Pearl Dairy dilemma: Farmers stare at a bleak future

Tuesday April 7 2020

A milk vendor sieves milk into another can at

A milk vendor sieves milk into another can at the quality control office at Abesingana in Mbarara district. Photo by Rachel Mabala 

By Paul Murungi

With a grazing stick firmly on the ground to support his waist, George Rutaboorwa takes in the expanse with a wide gaze of his dairy farm.

His gaze is directly fixed on young heifers feeding off pastures close to where he tells me about his dairy escapades.

Further across in the hills of Rwensheko village in Sanga Sub-county, Kiruhura District, large expanses of land are paddocked with herd of cattle grazing.

However, just like Rutaboorwa, many dairy farmers are wary of what seems to be an uncertain future for their major source of livelihood.

The coronavirus scare has hit Rutaboorwa and other farmers hard, but the beating seems much bigger and deeper.

Until last December, Rutaboorwa who is the chairperson of Rwensheko Dairy Cooperative Society, it had been bliss with members of the society earning in the excess of Sh30m per month.

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This had been largely pooled from milk supplies to Pearl Dairy, which produces Lato milk in Biharwe, Mbarara District.

Rutaboorwa, had been earning up to Shs4m through milk supplies of between 200 and 250 litres to Pearl Dairy per day at a factory price of between Shs600 and Shs1,000 per litre.

However, the unexpected happened: It is almost three months since Pearl Dairy suspended and closed much of its production lines.

Since then, Rutaboorwa is among the more than 10,000 dairy farmers affected with nowhere to sell milk in the south western districts of Ntungamo, Kabale, Lyantonde, Mubende, Mbarara, Kiruhura, Bushenyi, Rukungiri and Sheema.

The domestic market price largely dictated by milk vendors has dipped to Shs200 from an average of Shs600.

“The suspension of some of Pearl Dairy’s production lines has affected us,” he says, “I don’t have where to put the milk. In the last days, we have been selling milk at Shs 200 or 250 per litre to milk vendors.”

So, what is the alternative?
In the immediate, Rutaboorwa has been fighting with a plan that will see him sell off some of the cattle to remain with a number that he can easily maintain.

This plan or even worse, has been running in the heads of many farmers across the south western cattle corridor. According to Rutaboorwa, there is just too much milk without market that some “farmers have to pour lots of it”.

Similarly, away from Rutaboorwa’s farm Robert Kaijustsya, is lost for words.

Kaijustsya is the programmes manager at Lake Mburo Dairy Farmers Cooperative Society with more than 1,000 members in Kanyaryeru village, Kanyaryeru Sub-county, Kiruhura district.

The society had been supplying milk to Pearl Dairies. But that is now in suspense and the group, according to Kaijustsya, has to rely on milk vendors who “are overwhelmed by the supply yet demand is low”.

“We depend on the same line of income. We can’t pay back loans. Our cattle are dying because we don’t have money to buy acaricides,” he says and notes that for now, there has not been any alternative market. But they are looking at starting a processing line to turn the milk into yoghurt, cheese and other milk products on a small scale.

What is the problem?
Pearl Dairy has been depending largely on the export market in East Africa since it started production in 2013. According to Devendra Seth, its managing director, the company served the export market at 80 per cent while the domestic market was at 20 per cent.

The company had a daily production of 800,000 litres of milk per day, while buying 600,000 litres of milk per day from more than 10,000 dairy farmers mainly in organised cooperatives across the south western region.

However, the cold trade relations between Uganda, and other East African countries including Rwanda, Kenya and Tanzania is what Seth says has affected the company.

The problem largely lies with Kenya and more than a year of the border closure in Rwanda, which has locked the company’s milk exports out of those countries.

Beyond this has been the issue of high tariffs in Tanzania and the unreliable domestic market.

According to Seth, Uganda has a very low consumption rate for milk with an average annual consumption standing at 62 litres per person which is very low compared to annual milk production of 6.5 billion litres.

The low consumption, he says, had forced the company to diversify and venture into foreign markets where the demand and possible returns are high while maintaining a low supply in the domestic market because of low turnover rate.

However, the Kenyan factor seems to be a bigger blow to the company as Seth indicates that whereas other markets had a contribution, Kenya’s was bigger and reliable.

Apart from finding a reliable export market, the onset of the coronavirus pandemic is cause for worry for Seth, who says has affected the domestic market as well.

The shutdown has also affected more than 2,000 workers who were directly employed at the factory with the company only maintaining 76 workers since the closure.

Background
Pearl Dairy woes started last year in December when Kenyan authorities seized more than 19 trucks of powdered milk on claims of smuggling contraband milk into Kenya.

Last Month, Daily Monitor reported Kenya’s Agriculture cabinet secretary Peter Munya had described Uganda’s milk as “cheap milk putting Kenyan dairy farmers at a disadvantage.”

Kenya’s cabinet resolution last November to impose a 16 per cent levy was quashed by Uhuru Kenyatta, who argued it would only apply to milk imports from outside East Africa.

Kenya has also challenged Uganda’s capacity to produce enough milk for both local and export markets.

A Munya-led delegation had at the close of last year visited Uganda to ascertain whether the milk exported to Kenya was produced in Uganda.

Pearl Dairy recently told Daily Monitor, the seizures had hugely impacted the company with an initial loss of about Shs1.1b in the initial days of January.

The blockade against Uganda’s milk had been going on and efforts to negotiate a way out had fallen flat even before the coronavirus incident.

Efforts by Trade Minister Amelia Kyambadde and Foreign Affairs State Minister Hillary Okello Oryem to negotiate the blockade have not yielded results.

A February protest note to the Kenya High Commission to explain the hostility, especially towards Lato Milk has not been responded to.

However, the company, according to Seth is now seeking to venture into new markets such as DR Congo but the corona pandemic and the high cost of transport is still a worry for Pearl Dairy.

“The cost of venturing into other foreign markets is possible but this may take time since there’s need to do market research. The low shelf life for milk is an obstacle for the company to venture into distant markets,” he says.

Apart from Pearl Dairy, Lakeside Dairies also operating in western Uganda has since had its milk blocked by Kenyan authorities and is facing a tough time.

The company has since closed it UHT production line and is currently only running the yoghurt line.

Expert’s view
Prof Augustus Nuwagaba, an economist, says the meaning of the East African common market is being lost where each country wants to impose economic protectionist policies against each other for their internal markets.

He says a trade bloc means each country being able to contribute goods in the common market. He warns there might a repeat of the 1997 collapse.

He mentions that lack of comparative advantage is hurting East African economies where most produce similar goods for the same market.

“If a country sneezes, other countries must catch cold. But that is not happening in East Africa.”

He describes Kenya’s acts as asymmetrical where it is trying to play a dominant role in the common market by exporting its products to other countries but blocks others from accessing its market.

Seth says there is need for a clear confirmation from the East Community members why there’s no free movement of good across the markets in the region.

Pearl dairy’s troubles
Pearl Dairy’s woes started last year in December when Kenyan authorities seized more than 19 trucks of powdered milk on claims of smuggling contraband milk into Kenya.
Last Month, Daily Monitor reported Kenya’s Agriculture cabinet secretary Peter Munya described Uganda’s milk as “cheap milk putting Kenyan dairy farmers at a disadvantage.” Kenya’s cabinet resolution last November to impose a 16 per cent levy was quashed by Uhuru Kenyatta, who argued it would apply to milk imports from outside East Africa.

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