Flower and fruit exporters breathed a sigh of relief after officials in Brussels gave them a reprieve from new taxes that they feared would deal a severe blow to the billion-dollar industries.
The European Union signed a deal with the governments of Kenya, Uganda, Tanzania, Burundi and Rwanda that make up the East African Community (EAC), to have goods enter the prime EU market duty free.
The signing of the Economic Partnership Agreements (EPAs) came after weeks of negotiations and a delay when Tanzania stalled on signing the trade deal with the EU.
For the deal to work, it needed all five governments to sign the pact in unison by Sept. 30.
Negotiations between the EU and the EAC have been ongoing for seven years.
All exports from EAC to the EU , including Kenya will enjoy duty free status. But Tanzania’s delay in signing the agreement initialed a harsh trade regime that enforced taxes for cut flowers, juices and fish from Kenya.
According to the EU, internal procedures for reinstating Kenya to the preferential trade agreement will take an additional three to six months.
Meanwhile, fish exports are being taxed. So are juices and flowers and this will continue for the next three to six months until duty-free status is reinstated.
Tanzania finally agreed to sign in late October which means that flowers and fruit from Kigali to Kampala can enter the EU market duty free within the next few months.
Oct. 1 was supposed to to be the deadline for the Economic Partnership Agreements but without consensus, goods from the region were subject to taxes as high as 22 percent.
The Kenya Flower Council, an industry lobby group, said that the industry was relieved since the taxes could have made local farmers go belly up, resulting in massive job losses.
“Kenya flower industry was indeed in a crippling crisis,” Kenya Flower Council CEO Jane Ngigi told AFKInsider.
In 2013 horticulture exports from Kenya raked in $1 billion, 95 percent of this coming from sales to the EU market.
Flower exporters will have to pay taxes for the next few months as the duty-free mechanisms are being put in place, the cost of delayed signing by the member states.
“Exports from Kenya to the EU will suffer import duties of approximately 600 million Kenya shillings ($6.7 million US) a month under the regime,” added Ngigi.
Cut flowers are attracting tariffs of 8.5 percent, fish 6 percent, fruit juices from Kenya will be levied at 11.7 percent more while processed vegetables and fruits will be taxed more than 15 percent.
Analysts had feared that the juice industry would be one of the most affected by the new taxes.
“Del Monte will be particularly hurt since it has large plantation and a major canning factory in the country’s industrial hub of Thika,” according to a Standard Investment Bank report. “In 2009, Kenya earned almost $1 billion dollars in fruit juices. The Kenya Association of Manufacturers estimates that the competitiveness of Kenyan goods to the EU will be eroded by between 5-to-20 percent and put 2 million people directly employed or dependent on horticultural at risk.”
The Kenya Association of Manufacturers is a lobby representing 800 businesses, said its members welcome the conclusion of the talks. The delay will affect just as it did the flower growers and sellers.
“Because of the delay in concluding the (economic partnership agreements) Kenyan firms will unfortunately have to pay taxes for still another three to six months before the full legal processes for reinstatement into the duty-free schedule can be concluded,” said Betty Maina, CEO of Kenya Association of Manufacturers, in a statement.
