Why New KCC is not yet ready for privatisation

Matu Wamae is exiting the stage after serving as New Kenya Cooperative Creameries (NKCC) chairman for 15 years and a director for two years, paving the way for new leadership at Kenya’s second biggest milk processor.

Mr Wamae, a former ICDC chairman, a former general manager at the Central Bank of Kenya and a former Mathira MP, presided over some of the most turbulent times at the State-owned milk processor as the company went into huge debts running into millions of shillings.

The Business Daily spoke to him on the challenges the company faced and how he managed to steer the ship in the rough waters.

WHAT KIND OF LEGACY HAVE YOU LEFT BEHIND AT NEW KCC?

I am happy farmers are enjoying some of the highest prices of raw milk. In 2003 when I took over, farmers were earning Sh8 per litre and as I exit they are pocketing between Sh43 and Sh35.

The establishment of satellite milk coolers has reduced the distance farmers cover to deliver their milk is a big achievement.

Business automation has seen the company improve on service delivery and revenue collection and return to profitability. Farmers are assured of their timely pay without delay. New KCC is ISO-certified and a brand of choice.

WHAT ARE SOME OF THE MILESTONES OF YOUR TENURE?

The Sh4.5 billion payout to farmers and the company realising a Sh10 billion turnover are memorable achievements for me. The settlement of the Sh500 million old debt to farmers was a big relief to my leadership. The Sh1 billion modernisation project that has seen the company’s processing capacity and efficiency greatly enhanced is another milestone.

OF THESE ACHIEVMENTS WHICH ONE ARE YOU MOST PROUD OF AND WHY?

The payment of a prolonged 20-year debts of the old KCC went a long way in reviving the trust and confidence the dairy farmers had in the New KCC. Our profits are steadily increasing annually and we owe farmers no debts.

We have delegated some of the duties that were carried out by the company such as transport of milk from collection centres to factories.

Farmers own coolers and tankers and they are able to earn more and create jobs.

We are piloting a project in Eldoret and Thika to see whether they could also be part of sale teams in a bid to ensure they get more value from the business.

WHAT UNFINISHED BUSINESS HAVE YOU LEFT AT NEW KCC?

Moving farmers away from rain-fed agriculture so as to build a sustainable raw milk supply in New KCC. The company is not getting enough milk because productivity per cow at farm level is still an average of eight litres for most of smallholder farmers. We need to increase that to at least 15 litres and the cost of production will be lower. We need to change our feeding system.

WHAT ARE SOME OF THE LESSONS YOU HAVE LEARNT LEADING THE COMPANY?

The secret to success in this industry is putting the dairy farmer first and treat him or her as the king and queen of the business. They are central to any processor, and supporting them is key. Each of our collection centres has an extension service officer to take care of the farmers’ interest.

YOU WERE AT THE HELM OF THE COMPANY DURING SOME OF ITS WORST TIMES. HOW DID YOU MANAGE TO STEER THE SHIP IN THE ROUGH WATERS?

It was not a one-man show. It was a team that collectively made the right decisions at the right time, with farmers’ interest at the heart of such decisions.

I ensured there is meaningful relationship with our stakeholders, especially the farmers and lending institutions.

The support from the national government was key to our revival.

WHAT ARE SOME OF THE CHALLENGES YOUR TEAM FACED?

The days of milk glut and drought greatly affected the business as we lost a lot of money and milk.

That was the most difficult time for me as we could do nothing as milk went bad. We accumulated up to 500 million litres in reserve.

WHAT MAKES NEW KCC AN IMPORTANT PLAYER IN THE LOCAL DAIRY INDUSTRY?

New KCC is a raw milk price stabiliSer in the market, cushioning smallholder dairy farmers from unfair pricing.

As a buyer of the last resort, New KCC is able to mop up excess milk from the market, assuring farmers of a market for their produce.

IF YOU WERE TO GIVE DAIRY FARMERS JUST ONE PIECE OF ADVICE WHAT WOULD THAT BE?

Dairy farming is still a viable business with a bright future and my advice is to the farmers to invest more in new breeds, extension services, feeding system and form cooperatives for sustainable business.

WHAT IS THE STATE OF THE DAIRY INDUSTRY IN KENYA AS YOU EXIT?

The industry is still vulnerable to harsh weather patterns but with a bright future as the demand for milk and milk products keep on rising and this means a ready made market for farmers to earn more from their investments.

WHAT IS YOUR ADVICE TO THE INCOMING CHAIRMAN?

He should put dairy farmers first if he hopes to succeed. He should not condone corruption at whatever level. Personal integrity is very crucial and he must be firm on corruption. He must ensure New KCC stays on the profitability lane to secure the jobs of over 2,000 workers and dairy farmers.

WHAT ARE YOUR THOUGJHTS ON THE PLAN TO PRIVATISE NEW KCC?

The company is not yet ready for the privatisation and I support the government’s decision to suspend it. The company is still undergoing modernisation and upgrade, which is in the second phase. After the upgrade we can relook the privatisation plan to establish whether we are ready for it. New KCC is a processor of the last resort. It stabilises the milk prices and shields farmers from exploitation. New KCC takes care of the market and farmers’ interest.