W. (1990). Factors affecting the growth of the industrial sector in Nakuru. Thesis.

Belhekar,  S.P(2016). Role of Dairy Industry in Rural Development in India. Indian journal of research e

Mohammed, A.M., Ahmed, Simeon Ehui, and Yemeserach Assefa, 2004. Dairy Development in Ethiopia. EPTD Discussion Paper No. 123. International Food Policy Research Institute, NW Washington, D.C.

Tesfaye Lemma, 1995. An analysis of cooperativisation approach to agricultural development in Ethiopia: with particular attention to producers’ cooperatives. Unpublished master’s thesis, School of Graduate Studies, University of Reading, England.

Edquist, C., 1997. Systems of Innovation Technologies: Institutions and Organizations. London: W.W. Norton.