Nairobi Star (Nairobi)
Winfred Kagwe
4 April 2011
Insufficient tax incentives and high cost of transportation is seeing Kenya’s flower industry lose out to Ethiopia as the region’s leading exporter of the commodity.
While there have been very few changes for the sector in Kenya, in the neighboring country, tax benefits like income tax holidays for five years and duty free imports have seen aggressive growth in the sector.
A decline of the sector would not only see Kenya lose one of its top foreign exchange earners but could also lead to more than 100,000 employees lose their jobs.
Even though the Kenya Flower Council is downplaying Ethiopia’s threat to the industry, it says such incentives would be welcome.”Ethiopia is doing very good at the moment, this is not a threat to Kenya but it would serve to market the whole region as the preferred flower producer,” says Jane Ngige, the CEO of KFC.
Ethiopia flowers export value has been increasing at a fast rate; in 2009-2010 seasons (2002 according to the Ethiopian calendar year) it was $ 160m (Sh 12.8b). The target is to increase by 15-30 per cent in the 2010-2011 season and to hit over $500 m (40bn) in five years.
The local flower industry made an estimated Sh30 billion in 2010 which was a drop from Sh36 billion in the previous year. Even though the drop was attributed to natural calamities in the European market,the government did nothing to cushion the sector from losses. This year KFC has projected a rise back to Sh36bn.”The first quater was favorable, because of Valentines and so far we are on track for the annual target,” says Ngige.
Just like the local industry, the main markets for Ethiopian flowers are the Holland, UK and Germany but the northern neighbor is also giving Kenya a run for its money in new markets like Japan, and Russia.
Local players say transportation of the perishable commodity is too expensive eroding the competitive pricing of Kenyan flower. This is in addition to losing out the huge North American market due to lack of direct flights.
In Ethiopia, while air freight capacity was not always sufficient in the past, the problem was solved by the national carrier, Ethiopian Airlines, which now operates more flights at a cheaper cost, in addition to other passenger flights from other airlines.
Due to the better investment climate, some farmers are moving from Kenya to Ethiopia in search of higher returns. “There are many investors who now have farms in both countries, “says Ngige “Ethiopia is coming up very fast.”
AllAfrica – All the Time
Taken from:
Ethiopia Flowers May Wipe Out Local Growers