Flower Market Less Rosy in the Face of Unrests




Laketch Asfaw Burial Service, among the pioneers of burial service on Churchill Avenue, was quiet but ready to accept any walk in clients who have lost a loved one. Flowers stand outside in buckets of cool water to keep them fresh, while inside, lining the walls of the shop were various brightly coloured floral wreaths and arrangements waiting for a last minute reprieve before being thrown out at the end of the day.

“Our fresh flowers are usually those not chosen for export, which means they are not common- and a luxury,’ “We get them through a distributor who picks them up from the farm and brings them to us. And, because they are fresh flowers, they don’t last long, so we have to throw out a lot of our arrangements at the end of the day when they wilt. We usually have different suppliers. They come around and offer us their merchandise and we buy it as much as possible. We commonly use paper flowers that we make ourselves.” said Bezabih Mekuria, an employee and part of the management team of the shop.

Artificial wreaths made from paper flowers can cost anywhere from 70-80 birr, while one made from real flowers, depending on the size can cost 100-200 birr. Up to five wreaths are sold per funeral, or more depending on the needs of the client. The trend is the same across all burial services. Where real flowers are available, the services will buy them for use in arrangements and wreaths, but if flowers are not available, wreaths are made with old fashioned paper flowers.

Since the late 1990s, the floriculture industry has grown to claim an 8 pc share in the GDP with 107 floriculture companies operational in Ethiopia.

Last year alone the country gained close to 300million dollars in revenue from the export of 50,600 units of cut flowers. Flowers not chosen for the export market are diverted into the local market- to customers such as Laketch Asfaw Burial Service, as well as gift shops and hotels.

“Flower farms can take anywhere from 2-3 years to get off the ground, maybe even more depending on the size of the operation and the machinery and equipment it requires. The costs also differ, depending on the machines that need to be imported and the seedlings that are purchased. But all in all it’s a very expensive sector, costing millions to start and operate,” Gizachew Belay, a shareholder and advisor of Abyssinia Flowers told Fortune.

“The local market is not a significant portion of the sector,” Gizachew said. “Because only flowers that aren’t graded for export enter the local market, local sales make up about 1pc of a flower farm’s revenue, maybe less. A farm can produce about 200-400 boxes of flowers annually.”

Despite its late entry into the export market, Ethiopia’s horticultural industry has been a success story, seeing Ethiopia become the second largest exporter of flowers in Africa with an estimated 2pc share of the global export market, after Kenya (about 7pc), and ahead of Uganda, Zimbabwe and Tanzania.

“It has taken Ethiopia five years to reach half of what Kenya achieved in three decades. At this rate, Kenya could be overtaken by Ethiopia in a decade.” the Daily Nation, one of Kenya’s leading newspapers, wrote in 2007.

The Development Bank of Ethiopia allotted 5.1pc of 11.8 billion Br in available loans to floriculture industry. The floriculture industry has created direct and indirect job opportunities for 85,000 and 200,000 people, respectively.

In 2016, the export revenue from flowers grew by 9.5pc compared to the 2014/2015 fiscal year, and has shown a growth of 3.1pc per annum. Flowers had an 8pc share in total export revenue in 2015/2016, compared with 6.7pc in 2014/2015. Over 83pc of exported flowers went to the Netherlands, and 4.3pc to Germany.

However, in November 2015, things began to look less rosy for flower farmers. Political unrest began to stir, initially about the land allocation and resettlement of farmers to make space for farms, some of which were foreign investments. Then in August 2016, smaller protests and instances of vandalism began to lead to property destruction, vandalism and looting. Most of it was centered on government infrastructures and buildings, but then the protestors turned their attention to the flower farms. Machines and vehicles were burned and greenhouses were destroyed. More than an estimated 11,000 people lost their jobs in the flower industry due to the unrest.

Oromia region, which is the largest portion of the country with 50pc coverage, hosts 77.5 pc investments and leading the way in FDIs too.

Among the 107 farms in the country 83 of them are located in the region, that has most conducive weather and soil conditions for flower farming, as well as attractive land lease conditions and proximity to the capital and the international airport

In the last year, until the declaration of the state of emergency by the Prime Minister two weeks ago, no less than 20 farms were ransacked, vandalized and burned, particularly in Oromia and Amhara regions.

Farms run by Belgian, Italian, Israeli and Indian companies were damaged. One such company, Esmeralda Farms, a Dutch owned company, was set on fire and vandalized earlier this year, in Bahir Dar, in Amhara region, causing property damage to the tune of ten million Euros.

A social researcher who has done multiple research projects on the social impact of large scale agriculture in general and labor and social impacts of flower farms commented to Fortune asking that his name be anonymous. “The long term dissatisfaction of the local people and the legacy of these activities have led the youth to pick these farms as a target,” the expert opined.

One of the farms in Bahir Dar estimates its damage at 30 million birr, although the full extent of the issue is still under assessment by the company and the special fact finding and assessment mission dispatched by the Federal Investment Commission and Development Bank of Ethiopia, but is grateful that no lives were lost.

“We were lucky that no one lost their lives in the attack on our farm. But our employees are barely surviving their day to day life, without their monthly income since August,” said a representative of the company to Fortune.

As for the company in Bahir Dar, operations have come to a total standstill. “We are losing the brand that we worked very hard to build up. We were one of the very few companies that didn’t have to export our flowers to be auctioned in other countries like the Netherlands. We had direct customers overseas who would buy our flowers straight from us,” said the farm’s representative. “When we resume operations it will be the same hassle to break the global market, where we had firmly established ourselves before.”

Since the incidents of vandalism and property damage that accompanied the wave of protest over the last few months, stories like this are becoming unfortunately more common.

In spite of the unrest, the IMF recently released a report that affirmed Ethiopia’s positive economic growth in spite of the standstill of export revenues at 2.86 billion dollars because of weak international commodity prices and the drop in Ethiopia’s foreign exchange buffer to cover less than two months of imports.

For the moment, local consumers of flowers don’t seem to be feeling the price difference. Hotels, gift shops, wedding décor services and burial services are among the biggest local consumers of cut flowers, with a high rate of consumption due to the nature of their work. However, according to the small businesses that Fortune spoke with, prices don’t seem to be rising or falling any more than normal.

Alem Gebreselassie has owned a small floral stall on Churchill Avenue for six months. “Flowers are very seasonal,” she said. “During the rainy season, it is hard to get flowers because the conditions are very bad for the plants. So, they are more expensive. Sometimes, I have to pay 2 Br per flower, or more. But now that the rainy season is over, prices are also falling, sometimes to about 1.25 Br to 1.50 Br per flower.”

“We receive all the flowers we use when they’re returned from the airport. The prices range from 1.15 Br to 1.25 Br and even sometimes to 1.75 Br and 1.80 Br. It all depends on how many flowers are being returned from export or left the airport,” said Demes Negash, of NegashDegefu Funeral Services on Churchill Avenue.

Some larger consumers, such as Harmony Hotel, located in the Bole area, did see price differences, up to 80 cents per flower.

“We use about 2,500 flowers on an average week. When there are holidays such as Valentine’s Day, we use a lot more. But on average, we use about 1,000 flower a month in our restaurant, guest rooms and all around the hotel. The flowers used to cost from 1.50 to 2.10 birr per flower. But since the unrest in Amhara region, they cost about 2.90 birr per flower,” said Harmony Hotel’s general manager, Sileshi Debebe speaking to Fortune.

The view from the perspective of smaller businesses and consumers in Ethiopia seems to be holding steady for the moment. It remains to be seen how the flower market will rebound in the coming months and years, and whether it will be able to hold the lead it has gained in the African export sector.

 

 



By MENNA ASRAT
FORTUNE STAFF WRITER

Published on Oct 25,2016 [ Vol 17 ,No 860]


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