Dairy wars: Uganda, Ruto press reset key

Traders load milk onto a trucks in Katwe, Kampala in 2015. With an annual milk production of  three billion litres, Uganda senses an opportunity to be the region’s leading exporter of milk. PHOTOS/FILE

What you need to know:

  • The relationship between Uganda and Kenya as far as dairy trade is concerned has been uneasy, with the latter banning the former’s dairy products in 2019. Derrick Kiyonga writes that it is easy to see why Kenyan dairy farmers and authorities are so restless about their western neighbour. 

Idioms are apt in capturing President William Ruto’s conceptualisation of the regional dairy market. The Kenyan leader has been quick to view the glass as half full as opposed to half empty, reasoning recently that his country has “the market infrastructure to take over the market in our continent.”
Mr Ruto has also been keen not to cry over the proverbial spilt milk, describing the tiff over “Uganda … bringing cheaper milk” as a “small quarrel.”

“Uganda should bring cheaper milk because they can produce it much more cheaply. We should be adding value to our milk,” President Ruto declared recently.
The arithmetic has, however, been anything but straightforward. Such has been the uneasy relationship between Uganda and Kenya that the latter banned the former’s dairy products in 2019. It is easy to see why Kenyan dairy farmers and authorities are so restless about their western neighbour. 
Before the 2019 ban, Kenya accounted for 74 percent of Uganda’s milk exports, which totalled $131m (Shs496b) in 2018. This worked out to about $96m (Shs363b) as per the United Nations Comtrade, a database that aggregates detailed global annual and monthly trade statistics by product and trading partners for use by governments.

Kenya found itself looking over its shoulder after figures posted confirmed Uganda’s status as a regional milk juggernaut. According to the Uganda Bureau of Statistics’ (Ubos) dataset, by 2019, Uganda was exporting dairy products worth $135.9m (Shs514b). This tripled what the country earned in 2015 ($45m or Shs174b). Milk production also increased to 2.7 billion litres in 2019 from 2.08 billion litres in 2015. 
Five years prior, in 2010, Kenya—under the stewardship of then President Uhuru Kenyatta, whose family owns Brookside dairy—found it necessary to pull all the stops to protect its local market from the cheap imports of Ugandan milk. 

First, the technocrats in Nairobi suggested a 16 percent levy on Ugandan milk, whose sole purpose was to ensure Ugandan milk became expensive on the Kenyan market. President Kenyatta, however, rebuffed the proposal.  
A decade later, in 2020, when Kenyan authorities moved to ban Ugandan milk products, they particularly targeted Pearl Dairies, the producers of Lato Milk. Interestingly, the ban that they brought in didn’t affect Sammeer Agriculture Livestock Limited (SALL), the producers of Fresh Dairy milk and yoghurt.  
“They didn’t communicate officially when they banned our milk. We dropped by about 60 percent. The Kenyan Dairy Board has given us quotas: Just a few permits, but mostly to Brookside (Sammeer). But Brookside, the volumes are counted on our exports. The exports seemed to have remained because they were largely for Brookside,” Mr Samson Akankiza, the acting executive director of Uganda Dairy Development Authority (UDDA), said.  

Varied interests
With President Museveni as one of the biggest dairy farmers in Uganda, the dairy industry has always been ensnared in politics. In 2015, the political undertones went through the roof when Brookside, which has a semi-monopoly status in Kenya, bought 16,000 shares in SALL at $67 (Shs253,000) apiece in a Shs4b ($1.06m) deal. 
In 2006, the Ugandan government privatised Uganda Dairy Corporations, with SALL as the beneficiary. SALL is a joint venture company established by the Sameer Group of Kenya in conjunction with RJ Corp. of India after controversially shelling out $0.5m (Shs1.9b). 
When the lease looked set to expire in 2016, Brookside stepped in to take over the reins in 2015. Even back then, Mr Bright Rwamirama, the State minister for Animal Industry, didn’t like the deal and he made his feelings known. 

“I have not received an official communication, and I was not consulted but only got a briefing from the Ministry of Finance about the extension of their lease,” Mr Rwamirama noted, adding, “Brookside being a giant in Kenya is likely to create a monopoly, yet we don’t allow it. I don’t know whether we shall manage with the remaining small players.”
The mission by Brookside was very clear:  To make the regional dairy business their own.  
“We are already in Tanzania doing business. We have just commissioned a milk powder plant worth KShs96 billion in Ruio in Nairobi with a capacity to produce two million litres per day,” Mr John Gethi, Brookside Dairy general manager for milk procurement and extension services, said as they upgraded a plant in Kampala. 

Humble beginnings
Kenya’s domination of the dairy sector in the region can be traced to the colonial times when Lord Delamare—together with other groups of White farmers—joined arms to form Kenya Coop Creameries. That was in 1925. The sole purpose was to establish dominance of the regional dairy sector.   
“It is noteworthy that the settlers urged for restricted competition to ensure they monopolised the sector. They invested in creameries and commercial dairy herds. They also lobbied the state to enact enabling policy legislation and specifically, those that would facilitate their monopoly of the sector,” Rosemary Atieno and Karuti Kanyinga write in their paper titled “The revitalisation of Kenya cooperative creameries: The politics of policy reforms in the dairy sector in Kenya,” adding, “Domination of dairy farming by large-scale White settlers thus obtained until 1954 when the Swynnerton Plan introduced changes that allowed Africans to engage in commercial farming.”

Having settled in Kenya in 1903 and obtained land, which was approximately 100,000 acres on the floor of the Rift Valley within the precincts of present-day Naivasha, Delmare monopolistic policies negatively affected dairy farming in Uganda. 
“The Ugandan market in particular was a target of Delmare. He ensured the colonial policy frustrated the emergency of a competitor dairy industry in Uganda. A ban was placed on dairy production in Uganda, which wasn’t lifted until 1967 when the first dairy cows were imported in Uganda,” Mr Michael Baingana, a dairy farmer, revealed in a widely shared Twitter thread.   

Kenya and Uganda revive talks on milk
The ranching schemes in Uganda—according to Mr Baingana—were initiated, but to divert Ugandans into beef production. By law, the ranches were stocked with Boran cattle from Kenya. 
“Again, to protect Kenya’s dairy interests, it was for many years illegal to milk a cow in these ranches,” Mr Baingana wrote, adding, “At independence, Kenya’s White farmers were replaced by Africans, who inherited the state’s protection and unfortunately, the attitude of the settlers, and when Uganda lapsed into a 20-year political crisis, Kenya dairy and industry, in general, monopolised the Uganda market.”

Upward growth
There is unanimity that Uganda’s dairy sector grew in leaps and bounds, starting in the 1990s when Uganda depended rather heavily on imported milk. Dr Fredrick Muhumuza, a lecturer at Makerere University’s College of Business and Management Sciences, revealed that since 2010/2011, “milk production has grown quite rapidly at about seven percent annually, and the number of livestock has also grown.”
In a research paper titled “Coalition-driven initiatives in the Ugandan dairy sector: Elites, conflict, and bargaining, Prof Fred Muhumuza writes thus: “Milk production has increased most markedly in Uganda’s south-western region, where most of the country’s ruling elite come from. The ruling National Resistance Movement (NRM) party is regionally based and is primarily based on the Banyankole people from south-west Uganda, or, for the very important positions close to the President or in the army, from the President’s sub-tribe, the Bahima.”

President Museveni has been fairly open and forthright about his interest in cattle and dairy farming. Addressing Parliament in 2005, he said: “I always want you to come [to Rwakitura] and see what some of us did when we were still young people. We campaigned among those people who were nomads to make them settle down first, but later on when I was able—after I had come back from exile—I was able to introduce the selling of milk. Those people had been keeping cattle since time immemorial but they were never selling the milk, which is where the problem was.” 
Many big shots have since heeded Mr Museveni’s counsel. Former Works minister John Nasasira, for instance, is said to have introduced many dairy support schemes in his home district of Kazo in western Uganda. 
Mr Nasasira is believed to have educated the local people to exploit milk production better. 

President Museveni and former Kenya President Uhuru Kenyatta (behind Mr Museveni) tour Brookside dairy in Kenya in 2008. Mr Ruto’s view now is to end Brookside’s monopoly such that the Kenyan dairy sector focuses on invention and creativity. 

There were also early government initiatives to rehabilitate the dairy infrastructure in south-western Uganda. According to the Dairy Master Plan drafted in 1992, the Dairy Corporation had made a considerable investment in the establishment of new milk collection centres. All this investment has taken place in the south-western and western zones, often called the Mbarara milk shed area. 
These early initiatives mainly rehabilitated milk coolers and supplied generators for milk coolers. They also supplied generators for good measure.  Between 1987 and 1991, the government-owned Dairy Corporation got $10m (Shs38b) from African Development Bank and used it to establish 42 milk collection centres with (about 2,000-litre) milk coolers and generators in the south-western region. 

Love-hate affair
With its dairy farmers producing five billion litres of milk per annum, Kenya is still East Africa’s leading producer of milk. Since all the aforesaid litres are consumed locally, Uganda—which produces three billion litres—senses an opportunity to be the region’s leading exporter of milk.  
“We have a problem in Uganda with local consumption. Few people here drink milk,” Mr Akakinza told Saturday Monitor, adding, “We have done very well in buying coolers and also improving the value chain as we have attracted investors, but we are still reliant on the Kenyan market.”  

The importance of the Kenyan market was echoed by Mr Baingana. He wrote: “While Kenya now has a milk deficit and must import milk to cover it, Uganda has a big surplus and needs export markets badly. The Kenyan market is particularly attractive to Uganda because … it is near and … it’s big, and … Uganda needs to close the $200m (Shs757b) trade deficit it has with Kenya.” 
Indeed, the DDA figures show that by 2020, per capita consumption of milk stood at 63 litres and that is why a Kenyan ban on Ugandan milk products left dairy farmers in dire straits.   
“I am concerned about the inability to exercise the principle of reciprocity,” Ms Rebecca Kadaga, then Speaker of Parliament and now Minister of  East African Community Affairs, said, adding, “The Ugandan government has been slow on acting yet farmers are suffering and there is nothing they are doing about their suffering.” 

Protectionism?

There were many theories as to why Kenyans were rejecting Ugandan milk, with one being that surplus Ugandan milk was finding its way through illegal routes. Since it avoided tax, the theory further proffered, the milk would be quite cheap. This theory prompted Peter Munya, then Agriculture Cabinet Secretary, to “put on notice unscrupulous traders, who are illegally importing dairy products through the porous border points near Lodwar, Kacheliba and Ororo and others who are trading with illegal imports in Mombasa and Eastleigh.” 

Another theory is that Kenyans doubted Uganda had that much surplus to put on their market. They are alleged to have suspected that the powdered milk from Uganda that finds its way to the Kenyan market is actually imported from Europe.   
“We know that Uganda has no capacity to produce all this milk and there is a likelihood that most of it comes from Europe before finding its way to Kenya,” Mr Stanley Ng’ombe, then chairperson of the Kenya Dairy Farmers Federation (KDFF), said.

Mr Ruto’s view now is to end Brookside’s monopoly such that the Kenyan dairy sector focuses on invention and creativity—the two things he insists will enable them to take over the market on the continent; as opposed to seeing Uganda as a competitor.  
“First, we had 300 milk coolers that were sabotaged because of interest, but I have gone back to that. We have gone back to that programme. We are going to add another 660 milk coolers. We are going to add value to our milk,” he said, adding, “What we should be doing is that we should be adding value to milk from our farmers—like producing butter, powdered milk … go and sell it to the Democratic Republic of Congo, go and sell it to Central Africa, go and sell it to West Africa and then we get the cheaper milk from Uganda and we drink.” 

The Kenyan president proceeded to note: “…we are having a quarrel in Uganda because we have refused to take up our rightful place in our continent. We should have taken the next steps as we allow Uganda to take up the space as we move ahead.” 
While Mr Ruto’s policy will be tested in Kenya, it has—for obvious reasons—been hailed in Kampala as a win-win for both countries.   
“Uganda is the biggest importer of Kenyan goods and has been for decades, so the extra revenue Uganda earns selling in the Kenyan market will be spent buying more Kenyan goods,” Mr Baingana opined.

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