Flower farmers in Kenya have warned that they could mass relocate to either Ethiopia or Tanzania if the collapsed Economic Partnership Agreement ( EPA) talks are not revived soon.
The over 60 flower farmers, most of them foreign investors, base at the shores of lake Naivasha in the rift valley are responsible for over 75 percent of the country’s flower export which forms the biggest chunk of Horticultural earnings.
Horticulture is a leading source of foreign exchange for east Africa’s biggest economy alongside tea exports and tourism and agriculture accounts for about a quarter of Kenya’s gross domestic product. The country earned 93 billion shillings ($1.05 billion) from the cultivation of fruit, vegetables, flowers and nuts last year, up from 87.71 billion in 2012, Reuters reported.
Talks between EU and East Africa Community (EAC) collapsed and has forced Kenyan flower exporters to pay higher taxes to accessing European markets, which accounts for a large chunk of the exports from the region.
Kenyan flower exporters started paying taxes on goods entering the EU since Oct. 1, while their relief, the Economic Partnership Agreement (EPA) which grant Africa product tax free in the European market, is said to take six months for ratification, XINHUA reported.
Analysts say it is particularly essential for Kenya – the only country in east Africa classified as a developing country to sign the deal. The rest of EAC Partner States are categorized as Least Developed Countries (LDCs), which puts them in a better trading position compared to Kenya.
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Under the EU protocol, LDCs do not have to sign the EPAs since their preferences will continue under the Everything But Arms (EBA) trade arrangement. Further, Kenya is likely suffer more as her partners export little into the EU.
“Some of the farmers, mainly those dealing in vegetables, are considering relocating to Ethiopia where the labor is cheap and their products won’t be taxed. Flower farms might be forced to follow suit come next year and move to Ethiopia if the Government does not resolve the EPA issue with the European Union,” Maridadi Flowers Managing Director Jack Kneppers was quoted by The Standard saying.
Maridadi and Van Den Berg flower farms, two of the leading flower producing farms in Naivasha.
Apart from massive job losses, the farmers warned that the country stood to lose economically in the long run due to its failure to sign the agreement. With the sector facing a new tax of around six per cent on its products, the farmers warned of a financial crisis three days after the new tax regime came into force.
Kneppers, whose farm has over 700 workers, further warned that 50 per cent of the flower farms would close down by the end of next year if the current impasse was not resolved soon.
“Flower prices in Europe are not very good as some countries are yet to recover from the financial crisis while the war in Ukraine is also affecting the market,” he said
George Onyango, the human resources manager at Van Den Berg flower farm, said Kenyan produce would no longer be competitive in the European market. He said this will force some of the investors in the sector to move to Ethiopia and Tanzania.
“The move has raised anxiety in the sector and flower farmers will have no other option but to seek a more conducive environment where they can make profits,” Onyango said.