Livelihoods and the political economy of dairy in India and South Africa

Herd of cows

This is the second of two blog posts comparing the dairy sector in India and South Africa, as part of research from the Governing the Land-Water-Environment Nexus in Southern Africa project. Read the first post, exploring the reasons behind the different pathways taken by the two countries.


The dairy sectors in both South Africa and India are important not only in their contributions to Gross Domestic Product (GDP), but to the livelihoods of many people both in and beyond the countryside. How do the very divergent models of dairy development in each country fare in supporting the livelihoods of different classes of dairy producers and farm workers? Equally important, what are the implications for urban livelihoods and food security, especially for an important food commodity like dairy?

In this post, I look briefly at what these two countries can learn from each other, and what potential there is for exploring alternative pathways of dairy development – while remaining cautious of expecting the same outcomes in two radically different contexts.

The ‘Problematic of Accumulation’: What contribution can dairy make to the wider economy?

In any country, agriculture, and the surpluses it creates, contribute to industrialisation, accumulation and emergence of capital. A classic concern of agrarian political economists has been to analyse this contribution.

In both South Africa and India, the service sectors have become increasingly dominant as the main source of capital accumulation, accounting for 60% of GDP in South Africa and 59% in India. Therefore capital transfers from agriculture to industry may no longer be significant. Given the realities of global capitalism, sources of accumulation are also no longer restricted to local economies and thus questions of accumulation may be resolved on a global scale.

However in spite of this, we may contend that local sources of affordable dairy remain critical. Processes of accumulation in the countryside also have national political significance.

Prices in India

Tension will arise between the interests of industrial capital, which benefits from low food prices (which directly impacts the price of wages) and the interests of milk producers to receive a fair price for their produce. India’s dairy development programme, ‘Operation Flood’, implemented between 1970 and 1996, enforced a shift from low prices for urban consumers towards fair prices for dairy producers. However in the 1970s, when the programme was implemented, agriculture was still the major contributor to GDP. In the 1980s, 70% of the population was employed in the agricultural sector, whereas this had decreased to 49.7% by 2013.

Can we speculate, therefore, about a possible shift in the future, where the Indian state may begin to favour cheap milk for its growing urban population over a fair price for milk producers? Even if this possibility exists, dynamics such as class struggle also need to be considered. Dairy cooperatives, for example, have become a politically powerful interest group in India. This means that the implications of India’s changing political economy are far from obvious.

Prices in South Africa

In South Africa, two thirds of the population now live in cities, a proportion which is expected to grow to 80% by 2050; and only 4.6% of people currently work in agriculture. A higher price for dairy products would harm the urban poor, and could compromise employment in the industrial sector, thus negatively affecting the overall position of labour.

In this context, it’s in the government’s interest to keep food prices low, possibly even if this means squeezing out producers. This makes milk producers in South Africa extremely vulnerable to fluctuations of the world price in dairy and to the threat of cheap imports, unlike their Indian counterparts.

What are the livelihood benefits to dairy producers and farm workers?

Livelihoods in India

In India, the dairy industry has undoubtedly had a huge impact on livelihoods. This is evident in how 75 million people (5.72% of the total population) derive some part of their livelihoods from dairy production.

The key principles of the cooperative model are the maximisation of producer profits and the sector is praised for its contributions to poverty alleviation, especially for women and landless producers. However, debt cycles are common among the 80% of producers operating in the informal sector, and they are vulnerable to extreme exploitation by middle-men. This model of largely petty commodity production also does not create many jobs for wage labourers, since it relies largely on household labour (except on the larger farms emerging in the private sector). Wage labour is an import consideration for South Africa, which is under pressure to create jobs.

Livelihoods in South Africa

The dairy industry in South Africa generates 60,000 on-farm jobs and the extended value chain provides a further 40,000 jobs. In South Africa, the dividends that landowners receive on joint venture dairy farms vary depending on a number of factors, including the size of beneficiary groups, number of dairy animals, size of landholdings and the extent of government investment in fixed assets.

Large groups of beneficiaries often translate into limited benefits, whereas smaller beneficiary groups may receive enough dividends to invest in livestock, education and other productive assets and economic activities. The substantial capital investment required for setting up these capitalist dairy farms means that without government investment the model is unable to contribute to livelihoods.

Labourers compile meagre and unstable livelihoods from their jobs on the dairy farms (where they make minimum wage), informal work (particularly public works) and social grants. Many don’t have access to arable land or resources to maintain even homestead gardens. Access to permanent wage-labour contracts provides a lifeline to these households and in most cases become the largest income source. However, the many rural dependents they support means that daily reproduction of the household remains precarious, and opportunities for accumulation are limited.

Can we re-envision pathways of dairy development in India and South Africa?

Any attempt to re-envision pathways of dairy development must consider the particularities of the distinctive agrarian contexts and broader trajectories of capitalist development, which may shape outcomes differently. This doesn’t mean prescribing a structural path dependency. Rather, one needs to be acutely aware of these trajectories in order to be realistic about the political will required to shift barriers, if alternative pathways are deemed beneficial to promoting more robust livelihoods.

In South Africa, creating a sophisticated system of cooperative production, as India has done, would clearly require political will. However, this raises the hard but crucial question of whether these producers would be able to compete without being squeezed out by large capitalist farmers. Importantly, which model would create more jobs, given that South Africa does not have the same character of smallholdings as India does?

The South African government, rather than subdividing, has continued the trend of land consolidation in its land reform policies. It is perhaps not impossible to re-envision the dairy sector in South Africa, but it would take considerable reorienting of the agrarian structure, a task the government has yet to show any sign of undertaking.

India, on the other hand, is renowned for its cooperative dairy sector, but we are also seeing the emergence of larger dairy farms in India stimulated by the growth of private dairies. The overall milk processing capacity of the private sector has been developing at twice the rate of the cooperative sector in recent years, suggesting that the private sector may come to dominate the industry in future. Whether India manages to create space for differentiated producers, or whether these larger farms will squeeze smaller producers out, like in South Africa, remains to be seen.

Brittany Bunce is a PhD Candidate at the Institute for Poverty, Land and Agrarian Studies (PLAAS) at the University of the Western Cape in South Africa. Her research is funded by the National Research Foundation of South Africa and through a small grants fund from the Governing the Land-Water-Environment Nexus in Southern Africa project run by the ESRC STEPS Centre.