Dispute threatens privatisation of Kenyan dairy firm

Tuesday December 13 2016

New KCC workers package butter for sale at Kitale factory. PHOTO | FILE

Kenya has stopped the planned sale of the state-run milk processing firm New Kenya Cooperative Creameries Ltd, following an ownership dispute with dairy farmers.

The Privatisation Commission said it will now review the ownership position of the firm before proceeding with the sale.

“There is a dispute with the farmers with regard to the ownership of the company. We are going to identify the actual position in terms of ownership, because everybody is claiming ownership of this company,” said Henry Obwocha, the commission’s chairman.

The government saved New KCC from the brink of insolvency in 2003 at a cost of Ksh547 million ($5.47 million) and earmarked it for privatisation to improve governance and efficiency.

Now, dairy farmers, through the Kenya Dairy Farmers Federation (KDFF), argue that the government cannot claim ownership of the firm because their assets are worth more than the $5.47 million paid out to a few individuals who had taken over the firm.

First priority


They say New KCC should not be privatised, as it acts a price stabiliser in the market and they should be given the first priority to buy it in the event of a sale.

KCC Ltd, founded in 1925, collapsed in 1999 due to intense competition and operational inefficiencies that resulted in delayed payments for milk deliveries, eroding farmers’ confidence. It was then bought by powerful individuals in the then Kanu regime, who renamed it KCC 2000 Ltd.

In 2003, the Mwai Kibaki administration revived it and paid off the investors. New KCC was registered on June 25, 2003. The revival of the company was widely seen as a positive intervention for the dairy sector, resulting in its resurgence.

It is understood that the government is now looking to offload about 80 per cent of its shareholding in the company to a strategic investor with the balance being held for oversight reasons.

Dairy farmers have been demanding first priority in buying New KCC, arguing the defunct KCC owed them more than Ksh1.2 billion ($12 million). They want to buy shares through a private placement.