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October 24, 2009

Uganda flower farms withering as costs rise

by Elias Biryabarema

Once-blooming Ugandan fresh flower exports are withering due to crippling transport costs, a lack of new investors and the global economic downturn.

Hard currency inflows from agricultural exports including coffee, cotton and flowers are an important source of foreign exchange for the landlocked east African nation’s economy and of support for the Ugandan shilling. The country produced 6,700 tonnes of flowers worth $34 million last year, and the Uganda Flower Exporters Association (UFEA) expects output in 2009 to be flat or to decline slightly.

"The flower business in Uganda has become disappointing," said UFEA Executive Director Juliet Musoke. "Demand has remained terribly down since the credit crisis began at the end of last year, and when you add the high cost of fuel and airfreight, the margins drop to a very low level."

Uganda basks in a year-round tropical climate that makes production cheaper than growing in heated European greenhouses, meaning it should be well placed to serve markets in the West, as well as growing markets in the Middle East, Russia and China. Five years ago, industry players forecast that sales could double in three years with the right government support. They have long complained that they are being hindered by high transport costs and interest rates on loans -- which is vital because setting up a modern flower farm costs at least $1 million.

Given the tough environment, Musoke said, the sector had seen no new investors in the last six years. Instead, some growers were scaling back their operations and one major player, Victoria Flowers, had closed completely.

"I decided to close the farm because I wasn’t earning any money," said Gordon Wavamunno, a prominent Ugandan businessman and the owner of the now defunct Victoria Flowers. "The government has not given us adequate support and I decided to cut my losses," Wavamunno said.

Uganda boasts 19 flower farms covering 200 acres, mainly in the central region, and the sector employs about 6,500 people. Most of its exports are bought by European Union member states.

Apart from transport costs and lack of access to affordable loans, the big problem for growers is unreliable power. The country suffers from chronically insufficient electricity supply, much of which is generated by expensive diesel-fuelled plants.

Reuters

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