Kenyan flowers growers will be banking on the recently formed
working committee, to thrash out tariff issues with China, possibly
easing their entry into the world’s largest market.
Last
week, Kenya and China formed a technical work group that will oversee
the withdrawal of the four per cent duty on most Kenyan exports to
China. If successful, this will allow flower growers to tap into the
growing Chinese market and boost the earnings of the sector, as part of
the country's effort to diversify its markets.
“We are
going to have the first meeting next January with China and we hope to
have completed negotiations by the end of February. Our target is to do
away with this four per cent tariff to make our products competitive,”
Kenya’s Trade Cabinet Sectary Peter Munya said.
In July
2010, China removed tariffs charged on 60 per cent of the goods that it
imports from Kenya and 32 other developing countries but retained the
levy on cut flowers.
Beijing and Nairobi also signed a
memorandum of understating to drive exports of over 40 per cent of
Kenya's fresh produce to the Chinese market that has over 1.3 billion
consumers.
Currently, Kenya’s cut flowers are sold to a
single economic bloc, the European Union, exposing export trade to
vulnerabilities. Most Kenyan flower reach China via the
Netherlands-based international flower auction.
However, Kenya enjoys a duty and quota-free export arrangement
in the EU market, and also has a duty-free flower arrangement with
Japan. In the region, it is only Ethiopia that enjoys a duty- free
flower arrangement with China.
“This agreement will
facilitate export of agricultural products from Kenya to China. We would
love to see more of Kenya's products on our shelves,” Guo Ce, the
economic and commercial counsellor at the Chinese embassy in Kenya,
said.
For Kenyan growers — who earned $822.5 million last year — this new development is a boon.
“I
haven’t seen the actual documents signed but we are interested in
expanding our footprints in China. Currently our flowers are being
charged higher taxes in China, which makes them uncompetitive. We hope
that the government will negotiate favourable trade protocols and
agreements with China,” Clement Tulezi, the chief executive officer of
the Kenya Flower Council, said.
Bobby Kamani, the
managing director of Primarosa Flowers Ltd said the government talks
with China were welcome development, especially for the flowers sector,
given the potential it has.
“We were in China with
government officials and we saw the interest. It was an eye opener for
us at the expo because Kenyan growers had an unexpected reception in the
Chinese market. We got contacts of flower suppliers who have
traditional dealt with Ecuador and Colombia and having an African
connection further opens up our access,” Mr Kamani said.
He
added that Primarosa has turned around its business model and now does
more than 70 per cent of its sales to individual buyers with 30 per cent
sales in auctions, a model he believes the Chinese market will sustain.
Some
Chinese flower importers have been forced to use a single import and
centralised distribution system to lower costs as it allows them to
import multiple batches of products at a single time and redistribute
them in warehouses scattered across China, which also reduces their tax
obligations.
The opening up of the Chinese market now
offers bigger opportunities for Kenyan flower farmers and also Chinese
importers, who have over the years developed strong interest in the
produce.
Chinas Jiuye Supply Chain in Guangzhou has emerged as one of the leading contact firms that Kenyan flower exporters are using.
“We
chose to introduce flowers from Kenya to China because of the vast
number of varieties they grow, including some that you cannot find in
other regions. We were also impressed by the length of the flowers vase
life,” said Qi Bo, the director of Jiuye supply chain department, adding
that with a 25 per cent annual increase in demand for the Kenyan
flowers should see them double imports from Nairobi to five million
stems by the end of this year.
Logistics is, however,
still a challenge since only Kenya Airways through its code share with
China Southern Airlines flies directly to Guangzhou.
The
other options are Ethiopian Airlines flights from Addis to Shanghai,
with a two hour transit time, while the Gulf carriers are costly because
of connections.
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