Kenya is projecting a 10 per cent drop in earnings from its flower exports as East Africa’s cut-flower industry registers another year of mixed returns.
Uganda expects earnings to stay flat, as growers blame high production costs and taxes on flowers by the European Union. Tanzania, on the other hand, expects a 10 per cent increase in earnings owing to improved market access.
The EU had imposed an 8.5 per cent tax on Kenya’s flower exports pending its reinstatement on the list of countries eligible for duty-free access to the EU market, subsequent to signing the Economic Partnership Agreement with the EAC past the agreed deadline of October 1, 2014.
The blocs signed the EPA in mid-October in Brussels.
Jane Ngige, the chief executive officer of the Kenya Flower Council, said the country is expecting a 10 per cent reduction in earnings from last year. This is as a result of high production costs following the government’s decision to introduce a withholding tax on consultancy services to the industry, and import duties by the EU.
Ms Ngige said the increased costs would result in a 10 to 15 per cent reduction in volumes.
“With import duty now being imposed on Kenya’s flower exports for accessing the EU starting October 1, we are unlikely to earn the same income as last year. We anticipate a reduction in earnings as well as the export volumes,” she said.
She added that relief would only come after Kenya is reinstated to the list of countries whose products are allowed to enter the European market duty-free. The process is expected to be completed by the end of December.
Kenya earned Ksh45 billion ($491.4 million) from 123,000 tonnes of flowers last year, with the European market accounting for 40 per cent of the country’s horticulture exports.
Uganda has blamed the oversupply of flowers in the international market for its flat earnings. The executive director of the Uganda Flower Exporters Association, Juliet Musoke, told The EastAfrican that Uganda expects to earn $46 million from 7,000 tonnes of flowers, almost the same volume and value as last year.
“Earnings from flower exports are likely to remain the same because business has not been good in the past three months. There’s either a high supply of flowers at the international market or consumers now prefer other types of flowers,” said Ms Musoke.
Uganda aims to increase the area under flowers from 250 to 450 hectares, and push earnings to $50 million annually. Tanzania is projecting a 10.4 per cent rise in earnings, to $414 million, based on improvements in the economic environment, and Kenya’s move to lift the ban on Tanzania’s flower exports passing through Jomo Kenyatta International Airport last year.
Rwanda, which currently produces 1.4 million stems of summer flowers per year, mainly for the local market, is aims to increase production to 54 million stems per year, the level of output that will allow it to break into the international market. When those targets are achieved, the country projects earnings of $9.83 million from flower exports.
The Rwandan government plans to increase the land under flower production to 115 hectares in the next five years, to sustain local and export markets that are growing at 4.4 per cent per annum.
According to officials from the Ministry of Agriculture, the large volume of flower production will cushion the economy against the widening export - import gap.
“Cut flower exports should reduce the imbalance in trade,” Minister of Agriculture Tony Nsanganira said.
Additional reporting by Adam Ihucha and Kabona Esiara