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May 09, 2010

Rise in fuel prices adds to the woes of the East African flower industry

by McAdams Michael

The multi-million dollar horticultural industry is under threat in Tanzania and Kenya following rising jet fuel price and subsequent increase of freight charges with growers facing sanctions against using Lake Naivasha water.

According to Tanzania Horticulture Association (Taha) Fresh Handling Ltd general manager Paresh Maru, the rise in jet fuel prices that takes effect in May, will see farmers pay $0.24 extra on every kilogramme shipped from Kilimanjaro International Airport or Julius Nyerere International Airports to European markets.

Mr Maru explained that previously both Air France Cargo and Royal Dutch airlines cargo charges were $0.56 per kilogramme but now the charges have increased to $0.80 per kilogramme.

According to Maru, British Airways World Cargo has from April increased its charges to $0.75 p/kg from $0.56. Indeed, an April 22 British Airways note to customers indicated the carrier’s plans to increase its fuel surcharge to $0.75 per kilogramme in response to the recent rise in jet fuel prices fromApril 29.

Analysts say jet fuel constitutes 40 per cent of the operating cost of an airline and a rise in fuel rates would put an extra burden on carriers.

Prospects were high that horticultural growers would toast for remarkable earnings this year, but not any more, especially after the recent volcano eruption in Iceland and the price hike.

“This is yet another blow to the industry that is still nursing the wound of freight disruption in the recent volcanic eruptions in southern parts of Europe,” Taha executive director Jacqueline Mkindi said.

The industry suffered irreparable loss in turnover of more than $400,000 daily as a result of not shipping locally grown flowers, vegetables and fruits to the European markets.

An average of 50 tonnes remained unshipped every day creating produce wedge in the cold stores in the airports and in the farms, attracting other negative forces.

Cold storage facilities at Jomo Kenyatta, Kilimanjaro and Julius Nyerere airports were reported to be full and, according to Taha, officials managing the airport stores told growers to clear rotting products from their facilities and dump them back at their farms.

Nearly 70 per cent of the horticultural exports from Tanzania are air freighted to European markets via Jomo Kenyatta International Airport in Nairobi and the rest through Kilimanjaro International Airport and Julius Nyerere International Airport in Dar es Salaam.

Available data show that flowers account for at least 80 per cent of horticultural exports from Tanzania.

Tanzania’s horticultural products have a niche market in Western Europe, though few firms have managed to secure markets in the Mediterranean region, the Middle East and the US.

Revenues from the industry reached $140 million in 2008 from $1.4 million in 2002.

Large scale horticultural investment values reached $197.5 million last year, slightly above $195.4 million and $148.5 million in 2008 and 2007 respectively.

In Kenya, flower farms around Lake Naivasha could stop using the water mass for irrigation if plans to protect it are implemented.

Under the revised Lake Naivasha Management Plan, drawn by the Lake Naivasha Growers Group and submitted to the Water Resource Management Authority, extraction of water is to be divided into three categories depending on the water levels.

Traffic lights-like signals will be used to warn against use of the water when levels can’t allow. When the level is at 100 per cent, the light shows green, indicating there is plenty.

When it turns yellow at 50 per cent, take caution, the lake is at half capacity. At red — 25 per cent — you stop all forms of abstraction until the levels go back to green.

The East African

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