More questions than answers on duty-free milk powder imports

Even before the storm created by duty free maize imports has settled, more dust is blowing over milk powder brought into the country to reportedly cut the price of a 500ml packet by Sh10.

Details remain sketchy on how much of the 9,000 tonnes the government allowed in duty free in mid May has landed, at what cost and who shared what proportion among milk processors. It also remains unclear whether any milk has landed in the first place.

A consumer lobby is wondering what the powder is supposed to achieve, given that the country has gone past the dry spell, with supplies to processors almost normalising. Cofec says the timing is suspect.

There is even a bigger concern that milk processors have been given a free hand to import the subsidised milk powder and choose the margins they will reduce consumer prices by, hence minting millions of shillings from tax payers in another essential food subsidy programme by the government.

Agriculture Cabinet Secretary Willy Bett told the Sunday Nation that the duty free import incentive had played a major role in the recent fall of milk prices, but he could not confirm how much had been brought in, at what cost and how the Sh10 per packet price reduction was arrived at.

“We were not involved in the import; we only exempted duty. It is individual processors that were allowed to import, so I don’t really know what the landing cost per tonne was. The price reduction may also have resulted from traders lowering prices when they realised that cheaper powder was coming,” Mr Bett said.

In a new twist, the Kenya Dairy Board, which is responsible for allocating the duty free milk to processors, now says the powder will land by the end of this month. 

Board managing director Margaret Rugut Kibogy said she was unable to state the landed cost of the powdered milk and attributed the price reduction to an earlier intervention where some Sh500 million was used to purchase the product.

“In 2015, the government amended the Strategic Food Reserve Trust Fund to include milk powder as a strategic food commodity. Following this, the government in 2016 released Sh500 million to New KCC company to purchase surplus milk during the first half of the year in order to build milk powder reserves. The milk powder reserves, amounting to 1,289 tonnes, have helped to stabilise milk supply since December to May 2017,” Ms Kibogy said.

But at the time the reserves are said to have stabilised the prices of milk, the cost of fresh milk had recorded the sharpest rise in recent history (from an average of Sh45 in January to Sh70 in May). 

READ: Powder milk import set to reduce prices

Ms Kibogy said the sharp rise was caused by biting drought and supply constraints that have since stabilised, leaving open the question on what the intervention did and what the 9,000 tonnes are meant to do.

Rains have since started failing, providing much-needed succour to both farmers, processors and consumers. So why wasn’t the powder brought in earlier?

The mixed signals also come from processors themselves, who confirmed having imported the duty free milk powder from various sources but could not divulge the landed cost or quantity.

Brookside Dairy marketing director Oliver Mary said the firm had imported subsidised milk powder but referred us to the regulator for answers on how much the landing cost was.

“I don’t know how much it was acquired for, because my role is just to make sure we have enough and push more volumes. That question can be best answered by KDB,” Mr Mary said.

The dairy firm — which is majority-owned by the Kenyatta family — New KCC and Kiambu-based Githunguri Dairy, are the largest processors. They control about 85 per cent of the market, according to Egerton University’s Tegemeo Institute.

Cofec secretary general Stephen Mutoro said the opaque nature of the intervention raises many other questions and could be a potential scheme to mint millions of shillings from consumers whose taxes have been used to finance the subsidies.

“Who has determined the Sh10 reduction? Is it the processors or the government? Are we going to see price labels on packets of milk; and why did the price hit Sh70 per packet when there was already an elaborate intervention? Do we need the duty free powder now, and will it benefit consumers?” Mr Mutoro asked.