Cut flower export growth comes as Kenya looks to new markets

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Kenya’s cut flower segment is growing steadily on the back of strong exports, with new market prospects opening further opportunities, though the sector must contend with challenges that make it especially vulnerable to adverse weather.

Cut flower exports earned KSh42.6bn ($423m) in the first four months of 2018, a 40.4% increase over the same period last year, according to data issued by the National Bureau of Standards at the end of June.

If maintained, the sector’s strong performance could see it eclipse the full-year export total of KSh82.2bn ($816.4m) in 2017, which itself was 16.1% more than earnings of KSh70.8bn ($703.1m) achieved the previous year.

Kenya is the world’s fourth-largest exporter of cut flowers behind the Netherlands, Colombia and Ecuador, and makes up some 7% of global market share, according to Kenya Flower Council data. Products are exported to 60 countries worldwide; some 59% of domestic production is routed through the Netherlands’ flower auctions, accounting for about 35% of all flower sales in EU markets, while other key markets in terms of export market share include the UK (14%), Germany, Norway and Australia (all 3%).

Looking east and west for new market access

While looking to build on its base, growers are increasingly eyeing markets outside of Europe to expand global market share, both through improved links to Asia and an upcoming direct transport connection with the US.

The Kenya Flower Council has identified India and Pakistan, along with China and Japan, where Kenyan products have already established a presence, as key potential growth markets in the region.

China is being targeted in particular, both due to the size of its market and the strong aviation links between the two countries, which facilitates access for flowers and other horticultural products.

In July the Fresh Produce Exporters Association of Kenya announced it would step up marketing campaigns in the country to boost the industry’s profile and lift sales. While there is a ready market for Kenyan flowers in China, according to Hosea Machuki, the association’s CEO, shipments to that market accounted for less than 2% of total horticultural exports.

Meanwhile, during a meeting with South Korean Prime Minister Lee Nak-yeon in late July, William Ruto, Kenya’s deputy-president, singled out cut flowers as being among the products with the most potential to break into the South Korean market and help re-align the trade imbalance between the two countries.

Turning west, the launch of direct flights between Nairobi and New York’s JFK International Airport by flag carrier Kenya Airways in October could open up the North America market for Kenyan flower growers, with faster uplift times and lower costs boosting product appeal.

Direct access to the US, rather than routing exports through Europe, could see Kenya’s share of that market increase from present levels of around 0.4% to 10% in the medium term, according to the Kenya Flower Council.

The Kenya National African Growth and Opportunity Act (AGOA) Strategy and Action Plan (2018-23), which outlines government measures to increase exports to the US, forecasts flower exports to the country to rise from $5.8m this year to $7.5m by 2023, representing a 5.3% annual growth rate over the period.

To help facilitate this potential, growers’ representatives are seeking a commitment from Kenya Airways to secure freight space for cut flower exports ahead of the launch of regular services.

In total, the government’s Integrated National Export Development and Promotion Strategy, a plan outlining broader national trade targets, projects global exports for horticulture, of which cut flowers make up 70%, to increase from KSh132bn ($1.3bn) this year to KSh359bn ($3.6bn) in 2022.

Expansion to boost broader economic growth

The expansion of exporters into additional markets is also expected to be a factor driving broader economic growth.

While employing some 100,000 people directly and 2m indirectly, the cut flower segment accounts for just 1.1% of GDP, demonstrating its significant growth potential.

Continued gains in exports have been cited by the Central Bank of Kenya (CBK) as one of the factors driving growth in the national economy for this year. Revised estimates put year-end expansion at 6.2%, higher than the Ministry of Finance’s forecast of 5.8%, in part supported by a rebound in the agricultural sector from drought conditions in 2017.

Good rains earlier in the season were sustaining increased farm output, with cut flowers and tea in particular boosting export earnings, according to Patrick Njoroge, governor of the CBK.

Infrastructure remains hurdle to expansion

That the sector’s fortunes are so closely related to the weather highlights the continued vulnerabilities it faces, particularly in light of infrastructure shortfalls that could become more pronounced due to climate changes.

Industry figures have highlighted a series of infrastructure and legal issues, including water supply infrastructure, power supply, land registration, trade and title deeds, as among some of the hurdles facing growers.

With drought an increasing threat to production, climate change could impact Kenya’s flower sector in the years to come as the industry’s need for guaranteed water supplies will become more pressing, while expanded cold chain logistics capacity will be increasingly necessary to ensure products reach shipping hubs fresh ahead of export.

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