Kenya’s Dairy Recovery Will Be Won in the Middle of the Chain – Kinyanjui

By Nancy Kinyanjui, Managing Director, Avenews Kenya

Kenya’s dairy story this year has mostly been told at the two ends of the chain. At one end, dry weather thinned fodder and raised feed costs. At the other, shoppers in Nairobi, Nakuru and Kisumu found gaps on the shelves. Yet Kenya remains Africa’s largest milk producer, with an estimated 5.4 billion litres a year.

The recovery is under way. From October, the price paid for milk rises to Sh65 a litre, with a quarterly bonus of Sh2. The Government has invested about Sh1.4 billion in dairy infrastructure expected to aggregate some 475,000 litres a day. These are the right levers. They reward production and make it easier to collect and cool milk at scale.

How fully they deliver will depend on a part of the chain that rarely makes the news: the middle.

Where milk is won or lost

Between the cow and the shelf sit collection centres, cooperatives, transporters and processors. They turn scattered litres into reliable supply. Each of them pays out every day and is paid weeks later.

When cash flows smoothly through these businesses, milk follows the formal route: tested, cooled and processed. When cash runs short, milk follows whoever pays fastest. That is not the failure of any one player. It is what happens when daily costs and payment cycles pull in opposite directions.

A better price raises the stakes

Higher prices are good news for the sector. They also lift the working capital every business in the middle must carry. A collection centre that needed Sh250,000 a day to buy 5,000 litres at Sh50 now needs Sh325,000 at Sh65. Multiply that across the country’s collection centres and cooperatives, and the extra cash the recovery needs runs into very large sums every month.

Growth, not just survival

This is also an opportunity. Processors want dependable volumes, and the businesses that can supply them consistently will win larger orders and new customers. Their constraint is rarely demand. It is cash between delivery and payment.

Invoice financing is one practical answer. A business that has delivered milk and holds an accepted invoice can receive part of its value early, and settle the advance when the processor pays on the agreed date. That lets a growing business take on the next order without waiting for the last one to be paid.

A shared effort

Public investment is building the backbone of a stronger dairy sector. Private finance can keep cash moving through it. Processors and cooperatives can help too, by approving invoices promptly and predictably, because every day saved in approval is a day of cash returned to the chain.

At Avenews, we have financed more than 750 agribusinesses across over 35 counties, and 84% of our disbursements go to returning customers. That tells us something simple: when financing follows the real rhythm of trade, businesses use it and come back as they grow.

Ready for the flush

The rains will return, and with them more milk. The question for Kenya is not whether the cows will produce. It is whether the businesses in the middle will have the cash to carry that milk to market. If they do, this season’s shortage will be remembered as the moment the sector grew stronger. No dairy business’s next delivery should have to wait for its last invoice to be paid.

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The writer is the Managing Director of Avenews Kenya, an agri-fintech licensed by the Central Bank of Kenya as a Digital Credit Provider.