Faltering Flower Fortunes



The flower sector in Ethiopia has grown at lightning pace over the past 10 years. In 2007, it was reported that it had taken Ethiopia five years to achieve what Kenya did in three decades, becoming the second largest exporter in Africa next to its southern neighbour. There are, however, several issues, which are hurting what is an incredibly important part of Ethiopia's burgeoning economy, reports KALEAB MINDA, FORTUNE STAFF WRITER


Gemeda Dadi, 21, was jobless for three full years before joining Sher Ethiopia Plc -a huge flower firm in Ethiopia, contributing to 65pc of the aggregate Ethiopian horticulture export.

Sher’s headquarters is located in Ziway town inOromiaRegionalState, 163km from Addis Abeba. Its entry into the burgeoning Ethiopian flower industry in 2005 was a landmark event, as it became the largest farm inEthiopia, occupying 500ht. It had already been engaged inKenyafor over 15 years. It is currently requesting for even more land from the Ethiopian authorities.

The Company had created13,000 jobs for residents of Ziway and its environs.

Most of the people Fortune approached are happy with the Company’s investment in social infrastructure.

“Sher has not only been benefiting me, but my whole family,” says Gemeda, who was working in the flower farm on a sunny afternoon, on January 3, 2014.

In 2004, the two Dutch owners of Sher, Gerrit and Peter Barnhoorn, were invited by the Ethiopian government to set up a project inEthiopia. They were particularly emboldened by the support and encouragement they received fromEthiopia’s late Prime Minister, Meles Zenawi, they say.

Despite its late entry into the market, the Ethiopian horticultural industry has been a success story, marking the nation’s entry into a non-traditional export product.Ethiopiais the second largest exporter in Africa, afterKenya, and ahead ofTanzania,UgandaandZimbabwe. It is also the fifth largest non-EU exporter to the EU cut flower market.

“It has takenEthiopiafive years to reach half of whatKenyaachieved in three decades,” reportedKenya’s Daily Nation newspaper in 2007. “At this rate,Kenyacould be overtaken byEthiopiain a decade.”

This sector earned 94 million dollars forEthiopiain 2007, whileKenyaearned a whopping 364 million dollars.

Ethiopia’s fast progress “leftKenyastunned,” the paper added, despiteKenya’s fourfold revenue.

But it is far from an entirely rosy picture, as the sector is also operating with many challenges. These require government intervention, according to the flower company owners.Ethiopia’s new investment policy lacks an understanding of the sector, in terms of relevant incentives, some say, and there is a lack of access to land for expansion; air freight cost is high.

“We operate under challenges, including power cuts, connection problems and improper cargo services,” Kamal Hussein, Sher’s public relations officer, told Fortune.

Jagdish Mahajan, farm manager and representative of Joytech Fresh – another of the foreign flower companies operating inEthiopia-shared Kamal’s frustration.

“Whenever the electric is down, all the fans and the cooling room will stop working,” he said. “Hence, the greenhouse temperature will rise, wilting  the plants.”

He and other mangers in the sector lamented being unable to their customers’ needs due to power cuts.

“I am not even sure if we can continue in this frustrating condition,” Jagidish grumbled.

Maranque Plant Plc is another company in the sector facing logistical challenges not of its own making. Located in Alaga Dore, 125 kms from Addis Abeba, in the Arsi Zone of Oromia Regional State, the company faces challenges that it says that reduce its ability to generate more foreign currency and meet the target the government has set.

Although witnessing an increment in its flower cutting in 2013, with 360 million cuttings exported mainly toJapan, theNetherlands,South Africaand the US, it complains of complications in cargo services, among other challenges.

“Our main challenge is the cargo service,” Hebelom Tamerat, export department head at Maranque, told Fortune.

Initially, the Company was using KLM Royal Dutch Airlines, which had direct flight from Addis Abeba toAmsterdam- its main market destination.

When KLM terminated its Addis-Amsterdam flights in March 2013,Maranque was forced to use Ethiopian Airlines (EAL), which has a stopover inBelgium, causing delays.

“Sometimes, we also face delays, due to offloading and improper handling from EAL,” said Hebelom.

Some, like the Sher, which faced the same problem, have even gone to the extent of requesting that the government allows them to purchase their own aircrafts. They will then be able to transport roses more quickly and conveniently.

Although the flower exporters expect remedies for the challenges they face, the response from the Ethiopian Horticulture Development Agency (EHDA), is hardly an indication of remedy coming in the near future.

“The complaints are far too exaggerated,” says Mekonnen Hailu, public relations officer with the Agency. “They have been benefitting from the attractive  incentives the Agency has devised to support the horticulture sector.”

Mekonnen cites the tax holiday period to validate this argument. Initially, only five years was given as a tax holiday period to the companies. This time around, however, it has been extended to seven years. The Agency’s experts, he says, have been providing assistance in technical and environmental aspects.

Tilaye Bekele, executive director of the Ethiopian Horticulture Producer Exporters Association (EHPEA), argues the government could do more. He argued that the lack of a competitive cargo service, in addition to the absence of consolidated services is hampering the performance of the sector.

Out of 120 foreign and local flower companies operating inEthiopia, 96 are members of the Ethiopian Horticulture Producer Exporters Association (EHPEA).  Seventy-three out of the 120 investors invested through Foreign Direct Investment (FDI), while 11 are joint ventures and 36 are local companies.

 

 



By KALEAB MINDA
FORTUNE STAFF WRITER

Published on January 12,2014 [ Vol 14 ,No 715]


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