Source: The Guardian
Kenya may lose its position as the world’s biggest horticultural exporter, in the wake of the rising cost of production, compliance bottlenecks and uncertainty over trade talks between the EAC and the European Union.
The Kenya Investment Authority (KenInvest), the body charged with promoting investment in the country, says the horticultural sector, especially the cut flower business — which brings in the bulk of horticulture income — is facing threats which could complicate its current standing as the world’s leading source market.
There are concerns that flower importers are shifting focus to Ethiopia and India, which have cheaper flowers than Kenya.
“Ethiopia could become more competitive than Kenya, while India could overtake Kenya in floriculture, if the challenges are not addressed,” said Moses Ikiara, KenInvest managing director.
Currently, India’s flower exports are about a tenth of Kenya’s.
Data from the Horticultural Crops Development Authority (HCDA) shows that in 2012, Kenya’s flower exports stood at Ksh42.8 billion ($503 million), a four per cent drop from Ksh44.5 billion ($523 million) in 2011. Output increased marginally to 123,000 tonnes in 2012, from 121,000 tonnes the previous year.
India exported flowers worth $59 million during 2011-12, a growth of 23.3 per cent from the previous year, with projections to double the revenue by 2015.
Ethiopia’s horticulture industry earned $265.71 million during 2011/12, up from $224 million the previous year, a 19 per cent increase. Flowers constituted the biggest share of horticultural revenue, earning $212.56 million in 2012, up from $178.3 million in 2010/11.
In Kenya, production costs have gone up by more than 30 per cent over the past year; mainly on labour, power, fuel, chemicals, fertilisers and other inputs. The sector currently pays 41 different taxes and levies to various government bodies, including the Kenya Revenue Authority (KRA) and the HCDA.
The cost of compliance is expected to go up with the new devolved system of government that proposes to introduce a cess on farm produce.
Uncertainty has also hit the sector over delays by the EAC in concluding trade talks with Europe, which is hampering planning for flower producers, with the window for negotiating a new deal set to expire this October.
Under the Economic Partnership Agreements (EPAs), the European Commission had asked the EAC member states to open their markets to EU products in exchange for duty-and quota-free access to its market.
As a result, Kenya’s flower export volumes and revenues are falling, while India and Ethiopia have been recording fast growing numbers, helped by low cost of production and favourable business and weather conditions.
Farmers want the EAC governments to finalise trade talks with the EU to prevent Kenya’s horticultural products from attracting 5-8 per cent import duty in Europe.