New KCC shops for steady hands

By John Njiraini

After two failed attempts, milk processor New KCC has yet again embarked on a process to recruit a new managing director 14 months after the position fell vacant.

Unlike past attempts, early last year, that exposed glaring sourness between the company's board and the Minister for Cooperatives Joe Nyagah, this time round, stakeholders are hoping the process would be less controversial and divisive and that New KCC could get a substantive boss by end of next month or early March.

"The board is eager to fast track the appointment of a new chief after the application period expires on January 31," Seno Nyakenyanya, PS in the Ministry of Cooperatives told Financial Journal.

He said that taking into account the rising status and importance of the dairy sector in the country’s economy and the critical role New KCC is expected to play, the board is determined to ensure the process reaches a conclusion without sideshows.

There are good reasons for optimism that the position might finally be filled. First, the process is being undertaken at a time when New KCC is experiencing some sense of stability.

Compared to last year when the company tried to recruit a new managing director at the height of controversy generated by the departure of former boss Francis Mwangi in unclear circumstances, the latest attempt comes at a time when New KCC is enjoying some relative management stability under Milcah Mugo, who has been the acting managing director for the past 14 months.

Secondly, New KCC is back on a strong footing after surviving the threats of a milk glut early last year that saw the company suffer the pain of milk overproduction and found itself selling processed milk at throwaway prices that also included a buy-one-packet-get-one-free offer.

As a result of the glut, the company recorded a loss of Sh300 million in just under three months.

Foot-and-mouth disease

The company has also survived a breakout of a foot-and-mouth disease in the third quarter of last year that saw milk production plummet substantially from a high of 650,000 litres a day in February to about 250,000 litres per day in August.

Despite the challenges, New KCC bounced back to record a cumulative profit before tax of Sh80 million for the year ended June 2010.

Most important, however, the recruitment comes at a time when daily farmers are generally a happy lot. This time last year, as the gravity of milk overproduction was unfolding, New KCC was forced to reduce payment to farmers for milk delivered to a low of Sh18 per litre.

Today, farmers are earning between Sh30 and Sh35 per litre depending on the delivered quantity, a significant increase over a one-year period.

"Milk prices are at their peak and farmers are happy. New KCC is paying us Sh25 per litre plus quantity bonuses, meaning that most farmers are earning up to Sh35 per litre," said Stanley Kangombe, a milk farmer and transporter in Nyeri.

Then there is the other critical factor. The recruitment process is bound to take place under the stewardship of a new board chairman after the tenure of Matu Wamae expired after he served two-three years term as stipulated by law. This, however, still depends on whether or not President Kibaki chooses to renew Matu’s contract or not.

During the first recruitment process that was contracted to audit firm Deloitte, the process was bungled up after the New KCC board under the directions of Wamae decided to influence the process before eventually terminating it.

Though the board decided to carry out the recruitment, Nyagah refused to appoint from the three shortlisted names, arguing they did not meet the requirements.

According to observers, how the board handles the current process will determine the future of New KCC in the wake of increasing competition in the dairy sector and plans to privatise the company. In recent months, bitter rival milk processor Brookside has been engaging in an aggressive campaign to recruit more farmers to ensure a stable supply of milk considering a red alert by the meteorological department of a possible drought.

Market share

Other upcoming processors like Githunguri Dairy and Limuru Dairy are also engaging in strategies to expand their penetration and grow their market share.

Though Mugo has been steadfast in ensuring farmers delivering milk to New KCC do not defect by paying them impressive rates and offering them incentives like helping pay school fees, the fact that she remains in an acting capacity has made it difficult to craft long term strategies for the company.

Mugo is hugely credited for cleaning the endemic rot in the company. Under her stewardship, many staff who had transformed New KCC into a cash cow have been sacked and others arraigned in court.

The milk processor has also developed a more transparent and accountable sales and distribution channel while the process to increase the remuneration of staff is ongoing.