Government the Spills Milk in Dairy Sector

Eight months after it took the reins of power, the Coalition Government of President Mwai Kibaki chalked out an ambitious programme to fast track recovery of the ailing economy it had inherited from its predecessor, Kanu. Dubbed the Economic Recovery Strategy for Wealth and Employment Creation, the programme stated as its goals the generation of jobs, raising of income and improvement of the health of the millions of poor Kenyans, the majority of whom live in the countryside. With the percentage of the population living under the poverty line standing at an all time high of 56%, a near-stagnant economy that had just returned a depressed growth rate of 1% and an unemployment rate of more 20%, nothing short of shock therapy of the type that was being proposed in the economic recovery plan was viable.

The country's development partners gave a big nod to the plan and backed their agreement with pledges of billions of shillings in development aid and loans to help with implementation. And many non-governmental organisations that had over the decades helped save lives as poverty showed its ugly face in form of hunger, disease and even death joined the recovery bandwagon, encouraged by the fact that a number of people from within their ranks had been appointed to key positions in Government. Then came the time for action and the unity of purpose began to come apart. The Government began to show signs of loss of the resolve with which it had ascended to power, opting for policy options that clearly ran parallel to the very goals set out in the recovery strategy.

Nowhere has this shift been clearer than in the dairy sector where big players - through industry regulator, the Dairy Board - have launched a spirited campaign to wipe out small traders from the market. Through the drive dubbed 'clean milk campaign', the board has been trying to turn the industry on its head. It has pulled out from the shelves an obsolete piece of legislation that restricts the definition of milk only to processed products and threatens small milk traders with a wide range of action, including arrest on the grounds of selling unhygienic products. While the health concerns require some intervention, it can certainly not be bundling the small milk traders out of the market. From a practical point of view, the benefits of this informal part of the dairy sector by far outweigh the negative aspects of the business.

According to a recent survey conducted by Smallholder Dairy Project, a collaborative research work involving public, private and non-governmental organisations, Kenya produces a total of 1.4 billion litres of milk per year, 42% of which is sold directly to the consumer from the farm. Another 15% reaches the consumer through milk bars, 23% through mobile traders, and 6% via dairy cooperative societies. The big milk processors on the other hand have only 14% of the milk market. Most important is the fact that this structure of distribution supports some 29,000 Kenyans earning average wage levels that are higher than the official national minimum wage. Over 70% of the jobs are in the informal raw milk market which is mainly controlled by those classified as rural and urban poor. Besides, milk remains an important source of nutrition, especially for the majority of rural children whose welfare should, in the long term, be crucial to the government's development goals and is all that the government needs to consider while making policy decisions.

This being the situation on the ground, one would imagine that the government - with the stated goals of the economic recovery in mind - would root for policies that improve rural skills and technology, and hence hygiene standards, and promote efficiency in this very productive sector. Instead, individuals who have been put in charge of policy and regulation continue to exhibit futile pre-occupation with replication of western modes of development. Often they are naive to the extent of denying the existing duality of the domestic economy. So pervasive is the failure of those in charge of policy to understand the basics of the society in which they operate that one of them loudly wondered at a dairy sector symposium 'why are we still talking about boiling milk 200 years after the industrial revolution?' All this is said as if it is the fault of the struggling milk hawker that formal marketing systems such as cooperatives have failed to serve the industry. And consideration is given to the fact that other factors external to the industry, such as poor infrastructure, form part of the many bottlenecks facing the sector.

The bottom line of it all is that any government policy that leads to loss of income does increase poverty and that any strategy for economic recovery must target smallholder producers by creating access to credits and markets for farm produce. Even for those still committed to the discredited trickle down theories of development, the small scale informal economic activities do provide immense potential for the promotion of rural industrialisation that only the right policies can mobilise and channel toward a particular goal.

Government commitment to the goal of poverty reduction has also been badly dented by its legislative agenda in parliament. While preaching the gospel of economic growth and wealth creation, parliamentary business remains dominated by interests of big business and donor agenda. There can be no reasonable explanation why the Dairy Industry Bill has, for example, not been passed nearly 10 years since it was drafted in 1996. With its dairy herd estimated at 3.3 million or 70% of the entire dairy herd in Africa, the milk sector is one in which Kenya has a clear comparative advantage over her neighbours. With the right policies and legislation, the country can choose to make use of this advantage to the benefit of the wider population, or it can allow the cartel of big players who, for their failure to establish workable supply chains, are already importing powdered milk to kill it.

At the practical level, it is important that any policy options taken by the Government take into account the nature of consumer demand and the practicalities of complying with the policies without killing livelihoods - given the perishable nature of milk as a product. For the dairy sector to contribute to the goal of poverty reduction and income improvement, Government will have to come up with policies that link producers to domestic consumers through efficient, safe and appropriate marketing channels, while also developing opportunities for producers to access export markets.