Market News

Flower farms push for special zones


A worker in a flower farm. FILE PHOTO | NMG

Flower producers want the enterprises granted Special Economic Zones (SEZ) status to cushion them against runaway costs that are fast eroding competitiveness in the export markets.

Kenya Flower Council chief executive Clement Tulezi said while the SEZ Act was assented to in September, 2015, and came into effect on December 15, 2015, regulations to operationalise it were yet to be gazetted.

“We deal in export-bound only products that warrants us to enjoy SEZ status. New regulations will create licensing processes and state fees applicable while enabling flower enterprises to enjoy tax benefits that come with this authorised economic operator special status,” he said.

In 2018, the floriculture industry emerged third with Sh153 billion coming after diaspora remittances that raked in Sh272 billion and tourism (Sh157 billion).

Mr Tulezi said SEZ the status will help ease challenges attributed to new punitive regulations on control of plastics and double inspection of imported fertilisers.

Flower companies are losing the market to Ethiopia, with Finlay closing down two farms in Nandi. Every year, Kenya doles out billions of shillings, mostly to foreign-owned export-oriented firms in the form of tax credits, deferrals and exemptions.

Data from Kenya Revenue Authority (KRA) shows that tax handouts, which stood at Sh220.8 billion 10 years ago, rose steadily to hit Sh455.7 billion in 2016 and Sh478 billion in 2017.

“Flower companies pay up to 45 levies and taxes per year where the costs borne are passed onto flower buyers making our flowers uncompetitive on the global flower market. Kenya must abolish these taxes and levies or continue losing out investments to its neighbouring countries that offer tax incentives, VAT exemption of equipment and inputs, deduction on cost of energy, availability of water and accessibility to land,” he said.

KFC also called on the government to allocate development funds to the multi-billion shilling industry saying this could help smallholder farmers venture into flower farming thereby creating new jobs and businesses.

“Soluble fertilisers are in acute short supply, thanks to the abrupt change of rules on importation. This has seen fertiliser prices triple with Calcium Nitrate that used tom cost Sh40, now being sold at Sh90 a kilo due to demurrage costs. We ask government to mitigate this by building capacity at the Kenya Bureau of Standards to avoid unnecessary double inspection of imported fertilisers,” he said.