The emergence of new markets coupled with heightened marketing will see Kenya earn $531million from the floriculture industry with industry players projecting some 125, 000 tonnes of flowers will be exported in 2014.
“If there are no major disruptions, we expect export volumes to remain steady compared to last year,” said Jane Ngige the Kenya Flower Council (KFC) CEO in a press briefing. Between 2012 and 2013 flower exports grew by 5 percent.
However, statistics from the Kenya National Bureau of Statistics show that horticulture income declined for the third time in a row last year as overall production fell. Earnings from fruits, vegetables and cut flowers dropped to less than 1 billion dollars in 2013.
The country earned $981million from horticulture last year, down from $1.05 billion in 2012 and $1.13 billion in 2011.
The drop in earnings is blamed on a cold spell that affected mainly flowers in the second half of the year. Production of cut flowers and fruits experienced a tough year, with vegetables registering marginal increases.
Overall horticulture production stood at 196,241 metric tonnes last year, down from 205,728 tonnes in 2012. As in previous years, flowers contributed to more than half of the production. However, the quantity of flowers produced fell by 4,538 tonnes, from 108,306 tonnes in 2012 to 103,778 tonnes in 2013.
Earnings from the produce in 2013 consequently dropped to 659 million dollars, from 764 in 2012. Similarly, income from fruits dropped to 53 million dollars, down from 55 million dollars. In the same year, Colombian exports grew by over 20 percent. “This indicates that there is potential to increase volumes if the right environment exists,” Ngige said. The CEO further noted that Kenya is the third largest flower exporter globally, after Colombia and Ecuador.
She added that the European Union absorbs 85 percent of all the flower exports. “Market surveys have shown that even the Eurozone financial crisis has not affected demand for flowers,’ the CEO said.
“We are therefore asking the government to conclude the Economic Partnership Agreement with the EU so that flower trade is not disrupted,” she said. The deadline for signing the agreement is October. The CEO said that there is anxiety being created by the non- conclusion of the trade talks. “Buyers normally place orders one year in advance and so sales are being impacted by the delay in signing the agreement,” she said.
If a deal is not reached, then Kenyan flowers will attract import duty of between five and seven percent. “This will effectively reduce our competitiveness as the average profit margins are between eight to 15 percent,” Ngige said.
“It will also force the growers to change their current business model so that they can absorb the new taxes,” she said. Ngige noted that Kenya’s main competitors have already concluded trade agreements with the EU.
“There are looking to benefit from possible fallout between the EU and Kenya,” she said.
Kenya’s floral industry is well established. According to industry data, the sector employs over 500,000 people both directly and indirectly and supports the livelihoods of over two million households.
“However, the industry is dynamic and so the players must ensure they maintain a competitive edge,” she said. Ngige said that another challenge facing the industry is the devolved system of government. “The newly formed county governments are under pressure to raise revenue through taxes and levies,” she said.
Ngige added that all the major producing nations have agreed to sign a flower sustainability code in order to safeguard the industry. “We are developing a common standard to ensure the best practices are maintained throughout the value chain. This will ensure that final consumers end up with quality products,” she said.
“The ongoing discussion on the standards should not go beyond 2015 given the momentum of the top three flower producers,” she said. HPP Exhibitions President Dick Van Raamsdonk said that Kenya is the focal point of the floral industry in Africa. “However, Ethiopia and Tanzania also have fast growing but smaller flower sectors,” he said.
Raamsdonk said that Kenya can increase its production levels if it maintains a competitive regime for the floriculture industry. Horticultural Crops Development Authority Acting MD Grace Kyallo said that Kenya’s horticultural industry produced approximately 1.3 billion dollars in 2013.
“We are expecting to increase volumes so that Kenya can increase its foreign exchange earnings,” Kyallo said. She said that Kenya is exploring new markets including Russia, Japan and South Korea.
“The Japanese market requires high quality but the premium price is worth it for exporters,” she said. Kyallo said that Russia is also a rapidly developing market but there exists a language barrier. She added that the government is creating an enabling environment so that investments continue to flow into the industry. She said that authority also seeks to link producers to both domestic and international markets.