Take Out Your Cups – Kenyatta and Family Are in Town to Feed us Milk [opinion]

It feels like yesterday when President Yoweri Museveni signed off the sale of Dairy Corporation for the princely sum of $1. That transaction, 10 years ago, sparked off wide public debates, from the counters of bars to church verandahs.

For heaven’s sake, one dollar, even then, could not buy you a bottle of beer at an uptown joint! There was the unnerving sentiment that Museveni was mortgaging the country’s assets for the biblical 30 pieces of silver, and that the country had become his private casino where he gambled away property with reckless abandon.

Yet, the story of the sale of Dairy Corporation, regardless the debt-load it carried and all the marketinefficiencies that weighed it down, was hardly any different from how most of the state assets were cut loose under the country’s privatisation programme.

Friends and family of government officials took over abandoned state properties in a grab-all-youcan aenture that left those watching from the sidelines baffled. Last week, it emerged that Sameer Agriculture and Livestock Limited, the company that bought Dairy Corporation, had decided to cash in and sell its shares to Kenya’s Brookside Dairy Limited, owned by the powerful Kenyatta family.

The terms of the deal are still not yet available, and so is the valuation of the deal. We should, however, not just ask how much Sameer will walk away with rather, debate the reasons as to why no Ugandan company did not take over Sameer.

Uganda’s milk industry remains under exploited. The country’s milk consumption remains far below the sub-Sahara Africa average. While Sameer complained that it received less milk from farmers compared to the capacity it had to process, there are some farmers who claimed the firm had failed to buy their milk. It became difficult to know who to believe.

Still, as Sameer grumbled, local Ugandans such as the Mulwana family continued to prove that they could run a successful milk business like Jesa. There are also other local companies such as those producing Mega milk, who have emerged to share the space in the industry, however small.

And yet, somehow Sameer’s impact in turning around the Fresh Dairy products it ‘inherited’ was hardly felt. The company did not put up much of the investments it promised it would. And, in the urban centres such as Kampala, Sameer appeared to cede some market share to Jesa milk.

In all fairness, Sameer had to start from scratch to turn around Dairy Corporation. Dairy Corporation was so bad, few could only touch it with a long stick. Sameer took its chances. However, Sameer had a g brand in Fresh Dairy that had it employed a smart strategy, such as supporting milk farmers in terms of helping them access credit to put up storage systems, maybe things would have been different.

So, now Sameer has decided to sell. But why didn’t the company invite local bids? Of course Sameer’s argument is probably that the transaction was of the sale of its shares, and not necessarily that of its assets, which would have required open bids. The sale of shares, especially if the company is not listed on the stock market, can be done in the dark of the night while everyone is asleep, and it will still be legal.

At the end of the day, the buck stops with the government. When government was selling off Dairy Corporation to Sameer, there ought to have been a clause in the agreement that required that a Ugandan company be given the first option of buying back the company.

It does not look like that clause was ever there. Government was too desperate to offload Dairy Corporation from its books it did not think that the ugly duckling it was dumping would one day be quite a charmer. Now,

Kenyatta’s Brookside has an opportunity to become a dominant player in a sector where a Ugandan firm could have performed just as good. Do not get me wrong, I am not against foreign companies doing business in Uganda. If anything, foreign companies come with skills and knowledge, and tend to be far bigger investors than local firms.

My issue is that where Ugandan companies can do the job, the opportunity should be made available. But now that Brookside is here, we shall need to see whether it will have contractual obligations to hire more Ugandan staff in top management positions, and whether it will use more local materials.

Brookside will repatriate most of its profits back, so let’s not even hold our breath on that. Instead, let us find a way of ensuring that Brookside creates the opportunities for Ugandans, attracts more investors into the industry, and signs partnerships with local firms. It is the least we can expect.

Twitter: @jeff_mbanga

The writer is the business editor of The Observer

Source : The Observer