Sitting in his office at the Green House on Ngong Road, Nairobi, Mr Clement Tulezi, the chief executive officer, Kenya Flower Council, stares at his phone. His fingers occasionally flick at the screen of his smart phone. He is neither checking his email nor the weather, but following up on scheduled meetings with agriculture stakeholders and standards bodies to sort out the crises bedeviling the floriculture industry.
The sector, he says, has been gripped by a shortage of essential fertilizers due to the lacklustre service by the Kenya Bureau of Standards (Kebs). New stringent and lengthy local inspection regulations of fertilizers, have led to complications and delays.
“Fertiliser imported two months ago is still in the store. This has increased demurrage (penalty costs for failing to unload on time) costs for importers.” The umbrella body for growers and exporters is currently urging the regulator to speed up the process, as it is a threat to the industry.
“We believe this is a kneejerk reaction to the sugar industry scandals. We need a reliable flow of fertilisers to beat our competitors in the floriculture sector,” Mr Tulezi says.
“As much as we appreciate the controls Kebs is putting in place to ensure quality and conformity to standards, this should facilitate the industry. We are doing everything possible to avert a possible collapse of the industry,” a frustrated Mr Tulezi adds.
Previously, Kebs appointed inspectors to certify the quality of fertilisers in the country of origin. Currently, however, all consignments are being re-inspected Mombasa Port.
“Sometimes the inspection results from the country of origin may vary so widely from the Kenyan ones that we question the quality of the testing and the equipment used,” said Mr Tulezi.
The industry is also apprehensive about the recently signed Tax Laws (Amendment) Act 2018, which subjects all agricultural pest control products to 16 per cent VAT. This tax has been criticised by people saying it will increase the cost of pesticides and consequently that of agricultural production.
“Use of pesticides in the flower sector accounts for about 25 per cent of the production cost. Adding 16 per cent tax, will increase costs and make the end product expensive. Kenyan growers will thus become uncompetitive in the market.”
Pesticides are crucial because when not applied, pests and diseases contribute between 40 per cent and 100 per cent crop losses.
“The tax may also increase counterfeit pesticides by encouraging imports of cheaper zero-rated pest control products from neighbouring countries, which may compromise quality,” says Mr Tulezi.
He is pushing for bilateral discussions on taxation, energy and transport between the government and the private sector. The tax regime, high cost of labour, inputs, land, energy cost and water, Mr Tulezi explains, are vital parameters in floriculture production. The government needs to make them accessible to boost business.
“We are lobbying to lower these taxes because if we do not, investors will consider other countries,” he adds. “Ethiopia, Zimbabwe, Tanzania and Uganda are steadily playing catch-up in floriculture export volumes and if we are not careful, we will be overtaken.’’
The sector employs about 4 million Kenyans and might resort to laying off people, as a cost-cutting measure.
To boost earnings, flower producers have been pushing for a local flowerauction, which would enable players to source direct clients and encourage value addition. Mr Tulezi warns: ‘’This country is still not ripe for such an auction, due to logistical and cold room infrastructure hiccups. Building a global flower auction at the moment is a long shot.”
In Kenya, floriculture is a booming sector, with exports to more than 60 countries.
In 2017, the cut flower industry recorded a 20 per cent rise in revenue to hit Sh82.2 billion from 159,961 metric tonnes of exported flowers. “We have shown double-digit growth every year. From my observations we will be able to surpass the 2017 figures this year,” he adds.
Touted as the liberator from a flight logistics nightmare, direct flights to the United States are seen as a game changer on the export markets scene. Industry players are now angling for the US flower market that stands at Sh10 billion.