Ugandan dairy industry reels from Kenyan ban
SATURDAY DECEMBER 19 2020
Milk processing at a factory. The escalating trade dispute between Kenya and Uganda over milk exports, is just one of many facing all EAC partner states. PHOTO | FILE | NATION MEDIA GROUP
That Kenya is a lifeline for the dairy industry in Uganda is not in doubt.
Therefore, when Kenya slapped the Mbarara based Lato Milk with an import ban early in the year, the effects were devastating for farmers in the neighbouring state.
After several complaints by Kenyan farmers over the influx of Ugandan milk, which had seen a litre touch the historic low of Sh17, the government reacted by confiscating thousands of tonnes of milk from Uganda and consequently stopping imports.
The move did not only cause an uproar in Uganda, but also saw hundreds of workers in Pearl Dairies, the makers of Lato Milk sent on leave with production at the firm cut to bare minimum.
Uganda produces 2.6 billion litres of milk per annum. However, domestic demand stands at only 800 million litres, creating a huge surplus.
It is this surplus that finds its way to the Kenyan market, stepping up competition for local producers.
The attractiveness of Ugandan milk is helped by a lower production cost that stands at about Sh17 when compared with Kenya’s Sh26 on average per litre.
By the time Kenya banned Lato Milk from the market, it was retailing at about Sh40 for a half litre while the local brands traded at Sh45 on average, leaving processors with unmoving stocks as price sensitive consumers preferred the cheaper imported product.
The bone of contention has been whether Uganda has the capacity to produce all this surplus, with allegations that much of it comes from third party countries as powder milk then reconstituted in the neighbouring country before finding its way to Kenya.
Mr Stanley Ng’ombe, the chairperson of the Kenya Dairy Farmers Federation (KDFF), said imported milk has had a negative impact on farmers, driving down the volumes that they can afford to produce because of the low prices.
Mr Ng’ombe, whose organisation counts a membership of 26 dairy cooperatives scattered across the country, claims that most of the milk coming from Uganda is imported into that country as powder from Europe.
“We know that Uganda has no capacity to produce all this milk and there is a likelihood that most of it come from Europe before finding its way to Kenya,” he said.
Mr Moses Kiptanui, a large-scale dairy farmer in Cherangani and a three-time 3,000 metres steeplechase world champion, views imports as the bane of local farmers.
“In most cases you would find that imported milk is Sh10 cheaper when compared with our local commodity. This makes it difficult for it to compete in shops as consumers will tend to go for one with cheaper price,” said Mr Kiptanui.
Businessmen too prefer stocking the fast-moving Ugandan milk.
Mr Kiptanui, who ironically also owns a chain of supermarkets in Trans-Nzoia and Uasin Gishu counties, observed that as a businessman he makes good money in selling Ugandan milk, but as a farmer he loses out.
Kenya Dairy Board said that milk imports from Uganda have been regulated at the moment and that there is no more dumping of the produce in the country.
KDB managing director Margret Kibogy was adamant that they are no longer allowing milk firms from the region to bring in powder milk, which has been blamed to be the ones flooding the market after being reconstituted.
“We have tightened the surveillance and no longer have firms from Uganda dumping milk here as all the commodity coming in is well regulated,” said Ms Kibogy.
She said under the EAC Common Market Protocol, products from member states are allowed to move freely from one country to another, highlighting that there is no total ban on milk coming in from Uganda.
The measure put in place by the regulator saw the price of milk increase to Sh36 before going up again to Sh40 a litre, but this time on account of low production.
Ugandan processors rely heavily on Kenya as their main market on perception that the consumption of milk there is low. They also bank on Kenya’s free market which has less restrictions compared with other neighbouring states.
Tanzania, for instance slapped a heavy import duty of TSh2,000 per litre of milk from Uganda in 2017 making business prohibitively expensive, and which dairy players in Kampala believed was against the East African Common Market Protocol.
Lakeside Dairy has its main foreign market in Kenya and South Sudan and the firm was forced to scale down its business when Kenya stopped imports of milk from Uganda.
The company segmented its market supplying the domestic market with 10 percent while South Sudan and Kenya at 90 percent.
Lakeside, which has intake capacity of 150,000 litres a day, cut its operation to between 30-40 percent (45,000 to 60,000 litres) when Kenya stopped milk imports.
The closure of the market hit Ugandan farmers so hard that a litre of milk dropped to UGSh300 from a high of UGSh1,200.
A Business Daily survey in western Uganda revealed that a lot of farmers are investing heavily in dairy farming, having changed from keeping the traditional Ankole cows to rearing modern breeds.
Mr Safari Mugyenyi, a farmer in Mbarara said transformation in dairy sector started as early as 1960s when people started settling downs after the wars in Uganda, hence abandoning nomadism.
“Because of war, people could not settle and produce, and even so, they used to keep indigenous cows. Today, a lot of farmers have opted for exotic cows and our milk production has nearly tripled,” said Mr Mugyenyi, who is also a local chief.
The revolution in dairy farming has resulted in high production of milk against the low domestic and fragile foreign markets.
Mr Ephraim Rwehooda, a farmer in Sanga Town Council, Kiruhura District, is one of the cattle keepers that abandoned traditional long- horned cattle for exotic breeds. He milks 300 litres for sale every day.
“I cannot keep on my farm a cow that produces less than 10 litres,” said Mr Rwehooda.
Kiruhura alone produces 1.2 million litres of milk every day, which is about 60 per cent of milk produced in the entire country, according to Samuel Mugisha Katungunda, a farmer in the region.
Kiruhura, which is normally referred to as the first district because it is the home town of President Yoweri Museveni, has huge population of cows. Mr Museveni himself is a renowned dairy farmer.
Rev Katugunda, who is also a chief in Kiruhura said farmers changed to exotic breed in order to fight poverty and improve their livelihood.
“Traditionally, our cows were not for producing milk, but we had to change to exotic ones in order to eradicate poverty that was rampant here,” he said.
The closure of the local market has forced processors to lay off workers and sharply cut prices farmers get.
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