On June 23, 2023, Brookside Dairy Uganda sent home at least 200 workers saying it has been forced to cut production by 75 percent as it has been unable to export the milk produced since March.
Kenya is Uganda’s largest market in East Africa and Brookside says Nairobi has declined its 116 export permit applications.
This development, which is blamed on the supremacy battle between the regime of President William Ruto and his predecessor Uhuru Kenyatta, whose family owns Brookside, has left Ugandan milk farmers and processors on the brink of economic ruin, and Kampala is now aggressively looking for markets farther outside the region.
An earlier milk export deal brokered by President Yoweri Museveni with Algeria seems to have fallen through, and on Wednesday this week, Museveni asked visiting Senegal President Macky Sall to allow Ugandan milk into his country.
President Sall pledged to buy milk powder from Kampala, giving a glimmer of hope to the local producers.
“In Senegal, we import things from New Zealand and Brazil. We import powdered milk from these countries. We need to see how we can come and buy your milk,” the President said at State House Entebbe, where he was gifted samples of Uganda’s milk by his host.
Brookside Dairy Uganda enjoyed brisk business in the days Mr Kenyatta was president of Kenya. And now the tables have turned.
Pearl Dairy, which now enjoys easier export access in Kenya, was in a worse predicament in 2020, when it had to lay off about 1,500 workers after being blocked from exporting milk and milk products to Kenya.
Nairobi argued then that it was acting to block smuggled milk from the local market. Pearl Dairy and authorities in Uganda denied those claims.
In the past three years, Kenya has banned, allowed, and banned again Ugandan milk from accessing its market. Each time, a different reason has been given.
Yet the Kenyan politics punctuates it all. Dr Ruto and Mr Uhuru Kenyatta fell out in their second term and ended up on different sides in last year’s elections, which Dr Ruto won.
Ugandans found themselves roped into this rivalry, with a majority seeming to support Ruto.
Brookside Dairy Uganda, a subsidiary of Brookside Dairies Ltd established in 1993 by the Kenyatta family, is now struggling to stay in business after losing 75 percent sales since last October.
The current administration has blocked Brookside Uganda products in the Kenyan market and Benson Mwangi, its general manager, says the company has been forced to reduce their liquid milk processing capacity to below 25 percent and close the powdered milk production line.
“We have applied for a total of 116 permits since March 2023 but they have not been issued,” he told The EastAfrican on July 18.
At a recent rally in Eldoret, Kenya’s Deputy President Rigathi Gachagua blamed a “monopoly by one family” for the challenges in the milk sector.
“One person bought all milk companies in the country and was also involved in the importation of powdered milk from foreign countries,” said Mr Gachagua.
Brookside’s competitors, mainly Pearl Dairy, have been allowed to export to Kenya. In fact Pearl Dairy is expanding. It recently applied for a $35 million loan from the International Finance Corporation, the private investment arm of the World Bank, to support its ambitious plan.
Brookside, on the other hand, has been forced to shelve a $10.3 million planned investment to upgrade equipment for market expansion.
Meanwhile, the price of milk in Uganda dropped from Ush1,500 ($0.41) per litre in February to Ush400 ($0.11) currently, leaving farmers counting huge losses. The average cost of producing a litre of milk in Uganda is Ush670 ($0.18), according to SNV, a group of milk processing experts.
Mr Mwangi complained of an ongoing smear campaign by political activists in Kenya, who allege that Brookside Uganda imports powdered milk from Europe, before exporting it to Kenya.
Some politicians allied to Dr Ruto have celebrated the denial of permits, which they think will reduce the Kenyattas fortunes in the dairy trade.
Nandi Senator Samson Cherargei celebrated, saying in a tweet: “The era of milk monopoly of the market by Brookside Co. Ltd is now over. As farmers, this is sweet music to our ears. They had killed many milk cooperative societies in our country.”
In earlier bans, the Kenya Dairy Board often cited certain quality inspection requirements.
Now they do not even come. Mwangi said the last inspection was two years ago.
“They went to all departments, all processors. They came to Brookside processing plant in Bugolobi near Kampala and I addressed them. I took them on a tour of our factory, and they saw milk being processed, being offloaded. I believe they were satisfied. After that we resumed exportation of the milk to Kenya,” Mwangi told The EastAfrican, arguing that the war on milk is not about capacity or where it is produced but a political battle.
Uganda has 160 processors, up from three about two decades ago.
According to Dairy Development Authority, Uganda’s dairy sector regulator, the country’s raw milk production has increased from 200 million litres in 2000 to 3.2 billion litres today and the unending trade war with its leading trade partner is affecting the profitability of the dairy sector.
Uganda’s private sector says that if Kampala were to retaliate with similar sanctions against Kenyan goods, which Uganda’s Cabinet proposed but President Museveni vetoed, the situation would have been bad.
Humphrey Nzeyi, chairman of the Private Sector Foundation Uganda, said the ad hoc decision taken by the Ruto administration to block Ugandan milk is against the East African Community Market and tilts the playing field in favour of Kenya.
“On the flip side, Kenya products such palm oil, sorghum, vegetables, legumes, sugar, and confectionary, which Uganda also produces, have unlimited access to the Uganda market,” said Nzeyi.
Jane Nalunga, executive director of the Southern and Eastern Africa Trade Information and Negotiations Institute Uganda, said EAC policy makers need to facilitate the dairy sector development, describing it as cash cow.
“Kenya is blocking Ugandan milk, yet it went ahead to sign EAC-European Union Economic Partnership Agreement that will allow powdered milk from the EU access into Kenya. This is a contradiction,” Ms Nalunga said.
The dairy sector in Uganda supports more than five million people and employs more than 100,000. It is estimated that the 2019 blockage of Ugandan milk resulted in loss of 40,000 jobs and incomes for 3.8 million households.
According to Uganda’s Agriculture minister Frank Tumwebaze, the Cabinet tasked the minister for East African Community Affairs to push for negotiations between Kenya and Uganda regarding the milk trade. But Rebecca Kadaga has not made any headway.
Sounding resigned, Trade minister Francis Mwebesa said Kampala hopes Kenya will be reasonable and allow in the milk.
“If someone rejects your product, do you force him? No. You look for another buyer,” the minister said.
Uganda has been on a market-hunting spree for its milk, featuring Southern, Central and even Northern Africa, but has not got consumers for the 3.2 billion litres produced annually.
In March this year, the month Kenya announced the ban on Ugandan milk, President Museveni visited Algeria and on top of his discussions with his host President Abdelmadjid Tebboune was the sale of farm produce from Uganda, including dairy products.
Minister Tumwebaze, after the visit, said the move would provide Ugandan farmers and milk processors an alternative market.
The Algerian connection
“They will buy our powdered milk, coffee and bananas. We will in turn buy animal drugs and others. To our farmers, worry no more about markets for our dairy products; the only condition is to perfect our value chain standards, which have so far been approved,” Mr Tumwebaze said.
The dairy products were supposed to be shipped by road from Uganda via Mombasa, where they would be loaded on a ship to the Suez Canal and onward to Algeria by air. Uganda Airlines and Algiers Air started working on a co-operation agreement to transport each other’s cargo including dairy products.
Algeria’s strategic location in the Maghreb and its closeness to France and United Arab Emirates with high consumptive capacity offers more legroom for Ugandan processors to penetrate these new markets, according to the DDA.
“Once a product hits the Algerian market, potentially the whole of North Africa will access it. Algeria is a gateway to/from Europe. The country shares a border with France so it’s easy in terms of logistics to source products from them,”said Samson Akankiza, DDA acting executive director.
At home, he said processors were technically prepared to meet the standards, through sample preparation and management. Algerian experts flew in to check quality standards and the regulatory framework.
But the deal has largely remained on paper. The two countries were expected to sign commercial agreements to open doors for the market in June, but to date, nothing has happened.