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Not so rosy Valentine for Kenyan flower firms

By Lee Mwiti | Updated Tue, February 14th 2017 at 09:47 GMT +3

Valentine has always been a colourful hush-hush romance period that also comes with good profits for the Kenyan flower exporters.

But as trade relations with traditional partners in Europe take a negative turn, this Valentine, and perhaps many others to come, might not be so rosy for exporters.

What makes this year’s Valentine odd is the fact that the country’s lucrative flower industry is staring at uncertain future of the Economic Partnership Agreement (EPA) – a concessional trade deal between East African Countries and Europe.

EPA is a deal that primarily provides access to EAC exports to European markets duty-free and quota-free, while the European Union gets a gradual liberalisation of tariffs in EAC markets.

The special market access is given especially to flowers, fruits and vegetables exporters. Apart from Kenya, other East African nations considered Least Developed and are however allowed access to EU markets duty-free and quota-free even without an EPA deal.

But Kenya needs the EPA deal to get market access, especially for its flower exports.

Tanzania, Uganda and Burundi have been accused of blocking the signing of the EPA deal by the rest of the EAC bloc. The initial deadline for signing the deal was last year, October 1. But the EU gave the EAC bloc more time to deliberate over the deal. The deadline was extended to February 2, this year. Uganda, Tanzania and Burundi again failed to beat this time limit.

The three countries’ tax authorities and statistic agencies failed to provide important tax and trade input data that would have facilitated the signing of the deal.

And now, Kenyan flowers are being threatened to go to the EU markets encumbered with tariffs.

The only reprieve that stands on the way, which tends to maintain the existing state of affairs, is the Market Access Regulation that Kenya signed with EU last September.

The regulation is albeit a temporary reprieve for Kenya to access the EU market as EPA negotiations is concluded.

The flower business in the world is a lucrative one. It is worth more than Sh1.1 trillion every year, and Kenya is one of the world’s largest exporters of cut stems.

Tariffs that come with not signing an EPA, makes Kenyan flower stems a lot more expensive than those grown on European soil.

And therefore, without with preferential terms the country’s products are less competitive. Kenya Flower Council (KFC) Chief Executive Officer Jane Ngige reckons the refusal by some members of EAC to sign the EPA deal would see the country’s flower exporters lose Sh4 billion monthly.

“For now, the EU has granted us what they call a market access regulation. This means we can still export flowers duty free and quota free until the final conclusion of EPA talks. We hope even if EPA deal talks fail, we still can continue accessing EU markets duty free and quota free,” explained Ngige.

Ngige also explained that the decision by Britain to exit the European market cast a nightmare for Kenyan flower exporters.

The emotional and hurried Brexit decision is bound to lower sales, especially during Valentines season. For example, according to KFC, 30 per cent of last year’s total flower sales were made on Valentine’s Day.

Britain exiting the EU, meant a change of polices and this requires that Kenya must enter into new bilateral negotiations to access the UK market.

“We sell to them flowers in British pound. The pound is yet to recover to highs experienced when Britain was a member of EU. And this means we are not getting as much sales as we used to from their market,” Ngige explained.

Apart from Brexit, Ngige also explained that the coming of Donald Trump to the White House, with his ‘America first’ policy has seen the dollar greatly rejuvenated against other major world currencies.

Kenyan Flowers in EU markets are usually paid in Euros. The weakening of euro against the dollar means this Valentine flower sales would sink as it is likely to be overpriced for the country’s EU clients.

“Trump and his policies have brought some uncertainties in major European markets. We have seen the dollar strengthen significantly as the euro weakens. We surely will not be reaping big sales like before,” Ngige explained.

Good weather conditions are a requisite for a buoyant flower sector. And as matters rainfall go, this is one of the driest Valentines that love-struck couples have experienced in recent years.

Apart from hundreds of livestock perishing and the country experiencing untold suffering in the current raging drought, flower farms have not been spared from the gloom. “It has been a hard season and most flower farms have suffered lack of water. As you know, flower farms depend on huge amounts of rainfall as well as irrigation. But the farms have been hit hard. And yields would be hit hard too,” Ngige said.

Since the Roman and classical ages, Valentines has been a season that couples celebrate love.

And for those struck by the proverbial Cupid’s arrow, flowers have been a symbol for portraying this pious feeling of affection in a more tangible way.
But as the season comes to a climax today, there will be little to show for those who grow and export them. In the case of those celebrating this occasion, they might be required to dig deeper into their pockets to express their feelings with a bouquet of roses.