NAIROBI, Kenya, Aug 8 – The horticulture industry is likely to weather the storm occasioned by unfavourable climatic conditions and the spiralling eurozone crisis and register Sh84 billion in total earnings for 2011.
Although the estimates represent a 7.7 percent increase over the Sh78 billion in 2010, the figure is conservative compared to the Sh115 billion that industry players had projected to rake in this year.
Fresh Produce Exporters Association of Kenya (FPEAK) Chief Executive Officer Dr Stephen Mbithi told Capital Business that the downward revision was in reflection to the debt turmoil in Europe, a market which accounts for about 82 percent of Kenya’s flower exports.
“With the debt situation in Greece, now Spain and also Italy, people are not even very sure whether they will be able to keep their jobs and therefore there might be jitteriness in their (consumers) purchasing behaviour for luxury goods like flowers,” he explained.
Kenya is the largest supplier of cut-flowers to Europe accounting for 36 percent of that market but the sector has had mixed fortunes this year. The impressive sales from the Valentines Day in February for instance were offset by the effect of the European debt crisis.
In addition, the prices have remained stable with the volumes declining marginally compared to similar periods in the previous years.
The industry is not getting any reprieve either from the depreciating shilling that has continued on its free fall, closing at close to Sh93.40 against the US dollar.
Ideally, a weak shilling would be good news for the exporters who are paid in dollars but given that the industry is heavily dependent on imported farm inputs purchased in foreign currencies, the situation is hurting them.
“We think that the mid-point should be between Sh75 and Sh80 to the dollar and Sh100 to Sh105 to the Euro” Dr Mbithi opined.
While there is not much that the sector can do about the plummeting currency, it has tried to intensify its diversification efforts in a bid to lessen the impact of the European debt crisis.
Notwithstanding the importance of the Western European market to the Kenyan producers, FPEAK disclosed that they are aggressively looking towards the Eastern Europe, Middle East and the Far East as destinations to the products which would enable them to spread the risk.
Such efforts have begun bearing fruit with Kenya now ranked the second largest exporter of flowers to Japan.
Plans to launch direct flights between Kenya and the United States in the next few years are also expected to be a major boost to this campaign.
“Make no mistake; the biggest volumes can only be sold in auctions like in Netherlands and some of the new markets will take a bit of time before they can take some serious volumes,” the CEO added.
Venturing into new markets will also help take in the excess flowers that are being produced under irrigation and thus not affected by the ongoing drought that is being witnessed in various parts of the country.