Last week, President William Ruto made a visit to the Nairobi Securities Exchange where he announced that the government plans to sell shares in as many as 10 state-owned companies. He also said that there is a need to change the law to ensure that it becomes easier to list on the NSE.
The last listing at the NSE was the Bank of Kigali in 2018 while there has not been an initial public offering since 2015 when Stanlib Fahari REIT was listed. This is a significant statement as it means that there has not been anything exciting for investors.
Currently, the bourse has 63 listed stocks with a total market capitalisation of Sh1.9 trillion, with Safaricom controlling 50 per cent of the market share. Among those that are already preparing for listing are Credit Bank Ltd and Bio Food Products Ltd.
Some of the public entities that are earmarked for listing at the NSE include the Kenya Ports Authority and Kenya Pipeline Company as well as sugar companies that have been struggling and indebting the government.
One thing that no one seems to be discussing is the state of New KCC. In 2019, the government shelved a proposal to have 34 per cent of New KCC floated at the NSE. It is probably a good time to revisit this plan.
Many Kenyans can recollect a moment when we received "Maziwa ya Nyayo" in primary school. Those moments used to be the most cherished during the week, especially when the milk truck drove into the school.
At the time, KCC was working well and the government was even buying milk for the sake of supplying to schools. But that is all in the past as KCC became a pale figure of its former self due to various inadequacies.
New KCC has been mismanaged in the past and it doesn't seem to be profitable or to be supporting farmers significantly. The company always seems to want to reduce the earnings of farmers claiming that there is an oversupply of milk.
Yet companies such as Fresha – run by Githunguri farmers – have a bigger impact in the market than the government-run KCC. Even small outfits being run by farmers across the country are doing much better compared to New KCC.
Ironically, New KCC was the first in Eastern Africa to process lactose-free milk at its Eldoret plant in 2019. This means that the company can really do well if the management took its work seriously.
Government must take the necessary steps to return this sleeping giant to profitability, and maybe even consider floating an IPO to raise funds for expansion. One of the ways to revive New KCC is modernising it by ensuring that it gets the latest equipment and technology to support its operations.
In 2003, the government bought the firm from private investors at a cost of Sh547 million due to its importance to the dairy industry. Over the years, billions of shillings have been used to modernise factories and ensure that New KCC is operating as it should.
According to data from the Kenya Dairy Board, the state-owned dairy processor has increased its share in the market from 23 per cent to 35 per cent since 2016 after upgrading its factories in Eldoret and Dandora.
With the Sh1 billion invested in 2021 to upgrade its plants in Dandora, Sotik, Eldoret and Uasin Gishu, New KCC should have seen an increase in milk sales from farmers from Sh4.5 billion to Sh6 billion.
In 2020, the government announced that New KCC would be buying milk from farmers at Sh33 per litre up from Sh25. Over the years, middlemen have taken advantage of the ambiguous policies in the milk industry to gain from the farmers’ investment and sweat.
Most of them buy milk from farmers at Sh17 per litre and then sell it to milk processors at a profit. We must kill this link to ensure that farmers earn their full amount from milk and one of the ways of doing this is by listing New KCC at the NSE.
