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Friday, February 24, 2006

For a Better Deal than Kenya


Water shortages and strong local currency are driving Kenya’s flower industry over the border.


imageEast Africa

Map: Welt Atlas

As a friend of ours formerly in the banking business once put it, “Money never sleeps.” Nowhere is this truer than in the highly competitive flower industry, where companies are always looking for—and finding—a better deal.

That impulse not so many years ago rocketed Kenya from nowhere into the heart of Europe’s flower market. Recent estimates put Kenya’s flower exports at $350 million. But how quickly investors move on.

Catherine Riungu’s recent story for the East African reports that Kenyan flower firms are departing for advantages elsewhere. “Kenya has commanded a 25 per cent market share (in Europe) since 2000, after edging out Columbia and Israel and, last year, its share increased to 31 per cent. But now, emerging suppliers such as Rwanda, Ethiopia and Uganda have designed intensive marketing programmes to promote their countries as friendly for foreign flower investors.”

Kenya’s farms are beset by several serious problems. There have been increasingly well-organized labor actions on the huge farms around Lake Naivasha. And, we now learn, there are dire problems with the lake itself. Riungu reports that Kenya has been in a drought since 1997, lake levels have steeply declined, and the government has been perilously slow to safeguard supplies of water.

“In 1995, the lake was designated as a Ramsar site, a wetlands of international importance due to its rich diversity of flora and fauna. But with the expansion of the 4,000-acre flower farming sector on the lake, the population around the lake has grown in the past 20 years from about 7,000 to about 300,000.”

A spokesperson for one large flower farm said that unless the government stops issuing more permits, “the flower sector will be wiped out in five years because there won’t be any water for irrigation.”

Further, the strong Kenyan shilling is stifling exports. Farms in neighboring Uganda, Ethiopia and Tanzania hold immediate competitive advantages. The Kenya Flower Council has joined other export business to pressure the Central Bank to stabilize the shilling.

Meanwhile, the flower industry in Ethiopia is booming.

“The major United Kingdom retail chain Morrisons has announced recently that it would soon stock Ethiopian flowers such as roses, carnations and the red-brown berried hypericum…Indian floriculturist Karuturi Networks was among the latest investors to set up shop in Ethiopia recently with a 50ha farm at Holeta, west of Addis Ababa, and plans to acquire an additional 50ha.” Riungu’s story also reports that five Kenyan growers—unnamed—have bought large farms in Ethiopia.

While Kenya struggles with its labor force, a drought, and the foot-dragging of its national bank, money—with open eyes—is looking elsewhere.



Posted by Julie on 02/24 at 11:56 AM
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