EPAs may stifle struggling flower industry
Inter Press Service, Johannesburg
EPAs May Stifle Struggling Flower Industry
By Alexis Okeowo, Kampala
19 July 2007
Uganda’s flower industry needs government incentives and preferential European Union (EU) access to succeed, say members of the east African nation’s floricultural sector.
Uganda is Africa’s fifth-largest flower exporter, dealing solely in roses and chrysanthemum cuttings. The industry earns over 30 million dollars annually in revenue from over 7,500 metric tons of exported flowers. Some 142 hectares of roses and 32 hectares of chrysanthemum cuttings are currently under production.
In 1992, Uganda joined major African exporters such as Kenya and Zimbabwe in trading with the Netherlands, the world’s largest fresh floricultural products exporter. Flowers grown domestically are primarily for export, given the high demand and better prices offered in the European Union than in local markets.
Like other African flower-exporting countries, Uganda ships its products to the Netherlands, where the flowers are then re-exported to the rest of Europe and the United States. The Netherlands is the centre of the global flower trade, accounting for 1.3 billion euros.
Costs are naturally higher in Europe, where growers have to invest in expensive facilities such as glass greenhouses that can withstand cold weather. To reduce expenses, many international floricultural companies have opened branches in African countries. Uganda is home to three Dutch flower firms.
In 1993, only three flower farms registered exports in Uganda, but there are now 19 registered exporting farms. Uganda’s flower exporters have progressed significantly since the early 1990s when many pioneers lost their farms to commercial banks after failing to make a profit.
"The first problems we had related to the varieties of flowers we grew. Our climate was not suited to the Kenyan model that we tried to follow and we had poor returns," says Juliet Musoke, executive director of the Uganda Flowers Exporters Association (UFEA).
After many trials, growers decided that Uganda was most conducive to small roses, which are high-yielding but do not fetch as much money as bigger flowers.
Uganda’s flower industry is capital intensive, requiring entrepreneurs to be able to invest an estimated minimum of 1.5 million to 2 million dollars.
Ugandan flower investors say that they have had to back up their personal funds with hefty bank loans. The start-up costs go towards purchase of land, plant materials, greenhouses, irrigation equipment and airfreight charges
According to Stanley Mulumba, the proprietor of Ugarose Farm, the cost triples for an investor who wants their flowers grown in pre-fabricated greenhouses as opposed to wooden ones.
A few weeks ago, a joint venture between the Uganda-based Madhvani Group and the Netherlands-based Flower Direct announced that it would start the nation’s first chrysanthemum flowers farm. Madhvani Group said it expected to earn 1.4 million euros from 13 hectares in its first year.
The announcement is a key development for the Ugandan industry which has failed to attract new investors but needs to double its production to compete with other exporters in east Africa.
According to the UFEA, the current total investment in the sector is at 50 million dollars. Eight farms are owned by foreign investors, three are jointly owned by Ugandans and foreign investors and seven by Ugandans.
The UFEA wants a sector-wide expansion to 400 hectares by developing new farms, expanding existing farms and moving flower cultivation to cooler highland areas in eastern and western Uganda. But increased export volumes and earnings will depend on an investment incentive package offered by the government, Musoke says.
The pending economic partnership agreement (EPA) with the EU threatens the fragile industry. The EPAs require that the 77 African, Pacific and Caribbean countries offer reciprocal market access to their EU trade partners.
"How do we encourage industries in Uganda to grow by having them compete with multinational corporations in the EU?" Musoke asks. She adds, "You cannot have people on different development levels in the same market."
Jabber Abdul, proprietor of the farm Mairye Estates, says, "We cannot compete freely yet because we are still not ready to do without trade incentives." Mairye Estates has been in existence since 1952 but has only recently become certified by Dutch standards, which include ensuring workers’ welfare and adhering to environmental standards.
Most farms employ a minimum of 300 workers. The sector employs 6,000 Ugandans, 80 percent of them women. Workers on flower farms often endure harsh conditions from practices such as chemical spraying.
"Relatively speaking, Ugandan workers are in acceptable conditions on the farms. Workers are given safety wear, there are clinics on the farms, training and information are given on how to protect themselves and some have housing allowances," Musoke says. She adds that each farm has to abide by a safety code of practice for the floricultural sector.
Airfreight charges have put a severe financial constraint on farms in recent months. "One of the main challenges facing the industry is airfreight charges, which are now 2.40 dollars per kilogramme," Musoke says. The rate is uniquely high for Ugandan exporters. Kenyan growers pay 1.70 dollars per kilogramme and Ethiopians 1.50 dollars per kilogramme.
The reason is that Uganda is a landlocked country which depends on the air carriers of its neighbouring states, given that it has no national airline. Growers pay increased rates to foreign airlines.
Furthermore, the Ugandan flower market is still small in terms of the quantity of inbound and outbound cargo, which has not encouraged more airlines to enter the market. The Ugandan government, Musoke adds, has exacerbated the problem by not offering subsidies to the sector.
"It depends on the Ugandan government to offer a subsidy on fuel or handling charges. The farms are coming away with little profit," Musoke says.
Peter Mwangi, manager of Rosebud Farms, agrees. "We are enduring a lot of hardship with the airfreight charges," Mwangi says, adding that the country’s energy shortage problem has made doing business unreliable. Often, project operation costs for the year cannot be accurately projected.
Uganda’s recently released budget for the upcoming financial year includes subsidies for the floricultural sector. Incentives such as a tax holiday may finally encourage new investment and growth in the struggling industry.
