The Kenya Flower Council (KFC) has warned that freight costs will remain high well into the upcoming Valentine’s Season, offering no relief to Kenyan flower exporters who are also confronting reduced demand from key markets and high input costs as inflation rages across the world.
Insufficient freight capacity is also weighing down on the flower exporters’ outlook for business this Valentine’s season, the umbrella body for Kenyan flower farmers, Kenya Flower Council (KFC) said yesterday.
About 40 per cent of annual sales made by Kenyan flower farms to European markets are conducted during Valentine’s season which will be celebrated next week.
While Valentine’s Day is celebrated on February 14 every year, players in the sector start shipping flowers to European markets from mid-January.
KFC CEO Clement Tulezi, who spoke ahead of Valentine’s Day next week, said Kenya which generated Sh110 billion in sales in 2021 suffers a shortage of cargo capacity of about 2,000 tonnes.
“Nothing has improved (in terms of cargo capacity),” Mr Tulezi told Shipping and Logistics yesterday. “The industry is really struggling.”
Per-kilogramme freight costs are averaging at $2.9 (Sh301) Tulezi said. Straight roses fetch between $1.9 (Sh235.6) to $2 (Sh248) in European supermarkets.
Insufficient capacity, high freight costs, and reduced demand for luxury spending in key European capitals are expected to affect supply.
A lower-than-expected performance will be a repeat of last year where flower exporters also faced headwinds. “We expect a decline for 2022 earnings and volumes of cut flowers of between 10 per cent to 12 per cent,” said Tulezi.
“This season the prices of inputs have remained high. The global recession on major markets and pressure on fuel and gas has seen people reduce spending on ornamentals like flowers; they have to make a choice - buy food or flowers.”
The global economy is increasingly at risk of sliding into recession, recent surveys have shown, as consumers face with generation-high inflation rein in spending while central banks are tightening policy aggressively just when support is needed.
Spiralling costs for farm inputs like fertiliser on the back of global disruptions have also seen flower exporters faced with higher input costs.
Orders go up
Over 70 per cent of Kenyan flowers are sold in the European Union through the Netherlands and United Kingdom, says KFC. During Valentine’s season flower orders start going up from mid-January to around the 8th of February.
Mr Tulezi repeated an earlier request to the State to allow licensing direct access to international markets from Nairobi by foreign airlines to lower costs per kilo of cut flowers and ornamentals.
“More foreign airlines need to be allowed in Kenya,” he said. He said flower exporters were piloting the export of flowers through container ships.
“We see shipping by sea as an alternative,” he said. “We are pushing out about 15 containers every week.”
The flower sector is also seeking the fast-tracking of Value Added Tax (VAT) refunds by the government of between Sh12 and Sh13 billion.
Tulezi said the delay in refunds has compounded the liquidity challenges facing flower exporters. “Some growers are owed upto Sh1.2 billion,” he said.
President William Ruto said earlier he will take charge of a push to unravel the challenges that inhibit investment in Kenya including tackling the VAT refund headache that has become a moving target for the government.