New Kenya Cooperative Creameries (New KCC), the state-owned dairy giant, is on the brink of collapse, according to a scathing audit report. The company’s financial woes have raised concerns about its ability to continue operating, posing a significant threat to President William Ruto’s plan to revitalize the dairy sector and improve the livelihoods of Kenyan farmers.
For the year ending June 2024, New KCC posted a staggering Sh1.5 billion loss before tax. The Auditor General, Nancy Gathungu, revealed that the company’s liabilities exceeded its assets by Sh1.2 billion, signaling severe cash flow issues. This negative working capital has resulted in New KCC relying heavily on loans and overdrafts to stay afloat, with interest expenses amounting to Sh192 million. Delays in settling these debts could lead to penalties and supplier boycotts, exacerbating the company’s downward spiral.
The audit also highlights New KCC’s mounting debt, with Sh3.2 billion owed to farmers, some of which is overdue by over 120 days. This outstanding debt poses a serious risk to the company’s operations, potentially disrupting supply chains if the debts are not cleared promptly.
Despite these challenges, President Ruto has reiterated the government’s commitment to revitalizing New KCC, promising timely payments to farmers and plans to upgrade the company’s facilities. However, the Auditor General’s report casts doubt on the company’s future, citing the uncertainty surrounding its ability to continue as a going concern.
Further compounding the situation, New KCC’s management has yet to address these issues before the relevant parliamentary committee, and concerns about overstaffing and poorly managed assets persist. The company currently employs 171 more staff than the approved number, straining its financial resources.
As the company struggles to regain its footing, its ability to support the more than 650,000 small-scale dairy farmers in Kenya hangs in the balance. The looming crisis at New KCC underscores the urgent need for reform and careful management to secure the future of Kenya’s dairy industry.
