The International Finance Corporation is planning a $6.5 million boost to Uganda’s dairy industry through a loan to Mbarara-based Pearl Dairy.
The IFC said the financing will enable the firm to establish a powdered milk processing plant with a capacity of 240,000 litres of milk per day.
“The project will source raw milk from smallholder farmers in the surrounding region and will support the development of milk collection centres to further strengthen the dairy value chain,” notes the IFC loan disclosures.
Such a facility will help stabilise prices of milk products, which fluctuate widely in the region, falling when there is a surplus, especially after the rainy seasons and rising sharply during dry spells.
The lack of facilities that can be used to preserve milk products makes it difficult to take in surplus milk, which can be saved for the dry season.
Pearl Dairy is a new venture by Midland Group. The dairy processor is 50.5 per cent owned by Bhasker Kotecha and Family and 49.5 per cent by Anand Kapoor and Family.
The project will cost $13.35 million, the balance of which will be filled by $3.95 million in equity from Pearl Dairy’s shareholders and working capital facility of $2.9 million from a commercial bank.
“In addition, the team is considering a Global Agriculture and Food Security Programme component of $1 million to finance the rollout of the company’s extension services to dairy farmers as well as investments in cooling plants in selected hub districts to facilitate milk collection from smallholder farms,” notes IFC in the loan disclosures.
Lending to the milk processor is expected to encourage other agricultural value addition firms in Uganda to seek funds from other sources other than banks.
“There is a lot of untapped potential in the sector. We are yet to exploit almost 50 per cent of the market,” said Noor Panjwani of Snowmans Uganda Ltd, a distributor of dairy and food processing equipment.