Ruto now targets Uhuru, Raila business empires

 

By 

Nation. Africa

Summary

·         The latest in a chain of policy shifts and public pronouncements targeted a ban on the importation of powdered milk that they have linked to Mr Kenyatta’s Brookside Dairy business, which controls about 40 per cent of the market share for processed milk

Kenya President William Ruto with former Prime Minister Raila Odinga at Nyayo National Stadium during a past Jamhuri Day celebration. PHOTO | Nation Media Group

Kenya President William Ruto’s administration appears to have trained its guns on the multibillion-shilling business empires of his predecessor Uhuru Kenyatta and opposition leader Raila Odinga with recent moves signalling attempts to break their dominance in the dairy sector and the liquefied petroleum gas (LPG) cylinder businesses.

The latest in a chain of policy shifts and public pronouncements targeted a ban on the importation of powdered milk that they have linked to Mr Kenyatta’s Brookside Dairy business, which controls about 40 per cent of the market share for processed milk.

The new administration is also seeking to open the market for other players in the LPG industry and initiate government intervention to bring down the cost of gas cylinders in what would significantly impact the dominance of East Africa Spectre Limited, associated with Mr Odinga’s family.

President Ruto last week announced plans to reduce the cost of a 6kg gas cylinder to about Sh500 by June, largely through government subsidies.

Information on Spectre’s website indicates that it is the “leading and largest cylinder manufacturer” in the Eastern and Central African region with an installed capacity of about two million units annually.

Other available data indicate that East Africa Spectre Limited controls 20 per cent of the country’s market share in the supply of gas cylinders and 80 per cent dominance in LPG cylinder revalidation.

More suppliers

Energy Cabinet Secretary Davis Chirchir last week revealed plans to allow more suppliers in the market so as to reduce the prices.

Mr Chirchir, while appearing before the National Assembly Energy committee, said one company—which he did not name— was controlling a significant market share of LPG.

“LPG has been brought into this country by one supplier. There is a lot of effort to bring serious competition so that we can bring down the prices,” said Mr Chirchir.

President Ruto last week launched the building of a re-filling plant for liquefied petroleum gas.

The plant worth Sh16.7 billion ($130.5 million) is owned by Taifa Gas, the largest LPG gas dealer in Tanzania which was founded by billionaire Rostam Aziz.

Without mentioning names, Deputy President Rigathi Gachagua while in Eldoret on Friday claimed that the challenges facing the milk sector were because of a monopoly by one family, which he accused of buying out all milk companies in the country. The DP said this was part of the reforms he was leading in the agriculture sector — including dairy, coffee and tea sub-sectors.

He claimed, without providing evidence, that the same individual was involved in the importation of powdered milk.

Mr Gachagua said they have since banned the importation of powdered milk so that local dairy farmers can access the market for their milk.

“We have stopped the importation of powdered milk to allow our dairy farmers to enjoy the market. It is our responsibility to protect our farmers in the coffee, tea and dairy sub-sectors. Challenges in the milk sector have been caused by the monopoly we have. One person bought all milk companies in the country and was also involved in the importation of powdered milk from foreign countries,” said Mr Gachagua.

Brookside Dairies Ltd

The Kenyatta family’s signature milk processor Brookside Dairies Ltd, set up in 1993, has since become the market leader in milk processing and allied products in Kenya and the region.

Among the acquisitions, which have at times raised eyebrows about the effects of having one player dominate a market, are the purchases of Ilara, Delamere, Molo Milk and Kilifi Dairy brands.

Brookside has also expanded operations to some of the neighbouring countries.

The milk processor’s expansion drive started just after the 2013 elections with the acquisition of the Sh1.1 billion rival Buzeki Dairy — the maker of the popular Molo Milk brand—and topped it up with the establishment of a 1,500-litre capacity milk cooling plant in Narok.

Ilara, Delamere and SpinKnit, the makers of the Tuzo milk brand, had been similarly swallowed months before.

A document by the Competition Authority of Kenya (CAK) citing Kenya Dairy Board (KDB) shows that the main players in the market for processed milk are Brookside Dairy Limited at 40 per cent market share; New Kenya Co-operative Creameries Dairy Limited at 25 per cent; Sameer Agriculture & Livestock Limited at 14 per cent; Githunguri Dairy Co-operative Limited at 12 per cent; Pascha-Uplands Premium Dairies & Foods Limited (1.7 per cent); Musty Distribution Limited (3 per cent); Dodla Dairy Kenya Limited (0.9 per cent); with the others controlling 3.4 per cent.

The data further show that Brookside commands a 45 per cent share in milk-related products such as butter, cheese, ice cream, yoghurt, and condensed and dried milk.

"Economic sabotage"

Already, Azimio La Umoja One Kenya politicians have termed the move as an attempt by Dr Ruto to use economic sabotage as a tool to force Mr Odinga to back off from his planned mass action.

The leaders said the economic sabotage will not succeed, citing similar attempts deployed by the late President Daniel Moi in dealing with the late Jaramogi Oginga Odinga, who is the father of the Azimio leader.

They also claimed some of the top leaders in the Kenya Kwanza Administration had interests in the same sectors and were trying to use their position in government to frustrate their would-be competitors in the market.

“Moi tried to bring the same business (East Africa Spectre Ltd) down but it did not work. Let them not use economic sabotage because it would definitely fail. It will also affect the economy because even foreign investors will be scared in a country where economic sabotage is used as a tool to settle political scores,” said ODM National Chairman John Mbadi.

Vihiga Senator Godfrey Osotsi claimed that a senior government official has an interest in the LPG business and was pulling strings to frustrate current dealers.

 “These fellows are busy trying to acquire as much wealth as they can and have resorted to fighting individuals they perceive as roadblocks to their journey to more wealth. We are aware that they have some personal interests in the gas business,” said Mr Ososti, who did not back up his claims.

Democratic Action Party of Kenya Secretary-General Eseli Simiyu made similar claims, alleging that the scheme to kick out current dealers in the two sectors is to create space for individuals in government.

“It is pure political war with people they perceive as their political enemies and are out to interfere with their businesses. They should just concentrate on improving the economy instead of being vindictive because fighting Uhuru and Raila will not improve the economy,” said Dr Eseli.

“The whole thing is part of them trying to marshal their way into the same businesses. Their mindset is that anybody running a big business is a dynasty and has to be fought,” he said.

Liberalise market

But National Assembly Deputy Majority Leader Owen Baya told Sunday Nation that Dr Ruto’s interest is to liberalise the market to ensure competitive pricing.

Mr Baya said those who feel targeted should lower their prices so that they can continue operating in the local market.

“It is the responsibility of any government to ensure prices are affordable. Monopoly has not been good for this country. Let there be other players in the milk and LPG cylinder sectors so that there is competition in pricing,” said Mr Baya.

“This economy needs to be liberalised. The President has made it clear that he wants to open the market for other players. But if there are people who feel they are targeted then they should also drop their prices,” he added.

Nandi Senator Samson Cherargei said it was surprising that the same people going around the country complaining about the high cost of living were the sole suppliers of some of the products.

Mr Cherargei said Mr Kenyatta should lead by example by lowering prices of milk which, he claimed, his companies were selling at exorbitant prices.

“Why can’t they lower milk prices if they are genuinely concerned about the high cost of living? The government has made it clear that it wants to open the market so that Kenyans can buy some of these products at affordable prices,” said Mr Cherargei.

Similar views were shared by Kimilili MP Didmus Barasa, stating that the government cannot allow the same companies that have monopolised the market to continue operating at the expense of Kenyans.

“The plan is to free the country so that any Kenyan can choose to buy from the many available brands at a competitive price.

The only way to ensure there is a fair chance for anybody to run business is by breaking the current monopoly in certain sectors to ensure competition,” said Mr Barasa.

Mr Odinga’s older brother and Siaya senator, Dr Oburu Oginga, in his book titled In the Shadow of my Father narrated how his father’s businesses were constantly frustrated by the Jomo Kenyatta and Daniel Moi administrations but they eventually thrived over the years.

He gave the example of the family’s Lolwe Bus Company which was targeted by the Jomo Kenyatta administration. When he came from detention in 1971 he acquired more buses through a bank loan.

The National Bank of Kenya, which was government-owned, would abruptly recall the facility which was followed by auctioneers who took away all the 32 buses owned by the company.

The auction was done secretly, and the buses sold at throw-away or ridiculously low prices before coming back to attach the building the Odingas were operating.