Incentives such as tax holidays, cheap land leases and low cost labor offered to horticulture investors by Ethiopia are proving too attractive to foreign flower firms operating in a difficult environment in Kenya.
In 2015, five major investor in Kenya’s flower sector relocated their farms to neighboring Ethiopia and more companies are expected to make the move this year, according to the Kenya Flower Council (KFC).
There is consensus among flower producers that Ethiopia has an edge over Kenya in tax incentives and better access to new markets to the US owing to the direct flights it operates through its national airline.
“Ethiopian government has put in many incentives to encourage investors because they have realized the country has a good climate to grow flowers,” The Star quoted Jane Ngige, KFC’s chief executive, saying at a press briefing earlier this week.
According to Ngige, the relocation of flower firms from Kenya to other countries was mainly due to difficulties in operating in the county system, non-payment of value-added-tax refunds and volatilities in the local currency.
Other reasons include poor transport infrastructure and insecurity.
In 2014, over 60 flower firms, most of them foreign-owned, warned they would relocate in mass to either Ethiopia or Tanzania if a tax-waiver agreement Kenya had with Europe under the Economic Partnership Agreement (EPA) was not renewed.
Kenyan flower farms, most of them base at the shores of lake Naivasha in the rift valley, are responsible for over 75 percent of the country’s Horticulture export.
Horticulture is a leading source of foreign exchange for east Africa’s biggest economy alongside tea exports and tourism and agriculture accounts for about a quarter of Kenya’s gross domestic product.
Earning from horticulture for the country dropped to $546 million in 2014, compared to the$1.05 billion it raked in 2013, data from the Kenya’s statistics office showed.
On the other hand, Ethiopia’s flower industry is flourishing under government incentives to investors in the sector.
The country is currently the second largest flower exporter in Africa, after Kenya, with over 100 growers taking up 1,700 hectares.
“We are now second in Africa only to Kenya, and we expect to overtake them soon,” Berhanu Ludamo, Promotion and Information Service Head of Ethiopian Horticulture Producers Exporters Association told Anadolu Agency.
With its good climate for flower farming, Ethiopia projects that more than 3,000 hectares will be put under this crop in the next five years and will earn the country over $550 million, double the $250 million it brought in 2014.
