Ethio Lease this month became the first foreign-owned company to secure a financial services license in Ethiopia. Simplifying the country’s forbidding bureaucracy would help the country’s leasing market to reach its full potential.
Kenya’s flower growers to share Brexit pain
On a visit to Kenya in August 2018, British Prime Minister Theresa May said the country would retain duty-free access to UK markets even after Brexit. That assurance hasn’t been enough to allay fears of the impact of Brexit on Kenya’s flower exporters.
Kenya is the fourth-largest exporter of cut flowers in the world.
- The flower industry is one of country’s largest employers, providing about 100,000 jobs directly and an estimated 2 million indirectly.
- Kenya earned $423m from floriculture exports in the first three months of 2018.
According to the Kenya Flower Council, the country is the leading exporter of roses to the EU, with a market share of about 38%. About half of that is sold through the Dutch Auctions.
- That concentration means that the Netherlands has highly developed infrastructure for ensuring floral hygiene and quality control.
It will likely take the UK a long time to be able to replicate this infrastructure, says Aleydis Nissen, an expert on Kenyan floriculture who has been a visiting researcher at the University of Nairobi.
- Kenya, says Nissen, sets greater store than the rest of the East African Community (EAC) on EU trade. Other EAC members, she says, are not as industrialised as Kenya and have access to European markets under the Everything But Arms (EBA) programme.
- Kenya took a leading role in the establishment of the 2014 Economic Partnership Agreement between the EU and the EAC, which also includes, Burundi, Rwanda, Tanzania and Uganda, largely as a result of pressure from the Kenyan floriculture industry, Nissen says. Kenya is the only EAC partner state that has ratified the agreement.
The odds of a No Deal Brexit have receded in some minds after the EU granted an extension until October. Yet there is still no clarity on the content of any deal, or on why the elusive agreement has become politically possible by tacking a few more months onto the calendar.
Kenyan flower exporters currently enjoy zero tariffs on cut flowers sold to the EU. WTO tariffs would apply to Kenyan imports to the UK in the case of a No Deal Brexit, meaning that roses would immediately become more expensive. The Traidcraft Exchange and the Fairtrade Foundation say that Kenya could face WTO tariffs of between 8.5% and 12%.
- The costs of the new required British infrastructure would also feed through into higher costs.
- On top of that, Kenyan flower exporters would suffer from reduced demand resulting from slower UK growth or a contraction triggered by Brexit.
The impact of a No Deal Brexit, Nissen says, would fall mainly on Kenya’s smaller farmers who already find it the hardest to supply European consumers. Some Kenyans in the UK, Nissen says, expect more overall trade with Britain after Brexit, though Nissen — now based at Cardiff University — suspects this may be a case of “wishful thinking.”
- She argues that a trade deal would be best for the floriculture corporations, but would leave the underlying issues of decent working conditions and gender equality in the industry untouched.
Sourcing flowers from Europe rather than Kenya in a bid to keep costs down would also have an environmental impact. Kenya’s climate is suited to rose growing and replicating it in Europe creates a heavy carbon footprint.
- According to the Fairtrade Foundation, greenhouse gas emissions from the production of Fairtrade roses in Kenya are 5.5 times lower than in Europe, even after taking air transport into account.
Bottom Line: Kenya’s floral exporters have a major stake in the Brexit outcome. The only certainty is that they won’t be getting a say in the process.