Next week, a Kenya government delegation will be in Uganda to audit the milk value chain.
The visit comes after concerns among sections of the peoples’ representatives over a sharp jump in the quantities of Ugandan milk entering Kenya.
This has upset the market bringing Kenyan farm-gate prices crashing down to Ksh19 ($0.19) for a litre of milk.
There is lingering suspicion that Uganda, which as recently as just a decade and half ago could not produce enough for herself, could now be laundering milk from other sources.
The proponents of such an idea are likely looking at the dairy sector through the prism of the sugar sector where at some point, accusations of importation and repackaging of the commodity, for re-export within the region were rife.
In choosing to mount a verification mission, Kenya is once again demonstrating maturity and regional leadership.
In opting for a scientific rather than sentimental approach to what is potentially another unwelcome trade dispute in the region, Nairobi is laying out a template for resolving the many simmering tensions in the region.
Tit-for-tat trade disputes rarely serve any long-term interests and in this case could potentially distort the forces that are driving a more organic evolution of the East African project.
Most likely, East Africa is witnessing a subtle realignment of the regional economy and its value chains as economic integration enters a decisive, of disruptive phase.
Two of the major processors in Uganda have Kenyan roots and instances of cross-feed for their plants in the two countries; or simply upping production from the cheaper source to sell a finished product under the tariff free common market are not unusual.
One of these processors has exclusively focused on producing long-life milk to maximise the advantage from gluts in production.
Until they and a handful of others came into the market recently, seasonal scenes of farmers pouring milk into the ground were not unusual in western Uganda.
The other reality is that the region is approaching a more stable supply of raw milk. When Rwanda’s one cow per household initiative matured, there was a significant reduction in milk imports from Uganda during peak season. This is not necessarily a bad thing if the market could be made more transparent.
Uganda’s Dairy Development Authority reports that the country produced 2.8 billion litres of milk during 2018. By June this year, 2.4 billion litres of milk had been logged. Uganda has a lower unit cost for milk production because its industry is not as capital intensive.
As Kenyan political leaders cry over the plummeting prices for the commodity, the price in Kenya is at least Ksh8 ($0.08) above what Ugandan cattle keepers are earning from their milk at the farm gate.
The farm-gate price for a litre of milk in the South-western Uganda production hub has collapsed from an average of Ksh17 ($0.17) a year ago, to just Ksh11 ($0.11) today.
East Africa is on the cusp of vertically and horizontally integrated value chains. It is a process that might claim some scalps but we need to give a chance.
