Pearl Dairy resumes milk processing

Pearl Dairy resumes milk processing 

THE INDEPENDENT | JULIUS BUSINGE | Pearl Dairy Farms Limited has resumed operations after nearly four months of no activity.

The company had suspended milk processing until further notice at the beginning of the year (2020) after Kenya blocked the entry of its processed milk on allegations that it did not meet the required standards.

The other accusation was that the company was importing raw materials into Uganda to repackage/process milk, hence posing unfair competition to the Kenyan processors. That it was also underpricing and in the process compromising income for Kenyan dairy farmers.

But Pearl Dairy officials told The Independent that the allegations were false and that a Kenyan delegation that visited Uganda in December last year observed that the country had sufficient stocks of cattle to enable the company buy and process milk without necessarily importing any raw materials.

The company is located in Biharwe, a neighborhood along the Masaka–Mbarara Road, approx.9 kilometres by road, northeast of the central business district of the city of Mbarara, in the western region of Uganda.

It entered the Ugandan market in 2013 with production capacity per day standing at 800, 000 litres and employing 2,000 people both directly and indirectly.

But because of the Kenya-Uganda standoff, at the beginning of the year, a big number of workers had been sent home apart from a few totaling to 56 who had remained by March 20 when The Independent visited the company’s processing plant.

The executive said that 80% of the processed milk is sold outside Uganda, and Kenya was among the largest buyers of its milk.

Since December last year, there were several attempts by leaders in Nairobi and Kampala to resolve the standoff but by press time, engagements were still ongoing according to Emmanuel Mutahunga, the commissioner for external trade at the Ministry of Trade Industry and Cooperatives. Mutahunga told The Independent that negotiations on this matter had been delayed because most efforts are now geared towards fighting against the spread of COVID-19 by the two governments.

At some point in January this year, Uganda had threatened to reconsider her position on the East African Community Customs Union Protocol and impose retaliatory taxes after Kenya seized its milk products processed by Pearl Dairy on their market.

Ugandan government said it was“exercising maximum restraint but reserves the right to reconsider this position.”

Kenya had seized 262,632 litres of Ugandan milk valued at $157,106 (about Shs573million) and 54,310kg of powdered milk at $203,630 (about Shs743million) in two weeks in the month of December.

Uganda said the seizure of the dairy products was illegal since they had been cleared by the Kenyan Ministry of Agriculture, Livestock and Fisheries, Kenya Revenue Authority, Kenya Dairy Board, Kenya Bureau of Standards and port health services.

A Kenyan government delegation visited the country in December last year to verify whether milk imports originated from Uganda or from third parties following claims that the latter had no capacity to export such huge quantities.

Kenya’s trade ministry had already proposed a 16% duty on milk products that enter the country from Uganda to protect local dairy farmers who had protested over the influx of low cost Ugandan milk.

Uganda protested the tax, saying it breaches Article 15, 1(a and b) of the protocol establishing the East African Customs Union on national treatment. This view has also been shared by the Private Sector Foundation Uganda Executive Director, Gideon Badagawa.

Implications

Apart from job losses at Pearl Dairy, farmers had suffered a sharp drop in revenue for their milk. For instance, the farm gate price for unprocessed one litre of milk had dropped from an average of Shs600 to Shs200.

Some farmers told The Independent that they had resorted to ‘pouring’ the milk because of lack of the market.

“I am considering selling off some of my cows because I cannot look after them,” said Goerge Rutaboorwa, a farmer and chairman of Rwensheko Dairy Farmers Cooperative. Rutaboorwa has 50 heads of hybrid cows and has supplied milk to Pearl Dairy since 2017.

“The company has been paying on time and effectively,” he said in March this year. “I have nowhere to put the milk now,” he said.

Like other members of his cooperative, Rutaboorwa has actively been rearing cattle since 2002 and has largely depended on them to meet his daily needs.

He is not alone, his cooperative has 42 members and were all supplying about 1, 500 litres of milk per day, earning close to Shs30million a month.

In 2019 alone, the company bought slightly over 45million litres from the farmers in the entire South Western region of Uganda Similarly, Robert Kaijutsya, representing Lake Mburo Farmers’ Cooperative said that they were milking cows and ‘pouring’ some of the milk that they were unable to sell after Pearl Dairy closed business.

He also said that they had benefited a lot from extension services and provision of transport for the milk to the company’s factory, all facilitated by Pearl Dairy.

Going forward, Kaijutsya urged the government of Kenya and Uganda to speed up the process of resolving the standoff so as to support the lives of farmers that are largely depending on cattle to survive.

The company’s Managing Director, Seth Devendra said as long as the two political heads of Uganda and Kenya fail to move fast to resolve the impasse, farmers will suffer.

He told The Independent on May 29, that they had resumed production in order to help those farmers who simply could not find alternative buyers for their milk.

“When we closed the factory due to lack of market access driven by the Kenyan blockade, farm gate price fell as low as Shs200 per liter and a good numbers of farmers could not find buyers for the produce. So we resumed production, however we are only operating at 25% of our capacity,” he explained.

He added that at present they are looking at various other products and “our research and development department is working on many concepts.”

“We assure our consumers that, we shall keep innovating and shall introduce products like our 15 gram sachets which is pocket friendly and nutritious,” he said.

COVID-19 impact

Meanwhile, Davendra said that the regulations put in place during the COVID-19 pandemic lockdown certainly affected their supply chain.

Particularly at the beginning of the lockdown, with an expected level of uncertainty over how the measures were going to be implemented affected the milk supply chain.

He said that, with measures such as not allowing employees to move out of the factory premises during the period of lockdown, they had to work with skeleton staff.

He however said that beyond COVID-19 pandemic, what is affecting them most is the lack of market access. “As you probably would know by now already, Kenya – the largest market for Ugandan milk by far – have effectively blocked Ugandan milk. This led to the processors not operating at their optimal capacity, which resulted into a collapse in the farm gate price to an average of Shs200,” he said.

He insisted that blocking Ugandan milk is against the EAC spirit but remains hopeful that the situation will improve.

“We are confident that the EAC member countries will sit and solve this problem,” he said in March.

The company was employing 2,000 people directly and indirectly, and 40% of these were female. About 80% of their processed products are exported to the outside market especially Kenya.

Beyond East Africa, the company exports its products to the Middle East and Asian countries.

Large export volumes are as a result of small consumption in the local market, reported to be 62 litres per person per year. Devendra said they are looking for other markets to sustain business growth.

Dairy sector figures

Available government data from Uganda Bureau of Statistics indicates that production of raw milk was slightly over two billion litres in 2018 up from 1.6bn litres in 2017.

Less than 50% of this production is processed due to low purchasing power and other supporting infrastructure.

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