Kenya lost five major investors in the flower sector last year due to a punitive tax regime and more could relocate to other regional markets in 2016, the Kenya Flower Council has warned.
KFC chief executive Jane Ngige said the five investors relocated to Ethiopia, to tap into a raft of incentives, adding that there are flower growers who are considering taking investment to Uganda and Zimbabwe.
“The entry of county governments came with a multiplicity and duplication of taxes and levies, making it more expensive to do business and even discouraging to new investors,” she said yesterday in a media briefing in Nairobi.
“Ethiopian government has put in many incentives to encourage investors because they have realized the country has a good climate to grow flowers,” she said.
Some of the incentives that Ethiopia is wooing investors with include subsidies on freight, large serviced parcels of land and proper infrastructure to enhance production.
The Kenya National Bureau of Statistics data indicate the flower export volumes amounted to 136,601 metric tonnes in 2014 and earned the country Sh54.6 billion.
According to KFC, Kenya's flower sector experienced rapid growth between 2000 and 2010, with exports rising from 40 to 120,000 tonnes, which is equivalent to a growth of 12 per cent annually.
“Our growers are expanding to other markets because we have been experiencing a number of challenges. These include non payment of vat refunds, difficulties operating within counties, the fluctuation of foreign currencies and the hefty taxes that were paid to European Union last year,” Ngige said.
Kenya's horticultural industry was hard hit by export duty, in the range 8.5 per cent and 20 per cent, between October 1 and December 25, 2014, following failure by the East African Community to conclude negotiations for a new economic partnership agreement before the deadline on September 30.
According to Ngige, the El Nino rains has further led to low production of flowers and and increased
the attention to pests and diseases.
“Going forward, 2016 will be a tough year for the industry,” she said.