NAIROBI, Kenya, Mar 12 – Farmers who lost money when the then Kenya Cooperative Creameries (KCC) collapsed should be the initial shareholders when the government finally privatises the new KCC, a government official has proposed.
Cooperative Minister Joseph Nyagah said on Thursday that he would be appealing to the Treasury to give farmers priority in owning the company when it reverts to them.
“The challenge to the Treasury would be how to recognise farmers who lost money but they are still in the dairy sector. When it comes to its privatisation, I would hope that we can find a way to ensure that those farmers be the first to buy the shares so that its membership is retained in the farming community,” he said.
The government plans to return the running of new KCC, which was revived in 2003 back to the farmers once it has shown a proven profitability track record.
“We are consulting with other relevant government departments on the process of divestiture which is currently underway for state-owned institutions,” the minister disclosed.
He challenged the company to invest in innovative value – adding initiatives that would revive demand for milk and related products.
Mr Nyagah spoke when the company released its financial results for the year ended June 2008 where it announced a 30 percent increase in its profit before tax to Sh500 million.
New KCC Managing Director Francis Mwangi said despite the temporary disruptions to their milk collection network due to the post poll violence and the impact of prolonged drought, they still managed to collect and process 107 million litres of raw milk during the year under review.
“This performance was mainly fuelled by increased focus on cost reduction and a strong top line growth. During the year, our sales turnover grew from Sh4.4 billion to Sh5.6 billion,” he boasted on how they weathered the storm.
Before its collapse in the 1990s, KCC used to process up to 1.2 million litres of milk per day.
Mr Mwangi said they had commissioned a computerisation project that would see their systems integrated by the end of the 2008/2009 financial year.
“Upon completion, this project will see the company save on costs, increase operational efficiency and enhance decision-making processes at all levels of operations,” Mwangi said.
He added that they would also be modernising and expanding their production facilities to benchmark them with the industry’s best practises.
On his part Chairman Matu Wamae they had raised their producer price from Sh20 to Sh22 per litre of milk to help cushion farmers from the rising inflation and other costs.
However, he appealed to the ministry to help raise awareness on the adverse effects of milk hawking on the producers
He said they are currently installing cooling facilities across the country as a way of getting closer to the producers.
“We have identified an immense gap in the accessibility of farmers to the market and so we have introduced strategic collection points in all milk producing regions for easier access to them,” he added.
Mr Wamae expressed confidence that although demand for milk still outstrips supply, New KCC was able to retain its export market and would continue to explore and venture into new markets such as Southern Sudan.
The company exports to countries within the COMESA region and several Middle Eastern countries.