Business
How Uganda Milk & Sugar Control Kenya’s Economy
Kenyans have never believed that Uganda can produce anything worth in surplus to sell to the neighbouring markets.
It should be remembered that since the late 1960’s, Uganda slid into lengthy intermittent civil wars and this gave a chance to Kenya that embarked on growing its economy and turning into a leading producer of all forms of products that the region needed.
However, Uganda has been steadily working around its internal economics for example in western region, farmers started investing heavily in dairy farming and changed from keeping local longhorn Ankole cattle to rearing modern breeds.
People from western Uganda started settling down after the wars in Uganda, hence abandoning nomadism. The revolution in dairy farming has resulted in high production of milk against the low domestic and fragile foreign markets.
According to statistics, Uganda today produces 2.6 billion litres of milk per annum. However, domestic demand stands at only 800 million litres, creating a huge surplus.
Uganda started exploring neighbouring markets like Kenya and found a huge gap and noticed that it would easily penetrate Kenya by selling at lower price compared to Kenyan milk.
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.
In the past few years, Ugandan Milk flooded Kenya and swiftly became the best choice and much sought after milk.
It is said that Ugandan milk was retailing at about KSh40 for a half litre while the Kenyan local brands traded at Sh45 on average, leaving processors with unmoving stocks as price sensitive consumers preferred the cheaper imported product.
Kenya government was so devastated by the manner in which Uganda which they despised for decades would incidentally disrupt the market.
People of western Uganda started settling down after the wars in Uganda, hence abandoning nomadism after the lengthy civil wars
The chairperson of the Kenya Dairy Farmers Federation (KDFF) Stanley Ng’ombe, said Ugandan milk has had a negative impact on Kenyan farmers, driving down the volumes that they can afford to produce because of the low prices.
Kenya government has been wondering whether Uganda has the capacity to produce this entire 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.
Kenya government 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 likelihood that most of it comes from Europe before finding its way to Kenya,” said Stanley Ng’ombe who heads 26 dairy cooperatives scattered across Kenya.
After several complaints by Kenyan farmers over the influx of Ugandan milk, which had seen a litre touch the historic low of KSh17, the government reacted by confiscating thousands of tonnes of milk from Uganda and consequently stopping imports.
As if that was not enough, Kenya slapped the Mbarara based Lato Milk with an import ban early in the year, the effects have been devastating for farmers in Uganda. Hundreds of workers in Pearl Dairies, the makers of Lato Milk sent on leave with production at the firm cut to bare minimum.
Kenya Dairy Board says that milk imports from Uganda have been regulated at the moment and that there is no more dumping of the produce in the country.
Margret Kibogy Kenya Dairy Board Managing Director says, “We have tightened the surveillance and no longer have firms from Uganda dumping milk here as all the commodity coming in is well regulated.”
However, under the EAC Common Market Protocol, products from member states are allowed to move freely from one country to another.
The measure put in place by the regulator saw the price of milk increase to KSh36 before going up again to KSh40 a litre, but this time on account of low production.
Kenya and Uganda set up a joint verification team to assess the status of Ugandan sugar.
Uganda Sugar Diplomacy In Kenya
After several years of back and forth arguments and disagreements on whether Uganda had the capacity to produce excess sugar to flood Kenya, the battle was won by Uganda.
Since 2015, Uganda and Kenya nearly severed ties because Kenya did not believe that its neighbour had the capacity to export sugar.
With this state of contention, the two countries decided to assemble a verification team to independently investigate Uganda’s sugar production capacity.
The team visited 11 sugar factories in Uganda. According to the findings, Uganda’s Surplus Sugar for the year 2014/15 was 36,000MT on average.
Kenya later admitted that Uganda, its aggressive neighbour has the muscle to export large volumes of sugar to countries in the region.
