The Kenyan flower business is holding its breath

29-08-2016 10:50

Before the first of October the East African heads of state are required to ratify the Economic Partnership Agreement (EPA) with the European Union (EU) if it is to come into effect. In case they do not ratify, higher export tariffs will be imposed on the products of companies exporting their products from the Eastern African Community (EAC) to the EU’s common market. “This will be the end of the flower business in Kenya”, expects Jane Ngige, director of the Kenya Flower Council. The whole sector is holding its breath.

By Eva de Vries

Almost two years ago the EAC finalised the negotiations for a region-to-region Economic Partnership Agreement with the EU. The EAC consists of Burundi, Rwanda, Tanzania, Uganda and Kenya. The EPA’s intend to enhance regional integration and economic development and provide better access to the EU market for, in this case, the EAC member countries. The deadline for its ratification by the EAC’s heads of state is October first.

Uncertainty about ratification
Since the end of the negotiations in 2014, the EAC member countries continue to benefit from duty-free and quota-free access to the common market of the EU, pending signature, ratification and application of the agreed EPA. From the moment of application onwards, all EAC member countries will benefit from the same access regime under the EPA. However, it is very uncertain whether the agreement will be signed before the deadline.

Tanzania has declared that it is not ready to ratify the EPA yet, which would mean that the EPA would not come into effect as it needs to be signed by all EAC member countries. Following Tanzania’s capers, an ‘extraordinary summit’ for the heads of state was organised from the 17th until the 20th of August, in order to discuss the ratification and decide upon the way forward. Tanzania, however, cancelled the meeting at the very last minute, stating that it was “not ready to participate”. The summit has now been postponed to September.

Looming disaster
“We were hoping that the EPA summit would clear things up”, says Jane Ngige, the director of the Kenya Flower Council. She is disappointed: “It is a shame that the summit did not take place and that we now have to wait another month”. If one or more of the EAC member countries chose not to ratify the agreement, Kenya will need to pay extra tariffs in order to export its products to the EU market.

While the EU classifies most EAC member countries as ‘Least Developed Countries’, Kenya is the only member country that is classified as non-Least Developed Country. This means that different rules will apply to Kenya and that the other countries would still be able to export under more favourable conditions, making it less urgent for them to sign the EPA.

“It would be extremely hard for the Kenyan flower business to compete with important producing countries such as Ethiopia, Ecuador and Colombia”, thinks Ngige. She expects it will not come to that though. “If ratification does not take place, I am sure the government will come up with some sort of solution”, she says. “They are aware of the importance of the flower industry for Kenya, so they will do their utmost best to assist us.”

Smooth access
“I do expect that in the end the EPA will be signed, but it might not happen before October first”, explains Ngige. She refers to the political turmoil in Burundi and of course Tanzania, whose representatives argue they are not ready to sign the agreement due to “national interests” and “the protection of industries”.
Ngige states that the Kenya Flower Council has invested a lot in the flower business the last few years and that the quality of the industry can now be assured with regard to improved rules and regulations. “I just want the EPA to be signed so we can continue to develop the sector.”

When ratified, Ngige expects the EPA will facilitate smooth access to the EU’s common market and a better way of doing business. “I appreciate the content of the agreement and in the end it will also stimulate regional integration”, she says.

Risk to the business
Logically also the flower farms are nervous about the outcome, although the impact on specific companies depends on the volume of trade with the EU. Ravi Patel, director of Subati Flowers in Naivasha and Nakuru thinks that the influence on their company will be minimal if the EPA will not be signed. “Our roses are not going to the auctions in Europe as we mainly export our products to Russia, Australia and the Middle East. Looking at the bigger picture, he hopes that it will be ratified. “It will otherwise have large negative consequences on our country and its economy.”

According to Philip Kuria, farm manager of the Naivasha based Nini Flowers farm, it will indeed be a big risk to the Kenyan flower business if ratification fails. “We mainly export to markets within the EU, so for us it will be a disaster if the higher export tariffs are imposed.”

The so-called ‘extraordinary summit’ has been postponed to next month so the sector needs to be patient again. However, the deadline for ratification of the EPA is approaching quickly. “I cannot sleep properly until the agreement is signed”, says Ngige. “But my gut feeling tells me it will all be fine eventually.”

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Director of the Kenya Flower Council, Jane Ngige: “It is a shame that the summit did not take place and that we now have to wait another month”. If one or more of the EAC member countries chose not to ratify the agreement, Kenya will need to pay extra tariffs in order to export its products to the EU market.