Major retail outlets within the country that have failed to pay milk farmers are wreaking havoc on the nation’s dairy sector, hurting businesses across the value chain, the Kenya Dairy Processors Association (KDPA) has said.
The Association has argued that retail chains sometimes go up to three months without paying farmers who need the cash to feed, treat and maintain their animals.
“The supermarkets hold our money for an average of 90 days before payment. At any one time the retails hold in excess of close to Sh3.5 billion of processors money thus affecting the liquidity of the processor as it disrupts their ability to pay dairy farmers and other suppliers on time,” the Association said in a statement.
KDPA says delays in payments have affected close to 4 million small and large scale farmers as well as others along the value chain since farmers are forced to rely on high interest loans to keep them moving.
“We rely on loans for a period of three months and even more, so even if the retailers pay us our dues, over 75 per cent caters for the loans we have taken, leaving us with almost nothing as profits,” one farmer lamented.
As such, the Association now wants to be paid on a daily basis.
“Milk processors are forced to borrow to keep paying hefty interest on loans so as to fund their operation putting a further burden to their already precarious financial position,” read the statement in part.
Kenya’s dairy industry has grown exponentially over the last decade at an average rate of 5 per cent per annum and is ranked among the country’s major sources of employment.
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