The Kenya National Bureau of Statistics (KNBS) has reported a significant decline in the value of cut flower exports in June 2024. According to the latest KNBS Leading Economic Indicators report, the value of cut flowers exported from Kenya fell by 21.2%, from KSh 6.6 billion in May 2024 to KSh 5.2 billion in June 2024. The volume of exported flowers also dropped from 8.6 thousand metric tonnes in May to 6.7 thousand metric tonnes in June.

This decline has raised concerns within Kenya’s floriculture sector, which is a key driver of the country’s economy, especially in the agricultural and horticultural industries.

Sector Comparison: Year-on-Year Analysis

The cut flower industry has been facing challenges, as evidenced by the year-on-year comparison provided by the KNBS data. In May 2023, Kenya exported 13,495 metric tonnes of cut flowers, generating KSh 8.2 billion, compared to June’s 11,995 metric tonnes worth KSh 7.1 billion. This shows a steady decline in both volume and value over time, which poses a serious threat to Kenya’s standing as one of the world’s top exporters of cut flowers.

The largest export volumes were recorded in February 2024, with 16,102 metric tonnes, largely attributed to Valentine’s Day, a peak season for flower sales globally. January also recorded a high volume of 12,479 metric tonnes, fetching the country KSh 13.2 billion and KSh 14 billion, respectively. These numbers indicate that the sector thrives in the first quarter of the year, mainly due to international celebrations that boost demand for flowers.

However, the decline in June exports has created uncertainty about the overall performance for the year. This may prompt Kenyan flower farms and industry stakeholders to adopt new strategies to boost sales and stay competitive in the global market.

Factors Behind the Decline

Kenya’s floriculture sector is a vital component of its economy, accounting for a substantial share of the country’s horticultural exports. However, the sector is not without its challenges. According to a review by the Kenya Flower Council (KFC), local regulations, taxes, and international standards, particularly from Europe—Kenya’s biggest flower market—continue to pose obstacles. The sector is grappling with red tape and stringent rules on quality, pesticide use, and environmental sustainability, which all impact the cost and efficiency of production and exportation.

In recent years, the European Union (EU) has implemented stricter rules and regulations for flower imports, especially in relation to environmental standards. These changes are expected to become even more stringent, which could present additional difficulties for Kenyan flower exporters. With Europe accounting for the majority of Kenya’s flower exports, any further regulatory restrictions could significantly impact export volumes and revenues.

Potential Mitigation Strategies

To address these challenges, the Kenya Flower Council has recommended several mitigation strategies. These include:

• Locking in Sales and Prices: By securing fixed contracts with buyers, Kenyan flower farms can stabilize their revenues, protecting themselves from volatile price fluctuations in international markets.
• Diversifying Flower Varieties: Diversifying the types of flowers grown could open new markets and reduce dependency on traditional European markets. Some farms are already exploring different varieties that may have better resilience to changing climates and international preferences.
• Exploring Alternative Markets: Kenyan flower farms are increasingly looking to expand into new markets outside Europe, such as the Middle East, Asia, and North America. While these markets currently represent a smaller share of Kenya’s flower exports, they offer opportunities for growth, particularly in regions where demand for cut flowers is rising.
• Investing in Value-Added Products: Some flower farms are exploring products like dried flowers, essential oils, and other derivatives to create new revenue streams. Value addition could help buffer the sector against the unpredictable nature of fresh flower exports.

The Broader Horticultural Picture

While the cut flower industry has been facing challenges, other sectors within Kenyan horticulture are showing resilience. For example, KNBS data reveals that the volume of exported fruits increased from 21.7 thousand metric tonnes in May 2024 to 24.2 thousand metric tonnes in June 2024, with a corresponding rise in value from KSh 4.6 billion to KSh 5.1 billion. This indicates that despite the struggles in floriculture, other fresh horticulture products like fruits are gaining ground in international markets.

Similarly, the volume of vegetables exported in June 2024 stood at 4.2 thousand metric tonnes, fetching KSh 1.8 billion. Although lower in volume compared to fruits and flowers, the vegetable export sector is maintaining its position as a consistent performer within Kenya’s agriculture-driven economy.

Performance of Other Export Sectors

Kenya’s tea industry continues to be a major export contributor, with KNBS data showing a rise in tea exports from 42.9 thousand metric tonnes in June 2024 to 54.3 thousand metric tonnes in July 2024. This increase in volume was accompanied by a rise in value from KSh 11.8 billion to KSh 15.5 billion, highlighting tea as a strong and stable sector in Kenya’s export portfolio.

The overall volume of trade in Kenya expanded from KSh 295.8 billion in June 2024 to KSh 323.1 billion in July 2024, according to the KNBS. During the same period, the total export value grew from KSh 87.2 billion to KSh 97.0 billion, while imports also rose from KSh 208.6 billion to KSh 226.1 billion. This shows a broad-based expansion in both exports and imports, contributing to the overall growth of the Kenyan economy.

Key Trade Partners

Uganda and the United States remain Kenya’s primary export destinations, with values of KSh 10.8 billion and KSh 7.5 billion, respectively, in July 2024. Uganda, as Kenya’s largest regional trading partner, continues to play a vital role in sustaining Kenya’s export market. The United States, on the other hand, has grown as a key destination for Kenyan agricultural products, including flowers and fresh produce.

On the import side, China and the United Arab Emirates (UAE) were Kenya’s leading trading partners in July 2024. Kenya imported goods worth KSh 59.7 billion from China and KSh 28.6 billion from the UAE, indicating the strong trade ties Kenya has established with these two countries.

Future Outlook

Despite the short-term challenges facing the cut flower industry, Kenya’s horticulture sector remains a critical pillar of the country’s economy. With diversification strategies, technological advancements, and new market opportunities, the floriculture sector could recover and thrive once again. Kenya’s government and industry stakeholders are also working to ensure that the sector remains competitive in the face of global challenges such as climate change, stricter regulations, and shifting market dynamics.

Looking ahead, the Kenya Flower Council has urged flower farms to innovate and explore new opportunities to remain relevant in the international market. Furthermore, the potential for expanding into value-added products could offer a fresh lifeline for the sector, helping to cushion against economic downturns and market disruptions.

In the broader context of Kenya’s export economy, floriculture will continue to play a key role alongside other agricultural sectors such as tea, fruits, and vegetables. The KNBS report underscores the importance of sustained government support, investments in infrastructure, and the exploration of new markets to maintain Kenya’s strong position as an agricultural powerhouse in Africa and the world.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

27th September, 2024