Interview: Jane Ngige
What are the real prospects for growth in Kenya’s flower industry?
JANE NGIGE: Flowers account for roughly 7% of the 26% GDP contribution attributed to agriculture. This equates to 1.3% of total GDP growth, and I expect this figure to continue to rise. The world market for flowers is projected to grow at 5% year-on-year, and this means there is space to absorb our expansion.
There are huge opportunities for value addition. Extensive growth can also be seen in terms of logistics, given the fact that flowers are perishable and we must maintain their freshness as far as possible in the value chain. As Kenya continues to upgrade its road networks and introduce new regional airports, newly irrigated parts of the country, such as Turkana, will open up. We are saving much time on bringing flowers from various parts of the country to Nairobi, which increases our capacity. Flowers also do not compete with food production in terms of land, as they only require water and sun; good soil can be substituted with hydroponics.
All of this means a positive growth trend going forward. There is no reason why Kenya cannot become a local hub for flowers. I doubt it will ever be like Amsterdam, but it will still be a strategic point globally.
What do you see as Kenya’s future export markets, and what are the challenges in this regard?
NGIGE: We have made entry into the Eastern European market, which is quite lucrative. Major strides have also been achieved in the Japanese market, which is very prestigious. Becoming the number one supplier of roses there was a huge step. Once there are direct flights to the US, we will get access to the American market. With the upgrading of airport infrastructure, which has been put on fast track, we expect that the cost of transport will be substantially reduced, as Kenyan flowers currently have to travel through Europe or South Africa.
If the current EU-East African Community (EAC) negotiations for an economic partnership agreement (EPA) are not completed by October 1, 2014, they will be extended indefinitely; however, Kenyan flowers in the market place will attract a duty of 8-12% freight on board. This will render Kenyan flowers non-competitive in a fairly saturated market. The outstanding issues in the negotiations, including the most favoured nation (MFN) clause, export taxes, domestic and export support, and some governance issues, are not deal breakers and should be resolved in the next round of talks.
How can challenges surrounding the increasing cost of production be mitigated?
NGIGE: One of the areas that has been quite challenging is the tax regime. We are talking to both the county and national government to make the regulatory environment more conducive to business and to provide a level playing field. It is gratifying to know that they are listening. Moreover, as a result of the new government, there will be no incremental cost in terms of taxes and levies.
Over and above that, we are looking at ways of determining how regulations can be better coordinated between ministries so that related services are delivered much more efficiently on the ground through single-window payment systems. The amount of money we spend just pushing paper from office to office is substantial. It can be as high as $800 per month per company. Systems that improve efficiency are one way of reducing these costs.
The farms themselves are spending quite a lot on procedures for management of quality. Many farms are adopting processes such as the Sigma Principles to improve efficiency. Once these begin to take effect and we examine how resources are used on farms, it will impact the final cost of production.
Additionally, one of the weakest parts of Kenya’s value chain has been the productivity of workers. If you compare Kenya to other countries, we employ 12-24 people per ha while other parts of the world employ 9-11 people per ha. These numbers show an improvement as we continue to examine the real issues at stake.
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