EA’s flowering exports nipped in the bud

Broken dreams. Shattered hopes. Fragile livelihoods.

This is the scenario facing flower exporters in East Africa who are in a desperate move to save the multibillion-shilling sector from collapse owing to the global financial crisis.

The crisis has dealt a major blow, not just to the region’s most established exporter — Kenya — but to the other countries that are developing their respective industries.

Billions of dollars invested in the flower industry by regional governments and donors could go down the drain; and millions of jobs are being lost.

This has prompted governments and players to craft interventions to help the sector stay afloat.

The new kid on the block, Rwanda, which until early this year was upbeat, is now cautious.

It had been looking up to Kenya and Ethiopia as icons but is now failing to attract investors despite offering a very good deal.

In January, the Rwanda Flowers Association sent 20 farmers for a three-month training course in Naivasha, Kenya, with high expectations that skills learnt would give its sector new impetus.

The Minister of State in charge of Industry and Investment Promotion, Vincent Karega, termed the exercise an investment to increase local production and add value to the flowers.

Rwanda’s climate is ideal for flower growing. The country hoped to match the success of Kenya and Ethiopia.

It was encouraged by steady development of the young industry, which over the past four years registered 3,600 farmers with 42 hectares under flowers.

Although the sector has been identified as a priority area for export development, there is limited interest and investment.

The government has set aside about 200 hectares of land for a Flower Park in Gishari Rwamagana district, but very few investors have shown interest, with only 50 hectares occupied.

The Rwanda Horticulture Development Authority (Rhoda) says the project was expected to produce 60 million stems initially, rising to 100 million stems every year.

This is now becoming a tall order.

Earlier on, because most horticulture products are perishable, investors in the flower sector had complained about the lack of cold-rooms.

The government installed a refrigerated room with a capacity to store 30 metric tonnes of perishable products.

Since then, only East African growers, a subsidiary of East African Growers, Kenya, has come into the Rwandan market and diversified exports to include passion fruit, snow peas, pineapples and Japanese plums — besides roses and bananas.

Rwanda’s role model was Ethiopia, Africa’s second sensation, which until late last year saw its horticultural industry grow at speeds that threatened Kenya’s supremacy.

Reports coming from Addis Ababa now, however, are depressing.

Ethiopian Prime Minister Meles Zenawi is appealing to the country’s banks not to put a number of flower farms under receivership, as threatened.

Panic coursed through the banking sector in March following reports of imminent turbulence.

Since then, 25 farms have fallen by the wayside, while four have been put up for auction after failing to service bank loans. They are yet to find buyers.

Growers have appealed for help from airlines, banks and suppliers to keep the industry going.

Addis Ababa, which was seeking to compete with Kenya, and had projected that horticulture would eventually overtake coffee in earnings, is not sure any more what the future holds.

Ethiopia is expecting to earn 60 per cent of a projected $280 million from flower exports this year.

The Horn of Africa nation earned $177.6 million last year from the sale of 1.5 billion stems.

Tsegaye Abebe, chairman of the Ethiopian Horticulture Producers and Exporters Association, has appealed to the banks to reschedule all loans and cut down on interest rates.

This is “to help ease the pain of all growers operating in the country”, he says in a proposal to Mr Zenawi, who has promised to intercede personally on their behalf.

Recently, Zenawi said the government would do everything in its power to ensure the sector, an important foreign currency earner, survives the crisis.

The state-owned Development Bank of Ethiopia, which has lent over 800 million birr to the flower sector, is struggling with rising bad debts as the limping flower industry fails to honour debts.

Ethiopia announced last February that it had registered a 40 per cent shortfall on its set target from the past 18 months and that has climbed to 50 per cent at the moment.

Meanwhile, dismayed Ethiopian exporters and growers who addressed their complaints to top government officials have still not received any positive feedback.

“The decline is very dramatic. We are trying to cope with the problem in every way we can but we don’t know what will come out of it in the future,” said Mr Abebe.

In the global flower market, Ethiopian exports have increased five-fold between 2006 and 2008.

The problems in Ethiopia are increasing by the day. Workers are striking frequently for non-payment while the taxman is threatening to take them to court for failure to pay taxes.

In Uganda, where the flower industry is not well established, some European buyers are going bankrupt.

Juliet Mosoke, executive director of the Ugandan Flower Exporters Association, says: “Some of our buyers have closed down due to insolvency while others have not expressed interest in signing up new contracts”.

The prices have also dropped considerably, so much so that they at times do not cover freight charges.”

Growers are asking the government to provide them with a guarantee fund to help them weather the global financial crisis.

Ms Musoke said banks fear to lend money because they are not sure they will be able to recover it.

Several flower companies have halted exports because of low prices.

Some firms which had embarked on expanding their yields have put these programmes on hold.

Last year, the sector saw export volume rise by 200 tonnes.

The country earned $34 million out of 6,799 exported tonnes, up from $32 million from 6,559 tonnes exported the previous year.

One exporter whose buyer had been taking 1.5 million stems says this figure has gone down to 500,000 stems.

Jacques Schrier, managing director of the Royal Van Zaten flower firm, which specialises in chrysanthemums (cuttings), said: “Our clients in Europe are going bankrupt and our sales are going down.We are not sure of the future now”.

Ms Musoke adds that the government should provide subsidies on freight, especially on surcharge and security.

Currently the firms are charged $2.44 (Ushs4,880) per kilogramme.

In 2003, flower growers pleaded with President Yoweri Museveni to stop banks from selling off their businesses.

Following Museveni’s intervention, the Bank of Uganda appointed consultants from Nairobi to study the sector and make appropriate recommendations.

The consultants identified the main sector problems as: high interest rates on loans in US dollars; short repayment periods and unviable sizes of projects.

The government set up a “refinancing rescue fund” to assist growers.