The Cabinet has suspended plans to privatise the New Kenya Co-operative Creameries (New KCC) citing fears of completely leaving the key dairy sector in private hands.
Trade and Industry Secretary Peter Munya said New KCC is a critical State investment that cannot be privatised as it plays an important role in controlling the price of milk in the market, thus protecting consumers against high costs of the commodity.
Mr Munya said the Cabinet agreed to delay the process, which has been in the pipeline for almost a decade, and instead focus on building its capacity.
"New KCC is a strategic government investment in the country and the cabinet did not find any good reason why it should be privatised at this stage," said Mr Munya in an interview with the Business Daily.
The CS, however, said the firm could be sold later to a strategic investor once the dairy sector in the country has stabilised.
"We might consider to privatise it in the future."
The government will now pump more resources into New KCC to expand its milk intake capacity and production of long life products.
The government allocated the milk processor Sh400 million in 2015 to help it set up an instant powder milk plant in Eldoret. The firm has also been expanding its Nyahururu and Dandora facilities.
The State has been at loggerheads with dairy farmers who were opposed to the planned sale of New KCC to an investor, which slowed the process of privatising the firm as the suppliers resisted proposed allocation of shares.
According to an initial proposed sale plan, 34 percent of the New KCC stake would be floated at the Nairobi Securities Exchange (NSE) while farmers would receive 42 percent, company employees four percent while the remaining 20 percent would be allocated to the government.
The cabinet decision comes as a surprise to many farmers given that they had not been informed of the decision to shelve the privatisation process after years of pushing the government to revert its ownership to them.