Growth in dairy production increases Malawian farmers’ incomes

March 3, 2022

One year after Norfund invested in Lilongwe Dairy in Malawi the company is processing more product, working with more farmers, and reaching more customers.

Minister of International Development Anne Beathe Tvinnereim and Edwin Chilundo, General Manager Operations at Lilongwe Dairy i Malawi.

“This is a perfect example of how we can contribute in a scalable and sustainable way. With this we are creating jobs, developing agriculture, increasing the incomes of smallholder farmers, and improving food security”, says Minister of International Development Anne Beathe Tvinnereim.

This week she visited Malawi and Lilongwe Dairy, a family-owned company that has grown to be Malawi’s leading dairy producer. Norfund invested 52 million NOK in the company one year ago to finance an expansion of production.

One year later the dairy has grown markedly:

  • Milk intake has increased by 18% (from 26.5 million liters in 2020 to 31.4 million in 2021). In 2022 an estimated 16% growth (36.4 million liters) is expected.
  • The number of smallholder famers delivering milk to the dairy has increased by 11% (from 7980 in 2020 to 8890 in 2021), with an estimated 10% (9800) growth expected in 2022.
  • The number of direct employees has increased by 16%, from 403 to 468 in 2021, and there could be an estimated 11% increase to 520 in 2022.

With access to more capital the dairy has been able to invest in more storage, an increase in pasteurisation capacity, new packing machines, and a better distribution apparatus.

“As an active investor Norfund works closely with leadership and owners, and contributes to professionalising the company, finding good leaders, and securing high standards: environmental, social, and developmental.”

Nikolai Johns, investment director and Lilongwe contact at Norfund

Just before Christmas Norfund increased its investment in the dairy by 36 million NOK in order to finance further growth of the company based on raw products from local farmers.

Increased incomes for smallholder farmers

“These kind of investments in the food value chain are the key to unlocking the enormous agricultural potential in Africa”, says Tvinnereim.

Norfund is also continuing work with a project aimed at improving capacity and productivity of smallholder farmers that deliver to the dairy. Most of them own one to three cows each; the project involves, in part, financing storage tanks and more milk cows, as well as training in industry best practices.

“By providing farmers the opportunity to sell their milk Lilongwe Dairy is giving thousands of famers more stability and diversified income which can be used to invest further in their farms and improve their families’ living standards”, says Tvinnereim.

Increased food security

A large number of Malawi’s population is malnourished (18.8%), and local production only makes up 65% of all dairy production in Malawi. The rest is covered by imports. There is a large potential in the country to reduce dependence on imports and increase food security.

“This kind of investing is also an important tool to improve food security and access to nutritious food in a country like Malawi,” says Tvinnereim.

Avoiding aid dependency

Norfund always invests with a goal of contributing to development of profitable business, which in turn can attract private investors once Norfund’s capital and active ownership is no longer needed.

“This is a very effective, scalable, and sustainable way to contribute to development, while at the same time avoiding aid dependency”, says Tvinnereim.

“The path out of poverty is through sustainable economic growth. Increased private investment is crucial for that growth, and Norfund is our most valuable tool for this work,” she added.