The structure and dynamics of cut

flower export markets from Kenya

and Ethiopia, with particular
reference to trade with Norway
Brian D. Perry

Norwegian Institute of International Affairs

Norsk Utenrikspolitisk Institutt

NUPI Working Paper 797

Department of International Economics
 Publisher: Norwegian Institute of International Affairs
Copyright: © Norwegian Institute of International Affairs 2012

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The structure and dynamics of cut
flower export markets from Kenya
and Ethiopia, with particular
reference to trade with Norway

Brian D. Perry1
October 20112

1 Professor Brian Perry, Honorary Professor, University of Edinburgh, P.O. Box 437, Gilgil
20116, Kenya
2 Revised November 26th 2011
1. Introduction
This report is part of a broad study of trade preferences and market
conditions between various developing countries and Norway, con-
ducted under the auspices of the Norwegian Institute of International
Affairs and funded by the Norwegian Ministry of Foreign Affairs.
Norway's Generalized System of Preferences (GSP) was established in
1971. From 2002 Norway has provided duty and quota free market
access (DQF-MA) for all goods from all the 50 least developed coun-
tries (LDCs3). In 2005 the results of a review of Norway’s GSP were
published (Melchior, 20054), which showed that agricultural products
from developing countries other than LDCs were still subject to sub-
stantial tariffs, and this contrasted dramatically with advantages given
to European trading partners. As a result, from 1 January 2008 chang-
es were made to Norway’s GSP5. An important adjustment was that
14 low income countries that were not part of the LDC group were
included in the provision for duty and quota-free market access (DQF-
MA). Consequently, 64 low income countries now benefit from DQF-
MA to Norway for all their goods.

However, the broadening of access to a wider set of developing coun-

tries has not had the degree of change to imports from developing
countries that was anticipated. This project has been examining vari-
ous aspects of trade between developing countries and Norway to ex-
plore conditions promoting or limiting greater trade. One case study
has been on the export of cut flowers from eastern Africa, in particular
Kenya and Ethiopia, and this report presents an assessment of the
structure and dynamics of this market, and the factors influencing its
success and sustainability.

2. The flower industry in Kenya

Kenya presents a unique physical and climatic environment in the
world shared by few, which when combined with the track record of
private sector enterprise in other commodities such as tea, coffee, veg-
etables and tourism, has led to the country developing a unique profile
as an international year-round provider of cut flowers. Its major com-
petitors in Africa are its neighbours Ethiopia, Tanzania, Uganda, and
to a lesser extent the southern African countries of Zambia and Zim-
babwe. In South America the major competitors are Colombia and
Ecuador. Kenya is probably the strongest and most competitive of the

3 Least Developed Countries are nations identified as such by the United Nations Economic
and Social Council through its Committee for Development Policy and include countries
with “a low per capita income”, “a low level of human resource development” and “a high
degree of economic vulnerability”. The figures for these criteria are reviewed every three
years.
4 Melchior, Arne (2005). The future of Norway's GSP system. NUPI Working Paper: 680.
69 pages. Discusses the prospects for the GSP system.
5 http://www.regjeringen.no/upload/UD/Vedlegg/Handelspolitikk/gspchanges.pdf
6 Brian D. Perry

African flower trading nations. Kenya has a near perfect combination

of climate and altitude, a progressively improving infrastructure, rela-
tively low labour costs in a labour-intensive industry and excellent
freight and passenger air links to Europe, the Middle East and Asia.
The relatively low labour costs will undoubtedly not last, with strong
pressure from trade unions and other lobbies to raise the minimum
wage dramatically. Furthermore, the freight and passenger air services
have been stretched by the dramatically rising cost of fossil fuels, in-
fluencing one flower and vegetable freight airline to go out of busi-
ness.

The horticulture industry in Kenya as a whole generates some US$ 1

billion annually, and the floriculture sector has seen progressive
growth in both volume and value of cut flowers; it has also seen rapid
and substantial institutional organisation. By comparison, the tourist
industry currently generates some US$ 800 million, but given its vul-
nerability to recurrent political and security issues, is likely to be over-
taken by floriculture. In early 2008 the floriculture export provided an
impressive demonstration of infrastructure, solidarity, communication
and determination during, and in the aftermath of, the wave of vio-
lence which followed the general election of 2008. The peak floricul-
ture export season precedes the St. Valentine’s Day occasion, and
amazingly the orders and commitments were not disrupted.

Agriculture contributes some 25% to overall national GDP in Kenya,

with horticulture some 14% of agricultural GDP, and flowers some
7% of horticultural GDP. The industry directly employs some 90,000
people and indirectly some 500,000 of Kenya’s estimated population
of 40 million. Policy in the floriculture industry comes under the Min-
istry of Trade and Marketing.

3. The flower industry in Ethiopia

Like Kenya, Ethiopia presents a unique physical and climatic envi-
ronment in the world which has led to a rapid growth in its role as an
international year-round provider of cut flowers. Ethiopia also has a
similar combination of climate and altitude, a gradually improving
infrastructure, and low labour costs, but moreover it benefits from
strong support from the Government of Ethiopia to the floriculture
sector in the new 5-year Growth and Transformation Plan6, released in
late 2010. For this (and other agricultural development enterprises) the
country has also invested time and effort into attracting overseas in-
vestment in the country for agricultural and other enterprises (see for
example http://www.ethioinvest.org/why_Ethiopia.php and
http://www.ethiopianembassy.org/PDF/10ReasonstoInvestCombo.pdf).

6 http://www.ethiopians.com/Ethiopia_GTP_2015.pdf
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 7

However, as in Kenya, the costs of supporting this industry are chang-

ing and rising; there has been a rapid rise in labour costs over the last
two years (but this has been countered slightly by the devaluation of
the Ethiopian Birr).

There are some significant differences between Ethiopia and Kenya,

however, in terms of its market access conditions. Ethiopia is classi-
fied as a LDC, and as such gains tariff-free access to Europe for vari-
ous products (including flowers) under the Everything But Arms
(EBA) agreement. Furthermore, because of Ethiopia’s status as a
LDC, and its struggle to wrest itself from the “basket-case” image it
has projected globally with the periodic droughts, food insecurity and
famines, there has been some limited donor support to help establish
the flower industry. An example of this was the support received from
the UK’s Department for International Development (DFID) to the
Ethiopian Horticulture Producer and Exporters Association7 (EHPEA)
for the establishment of office premises, a vehicle and some technical
training facilities. Furthermore, Ethiopia has drawn substantially on
the experiences and expertise in Kenya, through study visits, support
by some of the Netherlands private farms in Kenya, and involvement
of Kenyan technical and managerial expertise in Ethiopian flower en-
terprises. A further example of public sector support is the Ethiopia
Netherlands Horticulture Partnership Programme, a public/private
partnership initiative launched in 2006 with funding from the govern-
ment of the Netherlands, and undertaken under the auspices of the
EHPEA (see below). This has the following series of activities:

 The development and implementation of a Code of Practice for

the floriculture sector
 The introduction of integrated pest management (IPM)
 Capacity building for production managers and agronomists
 Market information synthesis for key market destinations
 Cold chain management
 Phytosanitary service capacity building
 Support to research and strategy to guide policy development
There are approximately 85 farms exporting flowers from Ethiopia, 60
of which deal only in roses. Exports go to a total of 29 countries. As
far as exports to Norway are concerned, as an illustration the last three
months have seen the following volumes sent to Norway:

 June: 81,000 kg (85% roses). Suppliers: AQ Roses, Herberg

Roses, SHER Ethiopia, Joytech PLC, Dugda Floriculture PLC,
Oliji Roses, Linssen Roses, Florensis Ethiopia

7 http://www.ehpea.org/
8 Brian D. Perry

 July: 70,000 kg (95% roses). Suppliers: Linssen Rose, Dugda

Floriculture, Sher Ethiopia, AQ Rose, Florensis Ethiopia,
Joytech, Ziway Rose, Red Fox
 August: 135,000 kg (98% roses). Suppliers: Dugda Floricul-
ture, Olij Rose, AQ Rose, Sher Ethiopia, Ziway Rose, Red Fox
Ethiopia, Joytech, Braam Flowers.

Almost all of these are shipped through the Netherlands, where there
is an agent who handles flowers designated for Norway.

Broader issues of trade from Ethiopia

Ethiopia has been actively seeking to expand its trade links with a
wide variety of countries in many different ways. It has tended to fo-
cus on specific commodities, among which flowers and vegetables
have featured strongly; indeed, flowers have been a favoured com-
modity, and are contributing to the country’s economic growth, and of
course its image. There has been strong political support, including at
Prime Ministerial level, and also through a range of investment incen-
tives offered by government. The country is very keen to access for-
eign currency.

Ethiopia established a commodity exchange8, which is still evolving

and finding its role. At one stage, all commodities had to go through
the exchange, which reportedly required that all qualities had the same
price. As a result, certain producers of niche market products went in-
to their own private production to avoid the pricing restrictions; this
severely affected the coffee market9. There has since been a progres-
sive graduation of understanding and flexibility in the commodity ex-
change, and price differentials based on commodity standards are now
accepted.

Key products traded from Ethiopia are coffee, hides and skins, flowers
and livestock. Emerging commodities are rice (to India and China),
sesame (to China for biofuels), honey and silk.

4. Kenya’s negotiation to be part of an Economic Partnership

Agreement with the EU
Kenya is the only one of the five member countries in the East African
Community (EAC) that does not have a LDC status. The LDC status
gives automatic duty free import status into the EU under the Every-
thing But Arms (EBA) special arrangement. Ethiopia, a significant
producer of cut flowers, does enjoy EBA status. The lack of a fully
8 http://www.ecx.com.et/
9 http://addisnegeronline.com/2010/09/ethiopian-commodity-exchange-to-assure-pure-
monopoly/
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 9

endorsed EPA between the EU and EAC puts the Kenyan floricultural
industry at a considerable trading disadvantage compared with its
neighbours if duties are to be imposed (see Box 1 on the implications
of an EPA for Kenya’s market access with the EU). The bilateral Eco-
nomic Partnership Agreement (EPA) between the European Union
(EU) and the East African Community (EAC - Kenya, Burundi,
Rwanda, Tanzania and Uganda) to maintain duty free access of flow-
ers into the EU has not yet been finalised, but an interim EPA has
been in place since 2007. This delay is due to a number of technical
issues regarding long term trade arrangements involving a wide range
of products and development support between the EU and EAC. The
stumbling blocks include market access coverage and liberalisation
timetables, the use of safeguards and export taxes, and the Most Fa-
voured Nation (MFN) clause provisions. Following the breakdown in
negotiations, the EU stated specifically that failure to finalise the EPA
process could lead to putting non-LDCs such as Kenya on the EU’s
GSP trade regime, resulting in increased tariffs on some of Kenya’s
key export products.

Box 1. From: Implications of an EPA for Kenya’s Agricultural Market Ac-

cess in the European Union. Institute for Economic Affairs, Nairobi, 2006.

Although trade liberalization brings with it considerable welfare gains, the politi-
cal risks as well as economic costs involved often leads to preferences for trade
pacts which tend to balance the import competing interests to those of exporters.
Non-tariff barriers and other impediments may however limit the benefits that
developing countries can derive from trade pacts such as trade preferences grant-
ed by developed countries for products from developing countries. Kenya’s agri-
cultural exports to the EU are mainly coffee, horticulture and tea. From the EU
she also draws most of her equipment imports. The regional COMESA market is
the main destination for her manufactured goods. Therefore EPAs may, although
safeguarding market access into the EU, result in loss of competitiveness for
Kenya’s local manufacturing industries in the domestic as well as regional mar-
kets. Further, the envisaged CAP reforms not only threaten Kenya’s export earn-
ings from her agricultural exports to the EU but may also result in further decline
in exports from other markets as a result of the world price dampening effect of
the CAP reforms. Other than this the creeping use of non-tariff barriers to trade in
the OECD in general and the EU in particular may further jeopardize the benefits
that accrue to Kenya from the EPAs. This is further compounded by the consid-
erable erosion of these preferences by concessions granted by the EU under other
trading arrangements such as the WTO. For Kenya to benefit from the EPAs
therefore there must be, inter alia, unfettered access for all Kenyan products into
the EU market, long enough tariff phase down period to enable her to consolidate
gains from the regional integration, full compensation for expected revenue loss
in form of increased budgetary support and trade capacity building to mitigate the
costs of complying with the creeping non- tariff barriers such as SPS and TBT
measures.
10 Brian D. Perry

There has also been a problem with finance as the EU and Kenya both
ran out of funds to hold meetings, both blaming each other for the de-
lays. Funds have now been found and meetings have been re-
launched. If the EU became fed up with the negotiations and imposed
taxes on non LDC countries, the only one to suffer would be Kenya
and indeed within the country only horticulture and fish. Failure to
sign the EPA could potentially add duties to Kenyan horticultural pro-
duce of ten to fifteen per cent and would probably see the demise of
many Kenyan horticultural companies.

The EAC countries do not all see eye to eye; Tanzania for example
fears that Kenya might overwhelm them and undermine their embry-
onic floriculture industry (which has suffered recently from electricity
failure problems which have affected the national grid). The full
agreement was to have been signed by July 2009; it is now 2011 and it
is anticipated that there may be something signed by early 2012.
However this has to be ratified by the Kenya parliament which has
many other issues confronting it.

Other competitor countries in the floriculture business, notably Ecua-

dor and Colombia, qualify for the EU Generalised System of Prefer-
ences + (GSP+), a unilateral preferential scheme for developing coun-
tries that allows duty free import of flowers into the EU.

5. Horticulture and Flower Growing Associations

a. The Kenya Flower Council

One of the benefits of the growth of the flower industry in both Kenya
and Ethiopia has been the birth of organisations to facilitate the inter-
face of the industry with government and other actors. The Kenya
Flower Council (KFC10) is a voluntary association of independent
growers and exporters of cut flowers and ornamentals which was
formed in 1996. The industry was growing fast at that stage, and in the
absence of a national horticulture policy, and the vision that Kenya
had the opportunity to become a leading international player, there
was a need for self-regulation to foster responsible and safe produc-
tion and marketing of cut flowers in the country.

As of July 2011, KFC had a membership of 60 flower-growing and

exporting companies owning 70 farms throughout the country; this
membership represents about 50 - 60% of the flowers exported from
Kenya. Farms range from 3 – 250 ha. Associate members are involved
in the flower sector through flower imports, the provision of farm in-
puts and other affiliated services.

10 http://www.kenyaflowercouncil.org/index.php
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 11

The flower industry in Kenya (and indeed in other neighbouring coun-

tries) has gone through some difficult times, both with respect to the
image of the industry, and to actual practices, and this has been picked
up by, and sometimes distorted by the media. The major ingredients
for debate were the industry characteristics of being highly capital in-
tensive, highly non-skilled labour intensive and a high consumer of
water. A significant success of the KFC has therefore been the devel-
opment of a widely adopted Code of Practice to respond to this. Ac-
cording to the KFC website, KFC has developed a Code of Practice
that is fully bench-marked to GlobalGAP and is undergoing a bench
marking/mutual recognition process with various other standard set-
ting bodies which include: Tescos Nature, Fair Flowers and Plants
(FFP), Fairtrade (FLP11), MPS (MPS-SQ, MPS-Social, MPS-ABC)
and Rainforest. KFC is also an agent for the Kenya Bureau of Stand-
ards KS-1758. KFC offers accreditation for its Code of Practice at two
levels, the Gold and Silver Standards12. A new member is required to
comply with the Silver Code of Practice within one year from the date
of joining; a compliance audit is undertaken within 6 months from the
date of joining. The Gold Standard Code of Practice is the highest
KFC recognition, awarding members accreditation for environmental,
health & safety, good agricultural practices and quality management
systems, which are applied and monitored daily. The Gold Standard
Code of Practice is based on the ISO 14001 framework. The KFC has
shared its emerging Code of Practice with other countries in the re-
gion. The overarching body under which the KFC falls is the South
African National Accreditation System13.

The KFC has to liaise with a variety of different government and pri-
vate organisations, and arguably it struggles to fulfil the expectations
of its wide variety of different stakeholders, who expect it to cover
lobbying, harmonisation of standards, industry communication and
even marketing. This includes ensuring that it complies with the social
responsibility requirements of both government and organisations
such as the trade unions. This is indeed difficult for such a small or-
ganisation14.

In an interesting initiative involving KFC to explore competitiveness,

the World Bank, the EU All ACP Agricultural Commodities Trust
Fund Program (EU AAACP), and the African Caribbean Pacific has
organized a series of interactive Video Conference (VC) seminars to
elucidate challenges facing the flower industry in East Africa (notably

11 There are 54 FLP-certified farms in six countries: Chile, Ecuador, Germany, Kenya, Por-
tugal and Sri Lanka. These farms employ over 13,000 employees, with a total production
area of around 1,300 ha.
12 http://www.kenyaflowercouncil.org/auditing%20and%20code%20of%20practice.php
13 http://www.sanas.co.za/
14 The staff of KFC comprises a CEO, communications officer, accountant, receptionist,
driver, office support person, and four consultant auditors.
12 Brian D. Perry

Kenya, Tanzania, Uganda, and Ethiopia)15. The five VCs are address-
ing:

 The global competitiveness of the flower industry in the region

 The impact of agro-bacterium (Agrobacterium tumefaciens)
and other soil-borne diseases on the production of roses
 The impact of climate change
 The impact of multiple taxes and levies on the industry
 The role of Strategic Environment Assessments in the estab-
lishment of sustainable flower farms.
The KFC attempts to support the common good areas in the flower
industry, notably that employees are safe, appropriately rewarded, the
environment is safe, and there is support to long term training and ca-
pacity development. It also has some ambitious and enterprising ancil-
lary activities. One such activity is the support to a system of about
3,000 small-scale out growers, producing summer flowers for niche
market export to ASDA, a UK-based supermarket. Another is the sup-
port at the local level (particularly in Nairobi) to florists and flower
hawkers. The hawkers have now formed an association, gained recog-
nition and licenses (so that, for example, they do not have to pay
hand-outs to the City Council scouts to avoid harassment), donned
green jackets and gained formal status. This has boosted their self-
esteem and opened the door to a USAID scheme to help them build
kiosks and create micro-enterprises.

b. The Ethiopian Horticulture Producer Exporters Association

The EHPEA was established in 2002. It has taken on the mantle of
being the voice of the floriculture and horticulture industries in Ethio-
pia. Flower farming reportedly started in about 1995, with just three
farms initially; there are now about 100 farms. About 90% of the pro-
duction is flowers, worth approximately US $ 160 million of exports
in 2010, and the industry employs approximately 50,000 people
The EHPEA provides, or helps facilitate, the following support to the
industry:

 Training programmes for government staff

 Development of the Code of Practice

There are three classes in the Code of Practice, namely Bronze, Silver
and Gold.

 Bronze: This sets basic practices for internal monitoring and

management of the standard on the farm, record keeping, pro-

15 http://www.kenyaflowercouncil.org/blog/?p=1611
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 13

tection of the environment, employment practices and occupa-

tional health and safety on farm.
 Silver: This is similar to the major market labels and included
standards higher than bronze for good agricultural practice,
protection of the environment and welfare of employees.
 Gold: This challenges the farm to engage in corporate social
responsibility projects, and to become more involved in prod-
uct quality management and capacity building for staff in the
sector.

6. The interface with the Ethiopian government: The Horticul-

ture Development Agency and the Animal and Plant Health
Regulatory Directorate
The government of Ethiopia has made several provisions to attract in-
vestment in the country. These have included favourable prices for
access to land for flower growing (reportedly US $ 9 per ha per year),
favourable bank loans, electricity service infrastructure development
and a 5-year tax holiday. However there are also reported difficulties
with sending money outside of the country, which is desperate for for-
eign exchange.

The Horticulture Development Agency (HDA) is the arm of govern-

ment which interacts with producers. It was established in June 2008
as an autonomous Federal Government Agency under the Ministry of
Agriculture. Its objectives are:

o to ensure the fast and sustainable growth of horticultural pro-

duction and productivity;
o to facilitate the export of diversified horticulture products
which meet internal food safety standards; and
o to coordinate the development of supporting services.

Within the Ministry of Agriculture is the Animal and Plant Health

Regulatory Directorate (APHRD). This body has responsibility for the
phytosanitary certification of exported flowers. This group also over-
sees the importation of chemicals and pesticides for use in the indus-
try. The country had a poor historical record as a result of the past
maintenance of stockpiles of expired chemicals. This was of such
concern that specific government project, with support from the Food
and Agriculture Organisation (FAO) of the United Nations, was un-
dertaken to dispose of and manage these stockpiles. In response to a
GoE request, FAO implemented five projects concerning pesticide
management for a total budget of US$ 6.5 million. The projects fo-
cused mainly on the disposal of obsolete pesticide activities. They
14 Brian D. Perry

were almost equally split between capacity building and actual dis-
posal, and targeted the entire country (policy makers, national institu-
tions and their staff, in particular the Environmental Protection Agen-
cy, the Ministry of Health, and the Drug and Control Administration
Authority).

All imported pesticides are now handled through this Directorate.

Producers develop lists of pesticides which they wish to import, as
well as volumes, which are related to need (particularly farm size).
The APHRD evaluates requests, referring to the WHO hazard classifi-
cation manual as to suitability and likely risks, before approving im-
portation permits. Then following importation there are on-farm in-
spections of deployment, use of protective equipment, pesticide stor-
age etc. Ethiopia is very sensitive about pesticides, because of the ob-
solete pesticide history in the country which was communicated glob-
ally, and because the legacy of this has resulted in continuing rumours
of misuse and suspected toxicities. However, government is of the
opinion that this is now well managed, supported of course by the
Code of Practice and the variety of specific certification standards
(such as the MPS Code of the Netherlands), with which producers en-
deavour to comply. There has been a particular issue with pesticides in
the export of flowers to Japan, a market very sensitive to this issue.

7. A case study on a flower grower in Kenya: Sian Roses

Sian Roses15 has a very high quality operation in Kenya with five
farms located around Nairobi and in the Rift Valley on a total of 100
ha. The company exports flowers to Norway, but all through Dutch,
German and Swedish exporters. The products arrive in these respec-
tive countries and are then prepared for the customer for export. Prices
in Norway are attractive. The company produces 120 million roses
annually and has 1,800 employees.

Current issues identified include the following:

GSP forms. The GSP forms demanded by Norway cause problems, in

that there are never enough forms available from government. This
company has five farms, with the corresponding number of invoices
and airway bills, and the forms are never sufficient. Then once com-
pleted at Sian’s head office in Nairobi, they have to be sent to down-
town Nairobi for approval and stamp, the efficiency of which depends
on government staff availability. Forms must be in hard copy, no digi-
tal system has yet been developed (but which is clearly required). In
addition, there is a high penalty imposed of some 250% (on the im-
porter/buyer, but this is generally transmitted back to Sian) if there is
any inconsistency in numbers, etc. between the forms.
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 15

Fair-trade16. Sian is very strong on Fair-trade, and is Fair-trade certi-

fied. This means that 10% of the value of the flowers comes back to
the employees. This is handled independently from the trading financ-
es, with a Joint Body (separate from the company) set up to handle the
money with its own bank account. All in the chain are responsible,
and this is audited regularly. It is reportedly one of the toughest certi-
fication to acquire and sustain.

MPS17 (Mileu Programma Sierteelt). This is a Dutch certification

body which focuses on environment, quality and social aspects of
production. MPS-Socially Qualified (SQ) is a certificate that allows
growers to demonstrate that their products are cultivated under good
working conditions. MPS-Socially Qualified includes requirements on
health, safety and terms of employment, and is based on universal
human rights, the codes of conduct of local representative organisa-
tions, and International Labour Organization (ILO) agreements. MPS-
Quality is a quality assurance system that includes sector-specific re-
quirements for floriculture. Quality assurance – in the sense of prod-
ucts and services being of proper quality and achieving maximum re-
liability – is increasingly becoming a strategic choice for growers.

Kenya Flower Council (KFC). The certification system of KFC is pre-

sented in section 5a above. The organisation is seen as the voice of the
industry, and different players have different opinions on its perfor-
mance. Clearly there are many demands on this small body; some see
it as a marketing organisation, some as a lobbying body, and some as
an organisation to harmonise the different certification requirements.

The range of markets. The Dutch market has clearly dominated, but
many growers are looking for other independent markets, where better
prices and tighter margins (without the Dutch interface) might be pos-
sible. These have included Japan (a distant, high value/low volume
market with its own flower production) and Russia (a large and grow-
ing market with good prices, and traders in Moscow and St. Peters-
burg but with ultimate destination markets widely scattered). Japan
has been terrified of the phytosanitary risks, and all products have
been fumigated in the past, but this has reportedly reduced.

The carbon footprint issue. While this was a big issue a few years ago,
especially with roses to UK supermarkets for Valentine’s Day, a re-
port in 2007 showed that Kenyan roses had only a fraction of the car-
bon footprint of roses imported from the Netherland18. Since that re-

16 http://www.fairtrade.net/
17 http://www.my-mps.com/
18 http://www.fcrn.org.uk/sites/default/files/Cut_roses_for_the_British_market.pdf
16 Brian D. Perry

port, the issue has not hit the front pages, but it has definitely not gone
away. It resulted in aeroplane stickers being put on roses in the su-
permarkets. Interestingly, some customers reportedly interpreted the
aeroplane stickers as representing freshness!

Flower varieties. There are demands for different varieties in the dif-
ferent countries, and within a trading country there are also differ-
ences. This can be on the basis of whether the destination is whole-
sale, retail or to a specialist florist, and then within each of those cate-
gories there are different market favourites. In general the roses with a
larger head are grown at higher altitudes, and this characteristic is
generally at the expense of production. Colombia and Ecuador have a
speciality in the larger head varieties grown at altitude, but many of
these are reportedly highly specialised and targeted at the florist mar-
ket.
Relations with government. Generally, the Kenyan government has
left the industry alone. However as government becomes more aware
of the returns to the Kenyan economy, there are indications of possible
future changes in taxation responsibilities for the different actors.

8. A case study on a marketer in Kenya: The Flower Hub

Flower Solutions International Limited, through its Agency Agree-
ment with The Flower Hub19 (TFH) (an Export Handling Consolidator
and Facilitator), sources its flowers from 35 growers. Source farms
range from the very large (such as Oserian in Naivasha) to those of 3
ha.

TFH only started exporting to a Norwegian client in late February

2011, so this is their first Scandinavian customer since TFH was es-
tablished in 2005. Flowers are exported to Amsterdam, from where
the Norwegian client takes full responsibility and subsequent clear-
ance, handling and delivery costs; TFH price is landed in Amsterdam
and their responsibilities end when the plane lands. This represents
2% of their cut flower export business, so not very significant; howev-
er this is after 6 months they hope this figure will grow. There are oth-
er Kenyan companies (such as Sian) exporting much larger volumes to
Norway.

On what kind of marketing is done to target Norway, TFH report that

the Scandinavian consumers are very ethical and thus Fairtrade is a
key brand (Fairtrade does not like to be called a brand, but this per-
haps best explains the label) in the marketplace. The key flower play-
ers targeting such markets are the large organizations such as Omni-
flora (part of the Finlays’ Group; formerly the Flamingo / Homegrown
19 http://www.theflowerhub.co.ke/
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 17

Group) and The Dutch Flower Group (which was the Oserian / Mavu-
no Group, but this now falls under The Dutch Flower Group).

9. A case study on a rose breeder in Kenya: Inter Plant Roses

This is an example of many rose breeders in Kenya. Typically new
rose varieties are bred in the Netherlands and imported into Kenya for
trials at the premises of a rose breeder (in this case near Naivasha).
The breeder holds a well laid our display of the different varieties un-
der trial in their greenhouses. The range is extensive, comprising eve-
ry possible colour and colour combination, flowers with odour (the
majority do not have), large heads, small heads, bouquet cluster heads,
etc. Individual growers then visit the breeders’ establishment to select
varieties for trial on their own premises. Kenyan breeders may occa-
sionally send some new varieties of flowers off to a particular Western
market to test the interest and demand response. Most growers source
from multiple Kenyan breeders. Two personal comments emerging
were: the feeling that there is a need to harmonise the different accred-
itation standards; and the query as to whether Fairtrade should be lim-
ited to a certain number of growers, otherwise it will become manda-
tory, so eroding competition and comparative advantage.

10. Case studies on environmental conservation and sustain-

ability organisations in Kenya

Lake Naivasha Growers Group20.

The LNGG was founded in 1997 and is a voluntary association of
growers working to balance commercial and environmental sustaina-
bility in the region surrounding Lake Naivasha. Over 70% of the roses
exported to the EU markets come from the Naivasha area, and the hor-
ticultural sector of the region employs over 30,000 people directly.
Lake Naivasha is a Ramsar21 site (established as such in 1995, one of
two in Kenya; the other is Lake Nakuru National Park) and therefore a
wetland of international importance. Unlike many other Ramsar sites
it is under commercial use and not protected by fences.

The LNGG has an explicit mission to promote natural resource man-

agement and conservation in and around Lake Naivasha, thereby en-
suring the commercial sustainability of enterprises through the foster-
ing of best farming practices amongst its members for the benefit of
20 http://lngg.org/
21 http://www.ramsar.org/cda/en/ramsar-about-about-ramsar/main/ramsar/1-
36%5E7687_4000_0. The Convention on Wetlands (Ramsar, Iran, 1971) -- called the
"Ramsar Convention" -- is an intergovernmental treaty that embodies the commitments of
its member countries to maintain the ecological character of their Wetlands of Interna-
tional Importance and to plan for the "wise use", or sustainable use, of all of the wetlands
in their territories.
18 Brian D. Perry

all stakeholders. It initiated a Water Allocation Plan (WAP) in 2005,

which has recently been revised for the period 2011 – 2014. It was
jointly formulated by Water Resources Users Associations (WRUAs),
Catchment Area Advisory Committees (CAACs), and the Water Re-
sources Management Authority (WRMA). The WAP details concepts,
methodologies and water balance analysis to address water scarcity,
demand and inherent conflicts between various stakeholder groups.
Much of the responsibility for implementation of the plan falls under
the WRUCs.

Imarisha Naivasha
Imarisha Naivasha (meaning “empower Naivasha”) is a new initiative,
promoted by the Prime Minister of Kenya Raila Odinga and backed
by the Prince of Wales' Sustainability Trust, to try to coordinate local
industries and communities with government agencies and interna-
tional NGOs, to restore the Lake Naivasha environment. The restora-
tion will apparently include reforestation and afforestation, catchment
area management and the introduction of alternative livelihoods to the
local community. This is an emerging initiative (indeed information
about it has been taken from news items; there does not appear to be a
designated website or fuller documentation available yet).

11. Other initiatives emerging from the growth of horticulture

in Kenya
Horticultural Crops Development Agency (HCDA): this is the state
corporation which operates under the Ministry of Agriculture with the
responsibility to develop, promote and facilitate the horticulture indus-
try in Kenya. It has a Board of Directors which draws membership
from both public and private sectors. Its mandate is to a) regulate the
industry through licensing and the application of rules; b) provide ad-
visory services to the government and industry; c) provide market in-
telligence to the industry.

Horticultural News22: This is an independent magazine targeted at the

East African fresh produce market, set up by Karuri Ventures Ltd. It
plays a role in information exchange and knowledge of the industry,
and draws on both private and public sectors for articles, commentary,
etc.

22 www.hortinews.co.ke
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 19

12.Air transport of flowers from Kenya and Ethiopia to Europe

Kenya
Cut flowers are highly vulnerable to time and temperature, and are all
transported from eastern Africa by air. There are both freight and pas-
senger flight options, with the majority in Kenya transported by air
freight companies. MartinAir leads with 14 flights per week operating
B747-400F and MD-11 airplanes. Cargolux is the second largest
transporter of flowers to Europe with 9 flights per week operating
B747-400F aeroplanes. Other transporters include: Lufthansa (5
flights per week on MD-11); Air France (2 flights per week on B747-
440F); Singapore Airlines Cargo ( 2 flights week on B747-400F); and
Saudia Cargo (6 flights per week via Jeddah on B747-400F and MD-
11).

The B747-400F carries 110 tonnes of flowers while the MD-11 carries
70 tonnes. The Boeing 747-400F ranks among the best in its class,
both in terms of fuel consumption and CO2 emissions.

On average 250 tonnes of flowers and 10 tonnes of vegetables eventu-

ally go from Kenya to Norway on a monthly basis. Norway has very
strict customs regulations and in the event of any error on documenta-
tion the shipment is held until the correction is made; with the cargo
being perishable, it some instances shipments have expired and have
to be destroyed.

Escalating fuel prices over the last few years have been transferred to
the shipper, a portion has been borne by the airline and most of it by
the customer, making the product more expensive to the end-user.
Furthermore, the on-going financial crisis has also led to an increase
in transport costs as most of the transporters are supported by financ-
ing agreements, the cost of which have gone up. As a result some air-
lines have ceased operating due to the increased cost of servicing their
finance (such as MK airlines operated by Homegrown). Due to the
high demand for air transport since the collapse of this air-
line the available cargo is being moved at a higher cost.

Business Sustainability. There will always be a demand for the air

transport business given the high demand for vegetables and flowers
in Europe. However most of the cost is transferred to the end-user. For
the transporters the challenge is trying to transfer the high inflation
costs to the shipper. Very often these two players are forced to share
the costs; consequently business profitability has reduced substantially
over the past 5 years.
20 Brian D. Perry

Ethiopia
Addis Ababa, Ethiopia’s capital city, is also a hub for air traffic in
eastern Africa, but unlike Nairobi from where multiple freight and
passengers services operate, the Ethiopian hub is almost exclusively
Ethiopian Airlines. This has various repercussions. Firstly, while there
is a cargo section of Ethiopian Airlines, much of the flower freight has
to be carried in passenger flights (particularly those to the growing
Asian markets such as Japan), limiting volume and increasing costs.
Secondly, the lack of competition and dedicated freight carriers argu-
ably raises freight costs. But on the other side, Ethiopian Airlines is a
state owned (as the majority share-holder) company, and reputedly
provides competitive freight charges to floriculture in the national in-
terest.

Ethiopian Airlines reportedly lost the monopoly on cargo freight from

the country some years ago, but the company clearly retains certain
advantages.

13. Non-tariff barriers

A recent OECD report on the costs and benefits of non-tariff measures
included a case study of the Kenyan cut-flower sector. The report not-
ed that Kenya is among the top ten sources of cut-flower imports into
OECD countries, especially the EU. It also noted the growing im-
portance of non-tariff barriers within the expanding global trade in cut
flowers, most notably SPS controls, but also production and labour
standards. The paper focused on the impact of SPS standards in the
light of exporter concerns over the trade effects of such measures23.
The analysis argued that the increase of inspection costs for the EU
outweigh the benefits of reduced infestation for the EU producers’ and
that tighter inspections lead to losses for foreign suppliers, since this
can delay final delivery and lead to a loss of quality, and consequently
revenues. However, ‘improving production methods in exchange for
reduced inspection tightness would also lead to diminished profits for
foreign suppliers because of higher production costs. The report notes
that the ‘costs related to inspection programmes may become an entry
barrier for certain foreign producers.’

The most significant finding of the OECD analysis is seen by some to

be that SPS inspections (and their logistics and cost) can act as a par-
ticular barrier to market entry for low-income countries.

23 http://www.oecd.org/officialdocuments/displaydocumentpdf/?cote=tad/tc/
ca/wp(2009)2/final&doclanguage=en
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 21

14. Discussion

General
The Kenyan and Ethiopian flower industries have been a remarkable
success, and they both continue to grow and to organise themselves.
Floriculture has found a near perfect physical and climatic environ-
ment in both of the countries, which in the case of Kenya, along with
vegetables, tourism and tea, and in the case of both countries along
with coffee, now plays a pivotal role in economic growth, in the
emerging independence from the governmental controls on agricultur-
al enterprises so prevalent in many other African countries, in social
development and in environmental awareness. In broad terms, Kenya
definitely has the edge on quality, quantity and organisation, while for
Ethiopia flowers are an important diversification enterprise encourag-
ing entrepreneurship and foreign exchange earning opportunities.

The global economic downturn has affected both countries, and Ethi-
opia has recorded exports not reaching anticipated (and quite ambi-
tious) targets24. The airlines have been faced with substantial rises in
fuel a cost, which have in some cases been shared but inevitably has
affected the margins in the industry. Both countries also face some
uncertainty with the rising costs of labour. And while the Ethiopian
climate is highly favourable, the keremt or meher rains, with their long
duration and intensity (generally June to September), add challenges
to the provision of an uninterrupted year-round market. During this
period the industry attempts to reduce crop density, augment the use
of plastic protection, and treat the rising incidence of mildew and bo-
trytis.

Both supplier countries cherish their trading links with Norway, as

part of a strategy to diversify markets and limit risk. For both coun-
tries, the major risks to sustained volumes and margins are the fuel
prices, the rising costs of labour and regulation of the labour markets,
and the high costs of meeting SPS requirements. In the case of Kenya,
the absence of an approved EPA also presents a risk. However, while
the Norwegian market has a high based on the flower consumption per
capita of human population, it is still a small market. It would possibly
be attractive to both trading partners to relinquish the “middle men” in
the Netherlands, and reduce costs through direct export to Norway,
but given the small size of the markets this is unlikely to be viable for
most traders.

24 http://ethiopianflowerexport.com/ethiopia-flower-horticulture-exports-miss-target/
22 Brian D. Perry

The comparative advantage of a Norwegian market?

How do Norwegian markets fit into this picture? Currently the Nether-
lands dominates the market for Kenyan and Ethiopian flowers. And
indeed while the growth of the flower industry has been predominant-
ly in private hands, the Dutch government has supported several ini-
tiatives in the horticulture sector, particularly those which promote
small-scale producer (and indeed other small scale actors in the value
chain). Even those flowers which are destined for the Norwegian mar-
ket pass through the Netherlands, the majority through the auctions,
while the others pass through designated agents in the Netherlands.
From the Kenyan and Ethiopian sides there is a call for greater inde-
pendence from the Dutch auctions, and more direct market access to
alternative market destinations. This has already been seen for Kenya
in the case of Japan and Russia, for example, and the Norwegian mar-
ket offers similar potential opportunities; it is currently viewed as
niche because of the low volume, but considered a target because of
the high prices.

Norway is one of the markets for which broader development goals

almost certainly play an important role, and for example Norway
views the Fair-trade label as attractive, given the independent returns
it offers to the employees of flower growing organisations. The FLP
accreditation under the scheme provides attractive, unique and inde-
pendent financial returns that have the potential to benefit societies
associated with the floriculture enterprises.

While the floriculture industry is growing and is responding to the en-

vironmental, water use and social concerns raised by consumers and
lobbies in the West, it is inevitably struggling to keep up with the dy-
namics of the complex pressures on the industry in an environment of
weak institutions and infrastructures. How can enhanced trade with
Norway assist to redress these challenges?

One opportunity is perhaps a response to the call in both Kenya and

Ethiopia for more direct trading links with Norway. Could such more
direct trading enterprises sustain the volumes and qualities required?
There are undoubtedly producers in Kenya who could meet these
(such as the example of Sian Roses presented), and through the higher
prices offered by Norway, such trading partnerships offer the potential
for broadening and strengthening the social aspects of producer enter-
prises, both direct and through Fair-trade channels.

Has the floriculture trade succeeded, and if so, why?

The floriculture trade in both Kenya and Ethiopia has provided an im-
portant new agricultural enterprise which has filled a global niche
fuelled by the affluence of western development. Moreover, in export-
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 23

ing countries it has increased foreign currency earnings, boosted em-

ployment, provided additional social development and enterprise ca-
pacity functions which have all contributed to the broader good. This
has been at a cost; the industry is highly dependent on water and ener-
gy, and on a workforce which is itself heavily dependent on social and
environmental services. In both countries, particularly in Kenya, these
challenges have given rise to the emergence (and increasing im-
portance) of independent organisations to coordinate the development
of sound codes of practice, which respond both to the sophisticated
(and sometimes obscure) demands of the importing western countries,
and to the growing demands of the civil societies and governments in
the exporting countries.

Why has this success happened? The three key drivers of this success
are considered to be:

1. the demand for cut flowers fuelled by the growing affluence of

the West in particular;
2. the highly favourable physical and climatic conditions provid-
ed by the highland equatorial environments of eastern Africa
(and the Andean region of South America);
3. the rapid recognition of, and response to, the Western demands
of quality, safety and sustainability of market commodities en-
twined with the social, developmental and environmental de-
mands of developing country exporters.

The food production versus agricultural diversification conundrum

Because of the developmental and societal gap implicit in the third
driver listed above, there remains a polarisation of views on the merits
of this relationship in certain sectors of both trading partners. On the
one hand there is an extreme view which says “food deficit countries
in the developing world should use their land resources to grow food
to feed their people, not use it to grow flowers for export”. While ef-
forts are clearly being made in both countries to improve and develop
levels and efficiencies in the production, processing and marketing of
food crops, this generic argument misses some key issues of scale.
Flower farms are few in number (some 85 exporting farms in Ethiopia
and 150 or so in Kenya) and small in size (3 – 350 hectares). In theory
they do occupy land which could be used for grain crops, but the vol-
umes of grain that could be produced from these areas is insignificant
when compared to the food deficit gap to be filled (particularly in the
case of Ethiopia). Furthermore, the labour requirement for cropping
on such areas of land is small, dwarfed by the huge labour force en-
gaged in the flower industry.
24 Brian D. Perry

But there are many further reasons why the comparison between the
two as mutually exclusive opportunities is odious. Diversification in
agriculture offers multiple benefits to economic development, foreign
exchange earnings and societal development. In addition, the floricul-
ture industry has opened new opportunities in entrepreneurship which
arguably serves as a model to other sectors of agribusiness, and to
public private partnerships.

And beyond these reasoned arguments, the view that developing coun-
tries should stick to traditional agricultural practices for food crops
and not diversify into a wider range of agricultural, employment and
land-use approaches smacks of rather distasteful and paternalistic
western dominance. This infers a feeling that developing countries
should stay within their comfort zone and not seek innovative ways of
broadening the agricultural trade base. While it is likely that this view
is extreme, the condemnation of land use for flowers in countries with
food deficits plays regularly in the international media.

The complexity of land use and foreign investors in Ethiopia

Developing this conundrum further, some western commentators25
consider that the lease of land in Ethiopia to foreigners increases the
vulnerability of the population to famines. Ethiopia has allocated a
designated number of hectares for lease to investors to make use of the
land for enterprises not undertaken by those living there at present.
But it goes without saying that despite these being “unoccupied” lands
which are not favourable for many agricultural crops, there are indeed
people (often pastoralists) living there. This is seen by some as a dou-
ble whammy: taking the land from others, and using it export products
to other countries (such as rice to India and China). However, there is
another side to the story, of course. Despite what is written, these
lands have indeed been neglected in terms of agricultural develop-
ment, and are generally unfavourable for teff, wheat26, etc.

Much of this is considered by some to be the development of pragmat-

ic land use options which promote employment, despite the fact that
emerging commodities are destined largely (although not entirely) for
export. However, because of the lack of a political opposition in Ethi-
opia, they are interpreted by others to be dictatorial ventures which are
not in the best interests of the Ethiopian people. Both sides argue their
cases convincingly.

25 https://www.conftool.com/gc2011/index.php/Brunswijck-
234.pdf?page=downloadPaper&filename=Brunswijck-
234.pdf&form_id=234&form_version=final&CTSID_GC2010=xcHFVVfopV5BQADrm
cyAlUiFn68
26 The author was part of a mission to evaluate land on offer by the government for wheat
farming in the Wabe Shabelle Valley between southern Arsi and Bale. The largely empty
tracts of land were in an ecological zone entirely unsuitable for wheat production.
 The structure and dynamics of cut flower export markets from Kenya and Ethiopia 25

Conclusions
The flower trade from Kenya and Ethiopia has brought direct financial
benefits to both countries which contribute to agricultural GDP.
Moreover it has brought substantial indirect benefits in the form of
employment, organisational and institutional capacity gains, and it has
acted as a role model for national enterprise development led by the
private sector. Providing trading advantages in the market of flowers
to Norway offers an effective high profile modality to strengthen the
social and environmental responsibility aspects of this labour intensive
and water thirsty industry. Due in part to the quality pressures from
the West, and to the demanding and ever changing safety and envi-
ronmental standards needed, the industry presents a unique opportuni-
ty to be a leader in social change in these exporting countries.
26 Brian D. Perry

Appendix 1. List of people interviewed

Jane Ngige, CEO, Kenya Flower Council, Kenya
Mark Low, General Manager, Interplant Roses, Kenya
Jos van der Venne, Managing Director, Sian Roses, Kenya
Isabel Spindler, Redlands Roses, Kenya
Raphael Nzomo, CEO, Afrika Aviation
Rod Evans, private consultant (formerly Director, Homegrown)
Tim Hobbs, Managing Director, Tambuzi, Kenya
Millie Seagon, The Flower Hub, Kenya
Paul Walker, The Flower Hub
John Graham, author, Ethiopia
Haile Selassie Tekie, Director General, Ethiopian Horticulture Devel-
opment Agency, Ethiopia
Tsegaye Abebe, Chairman, Ethiopian Horticulture Producer Exporters
Association
Ashenafi Bekele, Animal and Plant Health Directorate, Ethiopia
Tsehay Azage, Animal and Plant Health Directorate, Ethiopia
Belachew Hurissa, independent consultant, Ethiopia