Food Imports to Kenya

While there have been several discussions about maize and other food imports to Kenya  such as where the maize came from, who is selling it, and at what price, more is on the way to deal a national disaster situation, partly attributed to delayed rains and prolonged drought.

Writing in a recent opinion piece in the Standard, James Nyoro, government advisor (who was previously the Rockefeller Foundation’s Managing Director, Africa, and probably the next Deputy Governor of Kiambu), wrote that food imports are normal for Kenya… in normal years, Kenya imports 30% of maize, 75% of wheat, 45% of sugar and 80% of its rice needs.

This comes at a time when all of Africa is talking about embracing agri-business and getting more people and more value out of agriculture. Kenya is probably in a very good place, as it  produces lots of foods, does a lot of local consumption and international exports, and has good networks and communications tools for farmers and government, but still, there is little finance to agriculture, and a lot of prime agricultural lands is being converted to real estate or commercial uses.

The Cabinet Secretary for Treasury recently gazetted and listed companies that were allowed to import duty free, non-GMO, yellow maize to be used for animal feed including Unga Farmcare 36,000 metric tonnes, Pembe Feeds 20,000, Isinya Feeds 50,000, Sigma Feeds 50,000, Milele Feeds 20,000, Mombasa Maize Millers 36,000, Chania Feeds 4,000, Farmers Choice 30,000, Naku Modern Feeds 2,000, Pioneer Feeds 3,000, Empire Feeds 10,000, Tosha Feeds 90,000, Turbo Feeds 1,000, Treasure Feeds 3,000, Economy Farm Feeds 1,000, Prosper Properties 2,000, Legorn Feeds 3,000 , Huduma Feeds 6,000, Eden Millers 5,000, Ohami Feeds 1,000, Tarime Feeds 1,000, and Thika Farmers Group 36,000 metric tonnes

He also set published temporary rules for white maize, sugar, milk, and dates: The ones for white maize included Any person may import white maize if it meets the following conditions—

• The white maize shall not be genetically modified in accordance with the standards applicable in the European Union; i.e it shall not be genetically modified (GMO) maize.
• It shall have a moisture content not exceeding 14.5%;
• It’s aflatoxin levels shall not exceed 10 parts per million;
• It shall be accompanied by a certificate of conformity issued by a company appointed by the Kenya Bureau of Standards; and
• It shall have been imported on or before the 31st July, 2017.
• Any person may import dates during the month of Ramadhan.

In a separate notice, he authorized there be no duty on sugar imported between May 11 and 31 July 2017 and as well as on 9,000 tonnes of milk powder imported by milk processors authorized by the Kenya Dairy Board.

Plastic Bag Ban in Kenya 2017

A visit to Nakumatt yesterday showed how the supermarket is trying to lead the proposed Kenya plastic bag ban by not packing any more shopping in plastic/polythene bags.

Neighboring Rwanda has had a plastic bag ban for a few years, and is now famed for its enforcement of the ban which has contributed to greener and cleaner image of the country. But the plastic ban was a shock, and the Government needs to champion consumer awareness before enforcement, and target food manufacturers, kiosks, fast food vendors, and the informal sector, which are all heavily dependent on the thin plastic packaging. While some have  commented that cash-strapped Nakumatt is cutting back on overheads such as free bags to shoppers, at the checkout line, Nakumatt offers customers #ThinkGreenGoBlue eco-bags which retail for 75/= large and 50/= small.

In a recent interview, Environment Secretary Judi Wakhungu who gazetted a ban on use of plastic bags, which is set to come into effect in September. She said it will be done in phases, as she spoke about the urgent need to clamp down on plastics, which has the support of most Kenyans and countered claims of job losses as a result of the ban

All you have to do is just go outside Nairobi. And how will you know you are approaching a town or a city? You will see plastic bags everywhere.

Coop Bank 2017 AGM

Cooperative Bank (Coop Bank) shareholders had their 2017 AGM in Nairobi where the directors proposed a Kshs 0.8 per share dividend as well as a bonus share for every five held.

At the AGM, their CEO, G. Muriuki, spoke of continuing the turnaround at the bank which had a Kshs 2.3 billion loss in 2001 when they had 100,000 customers – and on through 2016 when they had Kshs 353 billion of assets, Kshs 18 billion profits, 149 branches, and  6.2 million customers. The cooperative sector remains the heart and identity of the bank, and they will continue to provide services to the sector.  The cooperative movement also forms the anchor shareholding of Coop Bank with a 65% stake.

Most amazing, he said, was the digital transformation at the bank. Some years back, McKinsey had identified 60 services done at their branch that could be decentralized – and now, only 15% of transactions are done at the branch – with customers doing the bulk of transactions on mobile phones, at ATM’s, agents, and on the internet – and this had seen the Bank’s cost/income ratio reduce from 60% to 50%

At the AGM, there was also discussion on some challenges such as court cases & loan provisions, funds at held Chase Bank and hyperinflation in South Sudan which has resulted in losses. Some shareholders also asked if they could have the annual report mailed to them via post offices and also had other queries on issues like diaspora banking services, staff fraud, PesaLink, interim dividends, the bank’s share price, transport fare to attend the AGM, cyber crimes, and interest rate caps. In answering one question, the CEO said Cooperative Bank was not one of the bidders for Chase Bank as they had a presence similar to Chase and would focus on growing organically.

The  CEO also said this year marked the third bonus share issue since the bank had listed in 2008, and this was good for shareholders as the bank had grown its capital without asking shareholders to put in more money.  Coop Bank had a livestream of the AGM for any shareholders who were unable to attend the AGM, and more companies should do this for investors awareness

Kenya Airways 2017 Results

Kenya Airways (KQ) announced their full-year results in which they reported an operating profit of Kshs 900 million, an improvement from an operating loss of Kshs 4.1 billion the year before.

KQ flew 4.5 million passengers, an increase of 5%, to 53 destination, but had an 8% dip in revenue to Kshs 106 billion, due to the reduced fleet capacity including a change from anchor Boeing 777’s to 787’s

But more significant was that idle capacity, such as from the large Boeing 777’s, and been jettisoned, reducing fleet ownership costs by 47%, and this combined with Operation Pride initiatives, had seen the airline achieve the gross profit after all the direct costs, fleet ownership costs and overheads. However after finance costs were factored in, the airline still had an after-tax loss of Kshs 10 billion, a great improvement from the Kshs 26 billion in 2016.

These were the final results presented by CEO Mbuvi Ngunze who had announced his resignation and who is being replaced by Sebastian Mikosz from  June 1. The airline is next expected to extend the restructuring program to the other side of  their the balance sheet and address the negative capital position and high debt on the balance sheet.

During the year they added new flights between Entebbe and Bangui and two new routes  to Cape Town, via Victoria and via Livingstone. From October 2017, KQ will add 30 new flights to existing African destinations. On the cargo side, they are now flying flowers to new markets in Australia and China.

This month, their Jambojet subsidiary acquired a second Dash 8 Q400 as the airline also got Kenya government permission for international routes, which could include Kilimanjaro, Mwanza, Hargeisa, Mogadishu, Goma, and Kisangani.

Milk Pricing in Kenya

Most supermarkets in Nairobi now have ATM’s/’bars’ which are machines where customers can bring their own containers and buy their own quantities of unbranded milk. Today at one ATM, milk was Kshs 80 compared to about Kshs 110-120 per litre (sold in half litre packs for 55/= or 60/=) for branded milk packs.

Branded milk sachets

But how does milk pricing work? M-Farm tracked a milk trader called Wangondu,  who sells 1 litre of milk at 70/- at his milk bar.

  • Farmers usually use donkeys to transport milk. The wholesaler is introduced into the supply chain at the point which motorbikes transport milk to a center. When there was Mid March scarcity – majority of the milk was sourced from Kinangop at 35 to 37/= per litre.
  • Boda boda people who bring 100 litres to the main road are paid 250/- meaning, the milk bar trader has to add 2.50 per litre bringing the total cost to 40/- per litre. The road is bad; lot’s of push and pull which adds another cost to the milk.
  • Milk is very sensitive and has to be moved quickly. If one is collecting 1,000 litres, it means there will be 20 motorbikes from different sourcing points and have a vehicle using a particular route to collect aggregated milk. At end of day of the day, milk per litre costs a trader about 40/- to 50/- given the circumstances.
  • Pasteurization costs 6/- per litre bringing the total cost thus far to 56/- per litre.
  • Each vehicle collecting aggregated milk has to have 3 people; a driver and 2 loaders. At this point, transport cost of the milk is charged at 6/- per litre. A wholesaler trader calculates his/her profit margin at 3/-.
  • If milk is being sold to a retailer at 65/- they add 5/- margin to retail the milk to 70/- litre. When there’s surplus milk, a trader reduces 5/- per litre by demanding that the farmer delivers the milk to the aggregation center and bears the cost.   Were it not for the rains, the wholesalers had an agreement that on the Saturday before the start of April rains, milk pricing would have retailed from 80/- per litre.
  • When the rains come, they hire an escort to help with the pushing of vehicles who are paid 2/-. “We as traders, take advantage, don’t see the reason why we should sell the milk at 80/- and we see the way farmer and consumers suffer and we have to be neutral. When we have mercy on both the farmer and consumer, the consumer ends up claiming that my milk is cheap because it has been tampered with and therefore, of poor quality.”
  • Bars have lower milk pricing at some supermarkets

    But all the same, the little margins I make are able to pay licenses and pay my handymen in my milk bars. Even after all deductions, I am able to make 1/- or 2/- per litre as profit.

  • When there’s scarcity of milk, we source from Kikuyu and Limuru dairies. Harvesting, transportation to the milk buyer in town, management of milk at the milk bar – this is my business solely. I have to buy from the joint business source,  make sure there are no additives, and we have to be there to make sure the quality you get from the shamba is what we give the customer.

Milk is also being sourced from other countries in East Africa as and there is a butter shortage (affecting bakers like Sugarpie). 500 grams of butter is retailing at Kshs 1,000/- and this is just ridiculous.

$1 = Kshs 103.