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Delayed trade pact affects
Kenyan flower industry

NAIROBI (Xinhua) -- The delay in the signing of the trade deal between the European Union and the East African Community (EAC) is affecting Kenya’s flower sector, the industry lobby said late on Friday.

Kenya Flower Council (KFC) CEO Jane Ngige said that the EU currently absorbs over 65 percent of all Kenyan flower exports.

“The industry is therefore waiting for the speedy conclusion of the deal, so that Kenyan flowers can continue to enjoy preferential access into the market,” Ngige said during KFC’s 15th Annual General Meeting.

The meeting brought the industry stakeholders to discuss challenges and opportunities in the sector. The EU parliament has set a deadline of October 2014 within which the deal should be concluded.

“If Kenya does not sign the deal by then, exports to the EU, including flowers will attract an import duty of between six to 12 percent,” the CEO said.

She added that due to the ongoing economic crisis in the Euro zone, Kenyan flower exporters will not be able to pass on the duty to the consumers.

According to KFC, tariffs will also make Kenyan flowers less competitive compared to its competitors in the South American region which have already concluded a trade deal with the EU.

Presently, Kenyan Rose cut flowers account for approximately 40 percent of all EU imports. She added that production for 2013 is expected to reach 120,000 tones, similar to the figures achieved last year.

Ngige added that the industry has been holding back investments in the sector until a deal is reached.

She said that only a timely trade agreement with the EU will safeguard investments in the floriculture sector that are estimated at 595 million U.S. dollars.

“We expect the industry to earn 502 million dollars in 2013, which is same as last year but a decline from 2011’s 537 million dollars,” she said.

The CEO said that current area under cultivation stands at 3, 000 hectares. “However, our short term goal is to increase acreage by ten percent so that we can increase the sector’s contribution to the economy,” she said.

According to the ministry of agriculture, the flower sector accounts for1.6 percent of the Gross Domestic Product (GDP).

KFC Chairman Richard Fox said that floriculture industry is seeking to diversify into other international markets which have responded positively to promotions.

“Already South Korea, Russia as well as and Eastern Europe account for over 30 percent of export sales,” he said.

The chairman added said that Kenya and Russian governments are currently in talks with a view to reviewing trade protocols. He added that sales to the U.S. market will be boosted once there are direct commercial flights linking the two nations.

The chairman said that air and ground transport alone account for 50 percent of all costs.

Fox, who is also Sustainability Directory at Finlays, said most of the costs are incurred in foreign currency and so the industry prefers a stable foreign exchange regime. “Only the wage bill is paid in Kenya shillings as all inputs such as fertilizer are imported,” he said.

He added that KFC is partnering with the Kenya Association of Manufacturers in order to develop ways of improving operations efficiency.

“This will help the industry maintain competitiveness as the sector has low profit margins,” he said.

“In addition, we know that some enterprises have wastage of primary energy inputs of between 10 to 30 percent,” he added.

Fox said the industry is now encouraging local sales of flowers so as to tap into the growing middle class.

“Small scale farmers should also improve their standards so that they can access the more lucrative export markets,” he said.


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