Cablegate: Uganda's Cut Flower Industry Is Wilting

DE RUEHKM #1272/01 3070852
R 030852Z NOV 09



E.O. 12958: N/A

1. Summary: Uganda's cut flower industry, once seen as a potential
engine of economic growth, is suffering a major downturn due to the
global financial crisis and domestic challenges. Industry experts
are calling for government intervention to revive Uganda's flower
industry, as the domestic ripple effect of decreased flower exports
to Europe and the U.S. (under AGOA) is expected to negatively impact
the growth of the Ugandan economy. End Summary.

Early Blooming

2. Uganda's flower industry was established in 1993. It occupies
205 hectares of land and employs about 6,500 people. Uganda is the
5th largest African exporter of cut flowers and has an advantage
over other flower growing locations because Uganda's climate allows
for year round growing. Export earnings from the cut flower
industry average about $30 million annually and are an important
source of foreign exchange for the Ugandan economy. Flower
production and earnings peaked in 2005 at 7,500 tons worth $35
million. This strong growth had a broad impact on the economy. In
Uganda it is estimated that one wage earner takes care of ten
people, greatly magnifying the impact of 6,500 jobs. Further, the
growth in this industry spurred growth in agricultural suppliers and
other related sectors.

Starting to Wilt

3. Uganda's cut flower industry took a hit in 2006 when two major
farms were damaged by hail storms, and two others closed due to
financial difficulties. Power outages also worsened in 2006 due to
low rainfall, and a specific rose variety grown in Uganda was
blacklisted on the world market. This resulted in only 6,800 tons
of production worth $27 million. While earnings rose again in 2008,
production remained stagnant. In 2009, production and earnings are
expected to decline again as the main destination of flower exports
is the European Union, where the financial crisis has decreased
demand and reduced world prices by 30-50%. As a result, most flower
growers in Uganda have scaled down both production and staff.

4. Other local developments have also hurt the Ugandan flower
industry. Financing is difficult due to high interest rates and
short repayment terms for bank loans. Electricity supplied from the
grid has become increasingly expensive and unreliable as increasing
demands outpace power production. Due to rolling black-outs,
farmers are resorting to diesel powered generators - pushing
production costs even higher. Exporters also complain of high
freight charges. Relatively few cargo planes come into Uganda due
to the generally low volume of exports, resulting in higher
transport costs compared to other flower exporting countries in the
region such as Kenya.

No Fertilizer From the Government

5. Some industry insiders feel government support is necessary for
the industry to thrive. Five years ago, the Uganda Flower Exporters
Association (UFEA) forecast that sales could double in three years
with government support. They asked the government for land and
infrastructure, exemption from double taxation of profits, improved
cold storage facilities, subsidized airfreight charges and access to
long-term financing. According to Juliet Musoke, Executive
Director of the Association, these elements were part of an industry
strategic plan to build investor confidence and expand the
production area to 350 hectares and increase earnings to $44 million
per year. In response, the government gave growers some tax breaks.
However, the key issues of land, infrastructure, financing,
airfreight subsidies and improvement of cold storage facilities
remain unaddressed. Due to the harsh investment climate in the
sector, no new investments have been made in the last six years and
no new investors are expected in the near future.


6. Since 1993 cut flowers have earned Uganda an average of $30
million annually. While the bulk of these exports are to the
European Union, Uganda also exports cut flowers to the U.S. under
AGOA. This downturn illustrates some of the challenges to exports
inherent in many less-developed countries. Cut flowers, an industry
in which Uganda should have a comparative advantage, is rendered
uncompetitive due to poor infrastructure, inadequate access to
capital, and transport costs. These are challenges that even a
preferential trade regime such as AGOA probably cannot overcome.
With over 80% of the Uganda population making their living from
agriculture, a slump in cut flowers will have a ripple effect in
other agricultural sectors.

KAMPALA 00001272 002 OF 002


© Scoop Media

World Headlines


Save The Children: Tonga Volcano Ash And Smoke Cause Concern For Air And Water Safety
Families in Tonga are at risk of exposure to unsafe air and water due to ash and smoke from the Hunga Tonga-Hunga Ha’apai volcano that erupted on Saturday, reports Save the Children...

Sudan: 15 Attacks On Health Facilities And Workers In Two Months

With the crisis escalating in Sudan, there have been 15 reports of attacks on healthcare workers and health facilities since last November, the World Health Organization (WHO) said on Wednesday... More>>

Kazakhstan: Bachelet Urges Peaceful Resolution Of Grievances
Amid alarming reports of deadly violence in Kazakhstan, UN High Commissioner for Human Rights Michelle Bachelet on Thursday urged all, including security forces, protesters and others, to refrain from violence and to seek a peaceful resolution of grievances... More>>

Tigray: Agencies Suspend Aid As ‘Scores’ Are Killed Due To Airstrikes
Recent airstrikes on camps for internally displaced persons and refugees in Tigray, northern Ethiopia, have reportedly killed scores of civilians, including children, and left many more injured... More>>

UN News: For 25th Year In A Row, Greenland Ice Sheet Shrinks

2021 marked the 25th year in a row in which the key Greenland ice sheet lost more mass during the melting season, than it gained during the winter, according to a new UN-endorsed report issued on Friday... More>>

Afghanistan: Economy In ‘Freefall’, Threatening To Take Entire Population With It

Afghanistan’s economy is in “free fall”, the UN Emergency Relief Coordinator told a special meeting on Sunday, warning that if decisive and compassionate action is not taken immediately, it may “pull the entire population with it”... More>>