TRALAC - Trade Law Centre

Uganda: High logistics costs undermining flower sector

Tuesday, 06 November 2007

Source: The Monitor (Kampala)

High freight charges on flower exports have cast a gloomy future on Uganda's once promising sector.

Investors in the industry contend that high freight charges, power crisis, high production costs and storms have dealt a blow to the flower industry.

Freight charges have gone up to $2 (Shs3,411) per kg from $1.30 (Shs2,217) prior to the surge in 2005.

Mr Clive Drew, the managing director of Uganda's Agricultural Productivity Enhancement Program, said the costs have hindered flower investors from setting up new investments while some of them have been thrown out of business.

Flower exports plummeted to $31.6 million (53.8 billion) for the 2006 season from $34.7 million (59.1 billion) the previous season.

Production decreased from 7,600 tonnes to 6,631 tonnes of flowers and cuttings in the same period. About 70 per cent of Uganda's flower exports are sent to Holland.

In early 2006, Ugandan flower exports entered into the US market under the African Growth Opportunities Act (Agoa). Ugandan flowers are known for their unique size, colour and long vase life.

However, Uganda's competitors in the flower industry have lower freight charges in comparison. Freight charges in Kenya, the biggest flower exporter in the East African region, stand at $1.90 while the charges in Ethiopia, the leading exporter in Africa, stand at $1.40.

Investors also say that the recent increase in landing charges by Civil Aviation Authority (CAA) has affected them negatively.

CAA Spokesman Ignie Igunduura, said flower exporters have to consolidate their activities if they are to get better deals.

"We have told the flower exporters many times that they should come together and export as a block," Mr Igunduura said. "If you are exporting one tonne, the freighters can not reduce the cost. They will charge you the same price like somebody exporting 15 tonnes."

The Chairman of Uganda Flower Exporters Association (see link), Mr Jacques Schrier attributes the current shortfall in production to the departure of potential investors, who according to him, had to move to Ethiopia in search of better incentives. Because of better flower investment incentives, some flower investors have moved to Ethiopia.

In 2006, the flower sector was also hit by a stormy loss. The strong winds brought down almost all the green houses of two flower firms, Rosebud II (5.2 hectares), and Victoria Flowers Ltd (10 hectares), leading to $7.2 million (about Shs13 billion) loss.

Floriculture, according to Usaid, is Uganda's fifth-largest export earner, and it is estimated that every direct job in the flower industry supports five individuals.

For Ugandans, the newly tapped U.S. market, was offering great potential to increase incomes and improve livelihoods, especially for women, who make up 60 percent to 80 percent of workers on flower farms.

However, because of the stronger Euro currency, exports to the US have also stagnated as exporters now resort to the Holland market where they get paid in Euros. Currently, one Euro is $1.45.

"Because of the strong Euro and high costs of international freight, the US is no longer an attractive market at all," Mr Drew said.

Key flower exporters in the country are Rosebud Ltd, Pearl Flowers Ltd, Victoria Flowers, Fiduga, Royal VanZanten, Mellisa Flowers and Uganda Hortec. Pearl Flowers Ltd located on a 25 hectare land in Rubare, is a high altitude flower farm.

Despite the fall in export earnings, investors in the industry are optimistic. Uganda's biggest flower farm Rosebud Uganda Limited, recently announced plans to increase their exports with their 6.5 hectare expansion.

Mr Sudhir Ruparelia, the owner of Rosebud Flowers said that the 6.5 hectare expansion will add an estimated eight tonnes to the company's already bustling exports.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Uganda’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.