Horticulture export earnings drop again

Horticulture export earnings have dropped for the third consecutive year with growers blaming a strong shilling, subdued European demand and rising cost of production for the changing fortunes.

Horticultural exports dropped 7.2 per cent from Sh89.9 billion in 2012 to Sh83.4 billion last year in line with a declining trend started in 2011, according to latest Kenya National Bureau of Statistics data.
The industry had hoped to register a 10 per cent growth in the year.

“This business is no longer profitable because earnings have remained flat over the years while cost of labour, equipment and inputs continue to soar,” Homegrown CEO Richard Fox said.

Weak demand resulting from the European economic crisis and low shilling equivalent of dollar earnings also significantly narrowed the gap between expenses and revenues, discouraging farmers.

The shilling averaged 85 units to the dollar and about 115 against the Euro throughout the crop season compared to a low of Sh107 against the dollar in 2010.

The data showed that cut flower exports dropped by 13.9 per cent from Sh65 billion in 2012 to Sh56 billion.

Earnings from fruits dropped 4.4 per cent to Sh4.5 billion while vegetable growers had positive income growth of 10.4 per cent last year, bringing in hard currency worth Sh22.3 billion. The drop was also evident in actual volumes flown out.

The dwindling fortunes have rekindled debate about Kenya’s preparedness to compete for investment with emerging producers like Ethiopia.

“I see that Ethiopia is much more investor friendly than Kenya of late. They have cheaper labour, affordable air freight, easy land access and great tax incentives,” Mount Elgon Ochards chief executive Bob Andersen said. The firm is based in Kitale.

Most growers, however, see uncertainty over preferential trade with Europe where Kenya exports up to 82 per cent of horticultural commodities as the biggest threat to their investments.

The uncertainty has seen a number of growers scale down on capital investments, hurting the industry’s competitiveness even more.

“Nobody in the sector is willing to put money in long term projects because we face the danger of losing our largest market,” Mr Fox said.

Kenya and its East African Community partners have failed to formalise the preferential trade deal in the last 10 years, forcing the EU parliament to impose October 2014 as the deadline for concluding the talks.

If the pact is not signed by the deadline, Kenya’s horticultural exports will attract taxes of up to 8.5 per cent. Kenya has made slow progress in developing new markets, especially in Russia and Japan.

The Fresh Produce Exporters Association of Kenya (FPEAK) is hopeful of gains especially in China and the US.

“These markets are already familiar with our cut flowers which they currently buy via the Netherlands auctions,” FPEAK chief executive Daniel Mbithi said.