Driven by increased demand from both local and export markets and facilitated by far-reaching liberalization and privatization policies, the dairy sub-sector in Uganda has undergone significant changes in the last decade. With a comparative advantage in milk production, the southwest of Uganda has started to attract considerable Foreign Direct Investment (FDI) in processing capacity, mainly targeting the export market. As a result, processing capacity increased five-fold and dairy became Uganda’s third most important export product, coming from negligible amounts a decade earlier. In this study, we use observational data collected at different nodes within the value chain to compare the structure of the chain and the roles and economic activities of different actors between export-led value chains and value chains that cater for the local market. Doing so allows us to identify the technological and institutional innovations that both result from the emergence of export-led dairy value chains and at the same time drive further upgrading. Our analysis underscores the importance of milk collection centers, which often take the form of farmer cooperatives, in providing many of the support services that enable other actors in the value chain to produce sufficient milk, and maintain milk sanitation levels necessary for an export sector to emerge.

This publication constitutes a practical development tool, which implements the sustainable food value chain framework with a focus on small-scale livestock producers, targeting an audience of project design teams and policymakers. Small-scale livestock producers are important actors in food production, human health and management of landscapes and animal genetic resources. However, they face a number of challenges, which hamper their productivity, access to market, and competitiveness vis-à-vis their larger counterparts. By integrating the concepts of value addition and the three dimensions of sustainability, the sustainable food value chain framework not only addresses questions concerning the competitiveness, inclusion and empowerment of small-scale producers, but also incorporates the cross-cutting issues that are increasingly embedded in development projects. These guidelines take the user through the different steps of value chain development, highlighting the particularities of the smallholder livestock sector, such as multi-functionality, specific production cycles or food safety issues, through concrete examples.

Changes in climate that intensify drought and accelerate the spread of livestock parasites and diseases darken the economic future for sub-Saharan pastoralists. Already stressed, as industrial and urban development narrow their access to pastures and water for their animals, many pastoralists face a bleak choice: abandon their livestock and their cultural heritage or die. In Uganda, however, the outlook for pastoralists is becoming much brighter. Thousands of pastoralists in Uganda point the way toward a better option: commercial milk production.