Increasing income and jobs through small grants to enterprises
Guji Zone, in Oromia Region, is blessed with one of the most suitable climate and soil type for livestock production in Ethiopia. The zone is home to one of the best cattle breed (Borena) in the country. Abdulkadir Ahmed, 27 and a father of two boys, lives in Guji’s capital, Negelle. Abdulkadir gave up teaching to start a small restaurant in June 2005, which he ran for little more than a year until he realized that dairy collection would be a more promising business. While he was in the restaurant business, Abdulkadir realized that milk supply to Negelle could be more efficient. He had difficulty obtaining quality milk at the right time and the right place. In August 2014, Abdulkadir came across USAID-PRIME’s calls for small grant proposals to entrepreneurs who could potentially benefit small-holder dairy producers by expanding and creating market for their products.
Abdulkadir applied for the grant and won in September 2014. Since then, Abdulkadir set up a center (Abdi Milk collection and Distribution Center) for his dairy business and bought equipment, including two refrigerators, a milk churner, and a lactometer. He employed four people (three of whom are women) who earn an average of ETB 750 a month (over USD 35). Abdulkadir’s business involves collecting milk from neighboring sub-districts within 50km radius of Negelle town. He is working with four agents who collect milk from about 10 other sub-agents each, bringing the total of sub-agents to forty. The subagents collect about a hundred liters of milk a day from more than 120 pastoralist households. His products include fresh milk, home-made yogurt, butter, cheese, and buttermilk.
Abdulkadir’s business benefits all the actors in the value chain. Pastoralists sell their milk at their doorsteps when previously they had to travel 20-30 km to Negelle to sell their milk. His business helps pastoralists to have regular access to markets and higher prices too. The price used to be highly unpredictable. Today, they sell their milk at 12 birr (USD .60) a liter to sub-agents, who sell it for 13.5 birr to agents. Abudlkadir pays 15 birr to agents for a liter of milk, which he sells for 21 birr (USD 1). Consumers also have access to safer and more quality milk while previously it was exposed to mishandling, direct sunlight, and unsanitary conditions in the collection process.
In less than two months from its start-up, the business has already started to make a profit. September was a learning period for Abdulkadir. Due to lack of quality control, he lost money. Now, he has put in place a system to enable him to collect quality milk, including the use of lactometers for testing quality and keeping track of his suppliers. He is very optimistic that things will improve. “Starting to make a profit in just two months of operation,” says Abdulkadir, “is indicative of the potential for the business.” October saw a huge upsurge of sales. Just in two weeks’ time, he has made a profit of more than ETB 6000 (USD 300), expecting a monthly profit of ETB 12,000 (USD 600).
Abudulkadir’s major challenge is reaching pastoralists, who do not have access to markets due to long distances from Negelle. There is abundant organic milk in sub-districts like Haddessa and Dido, which are about 90km from Negelle. Linking with these sub-districts would benefit not only his business and producers but all actors in the chain including, agents, consumers and processors. Reaching these sub-districts requires a modest investment in motorbikes, which he believes is worthy and is looking into options to procure them.
USAID, though PRIME, is working to improve the dairy value chain by giving small grants to businesses that have the potential to improve the income and livelihoods of producers and other actors in the value chain. In all its operational areas, PRIME is offering this opportunity and receiving more applications from entrepreneurs in different agricultural and pastoral sub-sectors.