How coronavirus has affected Kenyan flower firms

Tuesday March 24 2020
PIX

Agricultural Employers Association Chief Executive Officer Wesley Siele speaks on the impact of coronavirus on the flower industry in Kenya. PHOTO FRANCIS MUREITHI | NATION MEDIA GROUP

By FRANCIS MUREITHI

Mr Wesley Siele is the Chief Executive Officer of Agricultural Employers Association (AEA) which oversees the operations of 94 flower companies in the country. He speaks on the impact of the coronavirus on the multibillion-shilling industry.

What is the impact of coronavirus on the industry?

Our members who export flowers, fresh vegetables and fruits are counting huge losses. Growers who sell direct to the auction in Holland are destroying the entire consignment of flowers and this translates to a loss of between Sh1.8 billion and Sh2.2 billion per month.

No one is buying the flowers and there are no flights. Our members who sell direct to supermarkets have had their orders worth billions of shillings cancelled.

Apart from shrinking markets what are other burdens the industry is coping with?

The cost of destroying unsold flowers at the farm and at the market is another cost that is eating into the profits of our members.

Fertilisers used in the flower farms are imported. Do you have enough stock just in case the situation stabilises?

So far, most of our members have enough stock of fertilisers and chemicals to last them a month. However, if the situation persists, their stores will run empty as their consignment from China have been suspended.

No ships are docking at Mombasa port due to coronavirus fears. Some members had placed orders and paid for their supply and are still waiting for their consignment to arrive.

What is the cost of destroying fresh flowers in a foreign country?

The cost runs into millions of shillings because these European markets have stringent measures and regulations of destroying the flowers as they take keen interest of their environment and their disposal system is very strict.

How are local fresh flowers being destroyed?

We have set standards with National Environment Management Authority (Nema) and they have issued our members with a procedure to destroy the flowers. The flowers are shred into pieces and buried in a pit where they are left to decompose. This is not harmful to the environment.

With this kind of worrying situation, what is the next course of action?

More than 50,000 employees are idle and we have been left with no option but to force them to go on paid or unpaid leave as we monitor the situation. But if things get worse, we may be forced to declare job redundancies.

What are some of the lessons you have picked from the coronavirus lockdown as far as your industry is concerned?

We need to diversify our market and stop relying on European markets alone. You can imagine what the growers who rely on Italy and Chinese markets alone are undergoing now that the situation is still delicate with restricted movement.

Some of your members have bank loans. How are they coping?

The government, now more than ever before, needs to bail out these companies by talking to banks to adjust their loan repayments and interest rates. Most of the farms will soon close their operations and will not be able to service their loans. These loans should be suspended until the situation gets back to normal.

What other suggestions do you make to the government to ease the companies’ worries?

The government should fast-track the release of the Value Added Tax (VAT) running into billions of shillings to the affected flower companies to cushion them from further losses.

The training levy amounting to billions of shillings that is being withheld by the National Industrial Training Authority (NITA) should also be released without further delay to our members. If the worst come to the worst, and we declare our employees redundant, the government should waive tax on their terminal benefits. The government must keep in touch with the stakeholders.

What is wrong with our local market in such dire situations?

We barely sell one per cent to our local market in Africa, where a flower is more of a luxury. However, from the coronavirus scare, we need to diversify and create more awareness to our local market in the continent. Markets in Asia, South Africa and Egypt are still unexploited.

What is happening in the farms?

A number of farms are harvesting flowers and are shredding them. Unfortunately, this was our good season as we are coming from Valentine’s and Mothers’ Day celebrations where we had favourable weather and had good volumes in production but we are now unable to sell.

The farms are now spraying fertilisers and irrigating farms while cutting the flowers to sustain them which is costly. We have a skeleton staff which we are maintaining to prune the flowers yet we are not exporting.

With this kind of disruption what next?

The pending global recession that would adversely affect our customers in Europe, the next challenge and might force our members to cut down production.