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New KCC wrangles poor show ahead of privatisation

By | February 16th 2010

By Luke Anami and John Njiraini

It is definitely one of the major success stories of President Kibaki’s administration.

But like the Free Primary Education programme now under threat following allegations of corruption by top officials at the Ministry of Education, New Kenya Co-operative Creameries (KCC) is in the news for the wrong reasons.

Just when it seemed like the company had shed off an infamous past and turned a new leaf, an unprecedented milk glut despite early warnings is threatening to derail its comeback.

A significant increase in milk production by farmers over the past two months has exposed New KCC challenges as key players engage in blame games while farmers feel the pain.

Only last week, the magnitude of the problem was evident when television footage showed thousands of litres of milk being poured after going bad in Ol Kalou, Nyandarua Central District.

Huge losses

The wastage, which came only days after New KCC reduced the amount paid to farmers for milk delivery from Sh24 to Sh21, exposed farmers to further losses, as the Government said it could not compensate them because the milk was not in New KCC premises.

The problem has assumed a political angle with MPs accusing Cooperative Minister Joseph Nyagah of igniting the mess after controversially refusing to renew the contract of former Managing Director Francis Mwangi. Last week, Mathira MP Ephrahim Maina told Nyagah to admit failure and resign.

The minister has vowed to stay put, maintaining that poor management decisions made by Mwangi like the importation of equipment worth Sh73 million and paying dividends instead of investing in capacity expansion are the cause of the problems.

But while milk was being poured, Kenyans in parts of North Eastern Province are starving. It has also emerged that the problem facing New KCC revolves around capacity constraints, aging machinery, dependence on a shrinking market, internal wrangles and political interference.

Besides the internal problems, New KCC is also being forced to shoulder the burden of increased numbers of farmers turning to the State-owned firm after being turned away by private processors.

Perishable Product

According to sources, the company is holding a milk backlog of more than two million litres across the country. This is posing a major headache for the management due to the fact that milk is a perishable product.

The backlog, according to the management, is a result of a drastic increase in production, and constraints in processing.

Acting Managing Director Milcah Mugo said the company was receiving about 680,000 litres of milk per day, against a processing capacity of 450,000 litres.

This has seen the company carry over more than 200,000 litres every day. "We are receiving milk that is beyond our capacity and we cannot turn away farmers like our competitors," she said last week.

But it has now emerged that some of the milk might have gone bad and is clogging its machines, making it impossible to process incoming milk.

Nyagah, who the Parliamentary Committee on Agriculture last week put on the spot due to the problems at the firm, said 320,000 litres have already been destroyed. "I have been made to understand that 320,000 litres have been destroyed," he said in a telephone interview.

He added that plans were underway to convert the backlog to powder milk and ensure New KCC reverts to normal processing.

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