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Take decisive action to save dairy sector

By | February 15th 2010

Accusations and counter accusations surrounding New Kenya Co-operative Creameries and the current milk glut are not news.

As has been the case with every other saga in the Grand Coalition, the milk glut is treating Kenyans to a characteristic boardroom intrigue, with no light showing at the end of the tunnel.

The circus shows no signs of ending as the New KCC Board and Ministry of Co-operative Development have resorted to an ugly blame game.

Just when it seemed New KCC had shed off an infamous past and turned on a new leaf, the milk glut now threaten to derail its success story to the detriment of needy farmers.

While Mr Francis Mwangi, former New KCC boss has defended himself against allegations of mismanaging the institution, Co-operatives Minister Joseph Nyagah blames the glut on Mwangi and board chairman Mr Matu Wamae.

That boardroom comedies pitting Nyagah and the New KCC management will eat time and provide no solution to such a historic crisis is not in doubt.

The minister claims the management authorised the importation of dud equipment worth Sh73 million late last year, plunging the New KCC into crisis.

He accuses Mwangi of misusing company cars and money, supporting unqualified employees besides spending huge sums of money on public relations campaigns to exaggerate the firm’s performance.

Sudden diversion

Nyagah has also blamed the glut on unfair trade practices by private firms, which he claims imported huge amounts of milk powder to sabotage New KCC, as well as Treasury’s sudden diversion of Sh600 million intended for strategic milk reserves from his ministry.

He says 317,000 litres of milk had been lost or disposed of in the last month for lack of storage and processing capacity.

According to insiders, the company is currently holding a milk backlog of more than two million litres in its storage plants across the country.

The backlog, it is said, is a result of a drastic increase in production and constraints in processing capacity. The glut has led to a major drop in prices, causing huge losses to farmers.

But as Kenyans demand the truth, the Government should acknowledge it is duty-bound to tackle the mess, restore farmers’ confidence and return New KCC to sustainable profitability.

It took the taxpayer sizeable financial burden to return the giant milk processor to life after decades of sleaze and sloth. Thus, the Government cannot afford to slumber when huge resources invested in the firm go down the drain.

For anything positive to come by and to avoid a repeat of the current glut, New KCC should be de-linked from the Co-operatives ministry and placed under check by the Ministry of Agriculture.

A probe would be necessary to check possibility of a secret hand in New KCC woes. Kenya Anti-Corruption Commission (KACC) should conduct thorough investigation.

Our economy is 80 per cent agriculture-based and it would only be fair that every effort is put to harness all sub-sectors with this vital segment.

Dairy farmers are victims of mismanagement and poor planning. The glut, for instance, resulted from failure by the New KCC to do a proper projection of milk supplies and to address expansion of processing plants.

Last week’s scenes of farmers pouring their milk after being turned away by processors were saddening.

Not acceptable

The crisis revolves around capacity constraints, aging machinery, shrinking markets, internal wrangles and political interference. These are not acceptable in an emerging economy.

Already the local market, with about 30 milk processors, is saturated and the company has not been proactive in exploring export markets. The dairy sector woes are a result of lack of foresight and innovation to fully harness resources and manage market forces through capacity enhancement.

Regulation, reform and macroeconomic stability along with investors’ search for yield have opened new frontiers and must be taken advantage of through capacity and value addition.

The Government should transform these challenges into opportunities.

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