Tanzania milk prices collapse after Brookside exit

Saturday May 2 2009

Brookside worker Lilian Njoki conducts a product quality test at a plant in Ruiru, Kenya. The firm says Tanzania does not have adequate supplies to feed an UHT plant. Photo/ANTHONY KAMAU

Brookside worker Lilian Njoki conducts a product quality test at a plant in Ruiru, Kenya. The firm says Tanzania does not have adequate supplies to feed an UHT plant. Photo/ANTHONY KAMAU 

By CATHERINE RIUNGU

Farmers in northern Tanzania have appealed to the government to allow a Kenyan firm to resume milk collection.

The appeal comes in the wake of a fall in prices of raw milk from Tsh400 ($0.3) to Tsh150 ($0.1) a litre, and rising levels of unprocessed produce.

Tanzania slapped a ban on the region’s largest milk processor, Brookside, six months ago, stopping it from collecting the commodity and processing it in Kenya.

It directed that all milk produced in Tanzania must be processed locally.

Authorities accused Brookside of contravening the 2004 agreement stipulating that it would rehabilitate the defunct state-owned Tanzania Dairies — on which it spent about Tsh2 billion to revamp — and put up an ultra heat treated milk processing plant.

An Arusha-based group, Kisube Women Dairy Farmers, wants Prime Minister Mizengo Pinda “to visit them to see how they have been robbed of their livelihood as a result of the government’s decision to ban the Kenyan firm from buying raw milk from them”.

“It was hard then and it is still hard for us to come to terms with the death of the only market; caused by our own government,” complained Devota Tumainiel Marandu, a leader of the group.

At the time of the closure in November 2008, Brookside was collecting 6,000 litres of milk — going to 13,500 in the peak season — from 2,000 farmers. The farmers earned about Tsh2.9 million ($2,230) daily from this milk.

This was a big improvement from the 1,000 litres that Brookside was collecting daily in 2004, but far below the 60,000 litres required for a UHT facility, whose set up cost is estimated at $100 million.

Marandu said the decision has pushed the price of raw milk to Tsh150 ($0.8) a litre, down from Tsh400 ($2) a litre.

Also affected is Tanga Fresh, which used to supply excess milk amounting to 30,000 litres a week to Brookside. “The supply line has been cut,” said Al Noor Hussein, spokesman of Tanga Fresh.

In a plea to the Tanzania Revenue Authority, Brookside says the country does not have adequate milk supplies to feed an UHT plant and has been working to build up the quantities; a feat it hoped would be achieved by the end of this year.

Not only is this unlikely to be achieved as the processor and the government seek a middle ground, but farmers have also been sucked into the feud and want the government to end the stalemate.

Available statistics indicate that only 10 per cent of raw milk produced in Tanzania (1.7bn litres) a year, is processed.

Tanzania has nearly 19 million head of cattle, among the highest in Africa.

The dairy cattle population is estimated at 650,000; over 60 per cent of which is in the northern regions of Arusha, Kilimanjaro, Tanga.

Livestock production accounts for 6.1 per cent of the GDP and 30 per cent of agricultural GDP.

The dairy sector accounts for 30 per cent of livestock production. Tanzania’s current GDP is Tsh 22 trillion.

The industry is bogged down by lack of investors and market for locally processed milk. Processing plants are expensive to establish.

The situation is compounded by exorbitant production costs — much higher than in neighbouring Kenya — especially power, water and high taxation.

The situation is likely to worsen because of a ban on plastic bags as milk containers.

Tanzania has low milk consumption; slightly less than 40 litres per person per year compared to 90 litres in Kenya.

Both countries, though, are below the 210 litres per year recommended by the World Health Organisation.

Brookside says the decision by Tanzania contravenes Section 178 of the East African Community Customs Management Act 2004, noting that outward processing is open to any person or business that applies for it, provided that conditions are adhered to and that total or partial relief from payment of duty will be granted where processing of the goods were a product of the partner state.

Milk consumption in Tanzania is low despite the government’s plan to raise it, starting with the school feeding programme that has been on the cards for the past 10 years.

Tanzania, Kenya and Uganda are members of the East African Community Customs Union (EAC-CU) under which internal tariffs of goods originating within member states have gradually been phased out since 2005.

Brookside had invested substantially in plant and machinery, and was in the process of improving the value chain in milk collection and distribution systems throughout the northern zone.

Some Tsh4 million ($3076) was put into setting up four milk collection and cooling centres mainly for individual smallholder farmers in Marangu, Machame, Moshi and Sanya Juu, with a long-term minimum daily storage capacity of 40,000 litres.

Each cooling centre would directly employ not less than 20 people, meaning about 60 locals would be hired. Brookside also supported dairy farmers through credit extension for animal feed and medicine.

Also in the balance were plans to distribute aluminium milk cans to women groups in northern Tanzania on credit to improve milk quality through proper handling.

Before the coming of Brookside, women used to walk nearly 14km carrying buckets of 20 litres of milk on their heads all the way to Fuka open air market.

Even so, they were not guaranteed of buyers. Now they are back to the old routine.

Dr Diodorus Kamala, Tanzania’s minister for EAC, set off the saga by accusing Brookside of turning the Arusha plant into a collection centre for raw milk to be processed in Nairobi and a distribution point for finished products.