Successful business models for delivery of dairy genetics to smallholders: The case of Kenya Nathaniel Makoni, PhD ABS TCM Ltd, Nairobi, Kenya

Have public-private models emerged and how are they performing? Ministry of Livestock Development

Private Sector Organizations

Dept. of Veterinary Services (AI regulation)

Livestock Genetic Society (Genetic importers and exporters - self regulation)

Department of Animal Production (Livestock recording center)

Kenya Livestock Breeders Organization (Records & Stud Book)

Public Sector

Private Sector

Technical Training for A.I. Service Providers - PPP

Public Sector (Institutes and parastatals) 1. Ahiti College 2. Dairy Training Institute 3. University of Nairobi 4. Agriculture Development Corporation

Private Sector: ABS TCM, Ltd

Harmonized curriculum & participants pay tuition fees (US$600 to $1,150/candidate)

Emerging Public Private Models A. Industry regulation 1. Private sector - Importers & exporters registered by Livestock Genetics Society for self-regulation, accreditation of AISPs and performance record keeping 2. Government role - regulatory & coordinating livestock recording B. Public Private Partnership 1. Training of AISPs can now be done by public and private sector 2. AI training syllabus was harmonized 3. DVS office licenses qualified AISPs

C. Common Appointed Distributors Private & Public sector genetics supplied by common distributors

A.I. Models in use and the prevailing environment MCC/Hub-brokered Services

A

Three models used by Dairy Farmer Groups/Cooperatives

AISP

B

Strong competitive environment

MCC - Hub

MCC - Hub

C

Weak competitive environment

MCC - Hub Farmer

AI SP

Farmer

Farmer

AI SP

What is the best A.I. Model to use? Hub Brokered Services: -Direct AI services to farmers by SPs - Hub milk revenue-based credit

Strong Competitive Environment: - Direct AI services by MCC/Hub to farmers

Weak Competitive Environment: - Direct AI services by SPs to farmers

All models function: - Choice depends on characteristics of competitive environment & hub dynamics

Other AI Models 1. Direct AI SP service to farmer/s

AISP

Farmer

3. Partial Outsourcing

Farmer Groups employ an AISP and contract other private companies to provide AI services

2.

Farmer-owned

Farmer Self Help Group trains a member who serves member farmers

4. Outsourcing

Farmer Groups purchase genetics and AI supplies & invite AISPs to provide arm service only

1. Private company model Advantages •Fast decisions & efficiency improved •Enhanced loan access •Pliant to customer breeding goals •Incentive schemes are easily applied Disadvantages •Low capacity for farmer mobilization & organization •Mixed messages from embedded extension service •Low bargaining power for inputs •Permit acquisition processes can be protracted •Employee bad business practice & management.

2. The cooperative model Advantages •A.I. supplies easily sourced •Known clientele - serving member farmers, ownership •Easy to set-up and track records, management •Has economies of scale, bulk purchase discounts & financial stability •Strong policy advocacy potential - strength in numbers •Easy to organize, manage & monitor breeding activities Disadvantages •Poor governance & leadership erodes trust & technology uptake •Serving widely dispersed members increases overheads •Decision processes could be slow and not pro-poor •Individual farmers might not meet their breeding goals •Cooperative by-laws could limit access to funds •Normally have limited knowledge on emerging useful technologies

3. Single operator Advantages •Strives to keep updated on useful technologies •Urgently responds to specific client needs •Fast decision making process Disadvantages •Not sustainable if not multi-skilled •Low economies of scale •AI management & record keeping often poor •Bad business practice where regulation enforcement is weak •Difficult to access credit - lack of collateral.

4. Public sector Advantages •Farmers more familiar with gov’t offices •Gov’t can subsidize AI service to poor farmers •DVO can be repository of AI records •Economies of scale realized Disadvantages •Lack of SP incentives & low morale lead to bad business practice •State services are not always market dependent •Fiscal pressures weaken ability to sustain quality services •High overheads - not sustainable without subsidy •Choice bulls limited as semen source is local •Can have limited knowledge on new useful breeding technologies •Can distort market for services - precludes private sector.

Are performance indicators (pregnancy rates, etc.) available? Performance indicators, mainly Non-return Rates are partly available 1. AISPs fill in AI Certificate forms 2. AISPs submit monthly returns to District Veterinary Officer office 3. Data available to compute non-return rate 4. PD rarely performed unless privately arranged 5. Returns mainly done in organized farmer groups (e.g. East African Dairy Development Program - Dairy Farmer Business Groups)

Livestock Genetics Society to take up this role; also Importers/Exporters self- regulation & AISPs accreditation schemes

What are the different business models for producing frozen semen for smallholder genetics?

Appointed distributors Government bull stud

AISPs/farmers

Private bull Stud

Private genetic importers

Models for producing frozen semen for smallholder genetics

Frozen semen comes from two sources: 1. Local Gov’t bull stud - unproven genetics • Locally produced semen distributed through appointed dealers 2. Imported from progeny tested global sires • Imported frozen semen distributed through appointed dealers or directly to AISPs or Cooperatives Two local private companies licenced to start private bull studs. Capacity, capability to progeny test bulls & competitively attain requisite standards could be limited.

Can public sector dairy genetics services be made sustainable, and if so, how? “Yes it can be done through privatization” A. Reduce Fiscal expenditure

1. Privatize semen production and set semen standards 2. Promote self regulation of the industry & reduce role to regulatory B. Production of genetics Genetics production competitiveness can be sustained by:

1. Strategic alliance with Global Elite Bull Studs to substitute or supplement local production 2. Importation of Global Elite Sexed-Male Embryo Program

Concluding Statements 1. Governments/donors can assist in setting up liquid nitrogen infrastructure for smallholder A.I. services as limited subsidy to buy down risk. 2. Delivery of A.I. services is a private good, the role of the government should be regulatory, & in research and extension.