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Kenya: Horticulture sector faces slump after robust growth

Horticulture industry earnings rose by 64 per cent to Sh49.5 billion last year buoyed by strong demand in key international markets, a Central Bank of Kenya report indicates. Demand in the international market was helped by poor weather conditions in Europe during the second quarter of 2007 that opened the window for local producers to increase their sales.

Traditionally, the onset of summer in the northen hemisphere reduces sales volumes for local exporters as their counterparts in Europe take advantage of improved weather to increase their output. Last year, however, unpredictable weather attributed to climate change and upset Europe's horticultural production in key source markets such as the UK. That meant prolonged period of demand for imports from countries like Kenya.

In its latest monthly economic review, CBK said horticultural exports increased both by volume and value, capturing the change in fortunes for the local growers.
The report says the volume of exports over the three first quarters of 2007 climbed 12.9 per cent over the previous year to 138,290.473 metric tonnes with flowers forming the bulk of the export volumes at 47 per cent. In the cluster of flowers alone, there was a growth of 4.5 per cent to 65,526.25 metric tonnes even though vegetables had the strongest growth margins at 27.71 per cent to realise a volume of 58,694.29 metric tonnes. "The value of total horticultural exports increased by 64.13 per cent to Sh49.51 billion.

By category, the flower export farmers earned Sh30.97 billion. Vegetables export farmers earned Sh16.97 billion while fruit export farmers bagged Sh 1.57 billion," CBK stated in the report. Analysts said the huge growth in earnings would help re-affirm the local horticulture sub-sector as one of the key drivers of the economy after tourism where players have projected that the earnings would be slightly above Sh60 billion over 2007.

This year however looks tricky for the tourism industry with violence attributed to the disputed December presidential results affecting operations of most facilities.
Several players have already projected massive drop in earnings for this year due to unrest, with indications that the horticulture industry may provide a lifeline since activities in the sector have not been hard hit.

The Central Bank however warns that the horticulture industry still faced a host of hiccups that could affect its performance this year. "Recurrent droughts remain the largest single challenge facing the industry. Other challenges are infrastructure related, crop diseases, hygiene standards imposed on the export product and competition from other producers like Ethiopia," the bank said in its review report.
The huge climb in earnings comes as sweet news for players in the sub-sector who suffered scares last year due to the food miles concept that threatened to lock local producers from key markets especially in Europe on grounds that shipments from far flung areas were contributing to global warming through carbon emissions.

Proponents of this concept argued that to discourage such threats of environmental degradation, all produce brought in through long haulage should be accorded cautionary labels such that buyers 'skipped them' for locally produced ones.
The industry also faced the challenges of a strengthening shilling against major international currencies that eroded producers' earnings from exports prompting a debate over possible switch to other currencies to avoid further damage.

That aside, there were the jitters of expiring preferential trade agreements that would have disrupted export trade with the EU come December 31. Kenya and other East African Community(EAC) nations have however since since temporary trade deals with the EU putting to rest fears of trade disruption between the two blocs.

Source: allafrica.com

Publication date: 1/24/2008


 


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