Markets & Finance
Regulator bans milk hawking as shortage persistsTuesday January 29 2013
The Kenya Dairy Board (KDB) has banned hawking of raw milk in a directive that could tilt the ground in favour of licensed processors currently battling for market share with informal traders.
Milk processors recently raised retail prices citing a shortage which has forced them to increase payment to farmers to lure them from diverting their supplies to hawkers who are said to offer better prices.
In a letter seen by the Business Daily, KDB attributes the ban on milk hawking to quality and safety concerns as well as the need to protect investors who have spent money on setting up processing plants and distribution systems.
“The continued sale and/or hawking of raw milk by organised dairy groups and milk traders to households and institutions such as hotels, hospitals, and schools has become a deterrent to the orderly development of the dairy industry and poses considerable risks to consumer safety,” read the notice signed by KDB managing director Machira Gichohi.
“This is therefore to direct all the milk dealers engaged in the sale and/or hawking of raw milk to stop the practice forthwith,” added Mr Gichohi.
He said that the board would only allow the sale of pasteurised and properly packaged or dispensed milk through approved premises.
The directive has, however, met opposition from milk traders with some arguing that it is contrary to the free market philosophy.
“The issue has come up because there is a shortage and we are aggressive. This is going to entrench monopolistic practices,” said John Wachira, the Dairy Traders Association national secretary.
He said that farmers were getting good prices from processors because of competition created by the informal sector.
He was supported by the Kenya Dairy Producers Association which pointed out that hawkers rescue farmers during high production seasons when the processors turn their backs on them.
“In the ‘90s when Kenya Cooperative Creameries (KCC) was not functioning, it is the hawkers who saved the farmers by buying their milk, and the same hawkers play the same role when the country is faced with a milk glut,” said Peter Lelei, the vice chairman of the association.
Major milk processors have expressed concern over competition from hawkers, saying that nearly half of the milk produced by farmers finds its way to the informal market.
“We are sharing the raw milk on 50-50 basis, a thing that has greatly affected our supplies,” said Zedekiah Bundotich, the director of Buzeki Dairies.
Mr Bundotich claimed that nothing had been done to enforce laws that bar hawking of raw milk, which is not only a threat to the processors’ income but also poses a health hazard to people who consume the milk given that it is often not handled hygienically.
Brookside Dairy said that although hawking had eaten into their market share, the wider milk catchment area for the firm had given it an upper hand over informal traders.
KDB has threatened to take legal action against those flouting the directive, including closing down their premises.
Fredrick Muhorela, a dairy farmer in Trans-Nzoia County, said that he sold his milk to hawkers because of the relatively higher prices offered compared to processors.
“I would rather hawk my milk at Sh50 per litre than sell the same to processors at a lower price,” said Mr Muhorela.
Milk hawkers offer dairy farmers Sh50 per litre as opposed to processors who buy the commodity at less than Sh40. Leading milk processors also delay payments by a one month, as opposed to hawkers who pay on the spot.