KENYA, Rwanda and Ethiopia’s efficient and cheap power, and elastic investment incentives are attracting away flower investors from Uganda.

Royal Van Zanten, a local Dutch-owned flower firm, which is also the world’s second largest producer and exporter of Chrysanthemum flower cuttings, has already established three hectares of Chrysanthemum flowers in Kisumu, Kenya whose climatic conditions are similar to Uganda’s with further threat to shift completely if the conditions do not improve.

Costs

“The cost of doing business in Uganda is very high because of the inefficient and expensive power. If this is not solved we are ready to shift business to Kenya. We would prefer to stay but in the end you cannot sustain the business when you are losing money every month. We are giving it three years because of our loyal working relationship with our employees,” the Managing Director Royal Van Zanten, Mr Jacques Schrier, said.

In an interview with Daily Monitor at his farm in Namaiba, Mukono district on July 12, Schrier said the company spends over Shs45 million on generator diesel to light 8.5 hectares of greenhouses.

The company exports five tonnes of flower cuttings three times a week and each 1,000 cuttings cost 12 euros (about Shs281,520).

Every year at least 150 million cuttings are exported mostly to Holland and the UK.

Every year at least 150,000 cuttings earn the company 1.8 million euros (about Shs42.2 billion) minus the company expenses and taxes.

For a company that has invested over $4.5 million (about Shs8.2 billion) in Uganda ’s flower industry over the last ten years and employs some 320 people, it would be an economic drawback for a complete shift, as this would mean lost jobs and revenue for the government.

The government has committed about Shs170 billion this financial year for the construction of energy infrastructure to generate addition electricity.

Bujagali and Karuma dams are expected to be in operation after less than three years.

The country has a total shortfall of about 180 MW of electricity that has forced many manufacturers to resort to diesel generators to power operations or operate only when there is electricity from the national grid.

The outcome has been reduced industrial sector growth in the last financial year at only 4.5 percent down from 10.8 percent the previous year.

Recently, the government offered a tax waiver on diesel used for industrial production. All companies that use 100KVA capacity generators have been enlisted by the Uganda Revenue Authority to benefit from the tax waiver on fuel.

Mr Keith Henderson the Uganda Flower Exporters Association, the industry’s umbrella organisation, Executive Director said that the erratic power supply coupled with uncompetitive freight costs were hurting business.

“Van Zanten spends a lot of money on lighting their greenhouses at night. Even the diesel rebate is not solving their problems enough. The other problem is that the general investment climate is not the same as that in the neighbourhood. There are not enough incentives to the flower industry here compared to the region.

Said he: “If they want to expand they have got a choice to go where it is more comfortable for them and where they can get the best value out of their investment. The investment climate is attractive no more and yet the cost of freight is too much. This is getting serious. We cannot compete no more, so why bring here more investment?”

He, however, said that rose growers were facing the same problem but not at the same intensity since roses do not require 24-hour light supply.

Uganda’s 20 flower industry players netted some 72,000 tonnes worth $36 million last year.

Rankings

Uganda is also the fifth largest flower exporter in Africa and provides up to about 80 percent of the chrysanthemum cuttings on the Dutch markets.

The other producer of chrysanthemum cuttings in Uganda is Fiduga (U) Ltd situated in Mpigi districts along Masaka Road.

Uganda’s other biggest competitors are Kenya, Zimbabwe and Ethiopia who apart from having a favourable climate also have cheaper freight costs.

Currently Uganda pays $20 cents more than Kenya, $40 cents more than Tanzania and $60 cents more than Ethiopia in freight costs.

“Uganda has been in business for 10 years and only 200 hectares of flowers have been developed yet Ethiopia who have been in the business for less than four years have seen 400 hectares of flowers planted because of their competitive advantage,” Schrier said.

Copyright © 2006 The Monitor. All rights reserved.