The World Bank, in cooperation with the Kenya Flower Council (KFC), organised a series of video conference-based seminars on topics pertaining to competitiveness in the floriculture industry. The 5th seminar, held on the 29th of November 2011, covered the issue of global competitiveness of floriculture production in the East Africa Region. Representatives from Ethiopia, Kenya, Tanzania and Uganda participated in the videoconference.

ProVerde was asked to prepare an issue paper on the competitiveness of the Kenyan flower industry and by extension the East African producer’s compared to other global producers and exporters. The paper provided an important contextual and experiential learning point for the other countries involved in the videoconference. Results from the study were presented and discussed during the conference.

The paper provided insight into:
- The developments in the global flower industry over the last 10 to 15 years, targeting the EU market. Highlighting experiences and lessons learnt from leading exporting countries.
- A bird’s eye view of the policy and policy guidelines that are operational in the major flower growing countries was given.
- Driving forces for horticultural development were identified. Incentives which really promoted the development of industries in the leading exporting countries are brought to light.
- Existing SWOT analyses of the Kenyan flower industry were reviewed, taking into account results of the preceding videoconferences and lessons learnt in other leading countries.
- Finally, the paper provided recommendations to strengthen the position of the Kenya flower industry for further growth in the next 10 years.

Europe has issued a fresh warning of possible revenue losses for Kenya should the East African Community (EAC) fails to reach a trade deal soon.

“Kenya risks taxation on its exports to Europe by virtue of economic strength if the trade talks stall”, Mr Bernard Rey, head of the European Delegation told players in the horticulture sector. “EAC should realise the risks of the current situation of uncertainty. Burundi, Rwanda, Tanzania and Uganda, all are least-developed countries, will enjoy duty-free quota access to the EU markets even if the EPA (economic partnership agreement) is not signed,” Mr Rey
said. “But Kenya will risk seeing tariffs imposed on a good number of exports to Europe including horticulture products”.

The EU said it was concerned that negotiators from the East African team are yet to respond to its latest move to relax their position over the terms that need to be met for a new trade pact with East Africa to be concluded, frustrating the talks.

The region —under the EAC bloc— has been negotiating the contents of EPAs with European Commission since 2007 — the deadline that World Trade Organisation gave its members to scrap all the non-reciprocal preferential trade agreements such as the ones Europe used to extend to its former colonies.

For Kenyan exporters, this legal void has created a lot of uncertainty. They cannot tell for how long the European Commission will continue to extend the preferential trade relations. And even as those preferential terms last, exporters are well aware of the enormous risk they are exposing themselves to since there is no treaty to turn to in case of a dispute. “Growers are looking to the EU being an important destination for the Kenyan products to hasten the negotiations and provide assurance that whatever happens, Kenya, under special circumstances, will not be worse off,” said Kenya Flower Council in a statement.

Source: Business Daily

The country’s foreign exchange from horticulture dropped 2.8 per cent from KSh 73.7 billion in 2008 to KSh 71.6 billion last year.

According to the Daily Nation, produce for export fell due to drought and a drop in market demand for some products due to recession in Europe, Kenya’s main market.
Relative to 2008, the combined effects of these two caused an overall fall of 14.8 per cent in the quantity of exports.

Difficult year
“In 2009, it was a difficult year but which the horticulture sector performed better than expected helped by the October-to-date rains, and depreciation of the Kenya shilling to the US dollar and other major currencies by at least 13 per cent,” said Fresh Produce Exporters Association of Kenya (FPEAK) chief executive Stephen Mbithi on Thursday.

“This depreciation of the shilling helped the sector greatly, since exports are paid in foreign currencies and domestic costs such as labour and inputs are paid in shillings.”

Despite the drop in earnings, horticulture remains the highest foreign exchange earner ahead of tea and tourism.

Last year tourism brought in KSh 62.4 billion while tea earned the country KSh 69 billion.

Flowers accounted for 51.8 per cent of the 2009 export value with fruits and vegetables comprising 48.2 per cent thus maintaining 2008 export levels in terms of quantity and value.

Cut flowers made up 95 per cent of all flower exports.

Reduced market
“Fresh vegetables accounted for 24 per cent of 2009 exports but suffered from both drought and reduced market demand, resulting in a fall of 5.5 per cent in exported quantities and value, equivalent to a 14 per cent fall in dollar returns,” said Dr Mbithi.

Processed fruit and vegetable products accounted for under 10 per cent of exports respectively but suffered most from reduced market demand, with exported quantities of canned beans and pineapple products falling by 55 per cent and 24 per cent respectively, compared to the previous year.

Exports of fresh fruit, particularly avocado, mango and passion fruit, increased by 46 per cent.

Although fresh fruit accounted for only 3.3 per cent of total exports it was the fastest growing category in 2009 with a wide range of regional, Middle East and European Union export destinations.

Source: Daily Nation

CBI’s Export Development Programmes (EDP) for cut flowers are designed to help entrepreneurs in selected African countries to adapt to EU market requirements in order to create conditions for market entry or market consolidation. ProVerde has been involved in many parts of the programme.

Each country programme combined different elements: technical assistance, training in export marketing and management and market entry assistance. In Egypt for example, the programme mainly focused on logistic cooperation and certification. In Kenya, CBI was of the opinion that there is enough knowledge available in the country itself to help to companies to develop their product quality, so instead the programme focused on developing export marketing (including a market tour to the Netherlands), HRM skills of the middle managers, and cooperation between the farms. In Uganda, improvement of product quality and farm management were the main issues, next to marketing training.

ProVerde involvement encompassed, amongst which:

Kenya

• Series of workshops on export marketing and corporate social responsibility.
• Market scan “Position of the Kenya flower industry in the EU”.
• Series of workshops on strategic planning and writing an export marketing plan.
• Individual farm counselling sessions.
• Market tour and meeting event.

Uganda

• One-week seminar and market tour in The Netherlands.
• Seminar & on-farm training: “From Product to Market orientation”.
• Workshop “Internal and External Customer Orientation”.
• Workshop “Building partnerships in the European flower market”.

Egypt

• Market tour and seminar.
• Strategic marketing seminar and clustered farm visits in Egypt.
• Seminar and clustered farm visits on Corporate Social Responsibility.

South Africa

• Workshops on entrepreneurial skills for flower exporters.
• Individual counselling session.

Market scans
In preparation of training missions, ProVerde carried out a number of market scans. The main objective of these market scans was to get a better understanding of strong and weak points of the floricultural sector in the specific African country and to identify opportunities and threats, all from the view of the European customer. Typically, a number of managers in the Netherlands flower industry were interviewed who have experience with cut flowers and foliage from that specific African country. The results of the market scan were used in the workshops and provided to the companies participating in the programme.

Handbook Cut Flowers
ProVerde compiled te ‘Handbook Cut Flowers’. The handbook is an information source and reminder of all topics discussed during the Export Coaching Programme for Cut Flowers in Egypt, Kenya, Uganda and Zambia. It will also help exporters deal with some practical problems. It contains useful checklists, exercises, practical worksheets, and questionnaires.

During a series of market tours organised by ProVerde for CBI, companies were invited for a one-week market tour in The Netherlands.

When having the desire to export to the EU, it is essential for exporters to understand how the market operates. Who is buying flowers and what does that buyer expect from it? What happens with price and market position if this expectation is not fulfilled?

The market tours generally consisted of a combination of company visits and supporting workshop trainings.

The company visits focused on the most important players in the logistics and market chain of flowers in the Netherlands: from arrival of flowers to transport, agents/importers, auctions, buyers and outlets like supermarket and flower shops.

The programme was set up as a practical exercise. In this way, the programme linked directly with the day-to-day work experience and responsibilities of participants. To make sure that the market tour would be a lasting experience, participants received assignments for each visit and were asked to make an action plan and formulate learning points to present to their colleagues.

A technical team from countries in the East African region, which has been meeting in Kampala, Uganda, has agreed on a pact paving the way for free movement of labour in the region. Once the Kampala Common Market Protocol is endorsed, professionals, services and capital owners would be able to move freely in the five countries of the East African Community (EAC).

Negotiations ended 24 September with a meeting of the council of ministers from the region who will iron out the final details to be presented to the heads of state for signing in November 2010.

Source: New Vision

Kenyan flower exports may drop 14 percent to 80,000 tonnes this year due to drought and a depressed world market, the chief executive of the Kenya Flower Council said.

Flower exports are the leading foreign exchange earner for the east African country and like other agricultural commodities has suffered from insufficient rainfall.

Production in the first nine months of 2009 fell at least 8.6 percent to 64,017 tonnes from 70,096 tonnes during the same period last year, according to KFC statistics.

“We are now targeting 80,000 tonnes of flower exports by the end of the year compared to last year when we did 93,000 tonnes,” Ngige said late on Wednesday.

“As per September, production had dropped … due to low demand in the market and the abrasive weather but we hope it will pick up as we head to the festive period.”

The value of exports fell at least 28 percent to 22.71 billion shillings over January and September.

Ngige said that the current drought had played part as farmers cut their production due to lack of water.

“The weather has been abrasive making water availability a problem and the farmers have been forced to cut down their production,” she said, adding that some farmers had laid off their workers.

Ngige was however confident that things would improve as the United States and Japanese markets had warmed up to Kenya flowers.

Kenya accounts for 35 percent of the flower imports into the European Union. Uganda, a neighbouring producer, is also suffering the effects of the global downturn.

Source: Reuters (22 October 2009)

On Monday 12 October, the Dutch supermarket chain Albert Heijn introduced mixed long roses under their AH Pure & Honest brand (AH Puur & Eerlijk). During a short ceremony in Zaandam, Mrs. R.C. Rono, Ambassador of Kenya, presented the first bunch to Mr. Albert Voogd, Director of Commerce of Albert Heijn. During the next two weeks, all Albert Heijn supermarkets will focus on the Pure & Honest theme. This new brand of Albert Heijn makes it easy for customers to choose responsible and sustainable products.

Ahold is an international group of quality supermarkets and foodservice operators based in Europe and the USA. Ahold’s subsidiary Albert Heijn is the first and largest supermarket chain in The Netherlands. The company operates stores in a number of formats: the everyday supermarket, the larger Albert Heijn XL for the weekly groceries (4000 square meters), the convenience stores Ah to go and the internet delivery service Albert.nl. Almost 200 of the Albert Heijn are run by franchisees.

A water rationing mode currently effected in Naivasha, the bedrock for flower farming, is likely to deny the country the revenue from improved sales ahead of the onset of the peak flower season later this month.

Analysts say the move is adding to the troubles the sector is facing. The industry reported a decline in demand for its products in key markets since the onset of global recession last year, as production drops further with the ongoing drought.

About 80,000 tonnes of the produce is expected this year, a decrease from last year’s production of 93,000 tonnes, said Mrs Jane Ngige, the Kenya Flower Council (KFC) chief executive.

Naivasha-based horticulture farmers, just like many other Kenyans, bear the brunt of a raging drought that has forced the country into an electricity rationing mode and left millions starving.

The prevalent drought has taken a toll on the sector even as it reawakens from the current lull ahead of the September – July season, said Mrs Ngige.

Flower producers in region rely on Lake Naivasha to water their farms, but priority is given to human consumption.

Limiting the amount of water going into the flower farms could slash productivity in the horticulture industry that accounts for five per cent of the gross domestic product (GDP).

Overall agriculture contributes 25 per cent of the country’s wealth.

It also threatens the performance of small and medium sized enterprises as well employment of thousands in the flower firms.Apart from irrigating the farms, water is also used to reduce dust on the loose surface roads used to transport the produce to the airports.

Kenya is the world’s leading exporter of cut flowers with Europe as its main market that takes in more than 80 per cent of total exports. Farmers are now seeking government support to grow the sector and move into emerging markets.

“We need a government fund to organiser flower farms. We are looking at Sh150 million per year to organise the sector.”

In 2008, Kenya earned Sh40 billion from flower exports; that, along with other commercial crops contributes a quarter of the country’s wealth.

According to KFC, the share of Japan has grown by 20 per cent in the last one year. While the US market has embraced Kenyan flowers, the industry is unable to supply the niche flowers and in the right volumes.

“The US is a volumes market. There is renewed demand for small head roses, but we are unable to supply them currently,” said Mrs Ngige.

According to the Trade ministry, the Cabinet has already approved the transformation of export processing zones into special zones in a deliberate move aimed at encouraging more investment as well as retaining existing investment in the country.

If the plans go ahead, the country will be adopting a Chinese model for development by transforming the Export Processing Zones into Special Economic Zones (SEZ’s).

Under the programme, the area along the railway line and the main Nairobi-Mombasa highway will be transformed into the Athi Basin Industrial Corridor.

Trade assistant minister, Omingo Magara said the move will reduce the ‘prohibitive’ cost of doing business.

“Two major flower farms have relocated to Ethiopia due to high cost of doing business in the country,” he said.

The government says it intends to increase the volume of water reserves through long-term measures, including the building of eight dams.

The sub sector has recorded very high growth in volume and value of cut flowers exported over the years. Remarkable growth is attributed to massive investments by both local and overseas investors, aggressive marketing by growers and availability of air freight.  Kenya is a lead supplier to the European Union, contributing over 35 per cent of all flower sales. Export volumes has grown from 14,000 tonnes in 1990 to 93,000 tonnes exported in 2008 an increase of about 700 per cent over the period. The value of flower exports in 2008 stood at Sh40 billion.

Source: Business Daily Africa (17 Sept 2009)

Recently published trade data (Eurostat) covering the year 2008 shows that The Netherlands remains the leading gateway for flowers from a number of different developing countries. Nevertheless, one leading supplying country can be recognised: Kenya. Imports from Kenya increased by 13% annually between 2004 and 2008, while imports from Ecuador increased by 20% annually during this period. Imports from Colombia and Tanzania showed significant increases as well. However, the most notable performance was that of Ethiopia. Imports from Ethiopia increased by 193% annually, with imports amounting to € 63 million in 2008. Only four years before, the imports from this country were still negligible. In contrast, imports from Zimbabwe decreased by 18% annually during the review period, due to the unstable economic and political situation.

Source: ProVerde, Eurostat