IN the wake of falling flower exports, the Government has promised incentives to turn around the worrying trend.

Over the last 12 years, the flower sector has grown to 22 farms, boosting foreign exchange earnings to over $35m (sh62b) in 2005.

However, the introduction of attractive and sustained investment incentives by other countries like Ethiopia, Kenya and Tanzania has created stiff competition and destabilised Uganda’s growers. Some farms have closed down due to financial constraints, while others relocated to Kenya and Ethiopia.

Kenya, Tanzania and Ethiopia offer a 10-year corporate and withholding tax holiday, long-term finance, exemption from taxes on all inputs like machinery and raw materials.

Flower growers are also exempted from stamp duty, restrictions on management and technical arrangements that limit expatriate positions to those where local skills are not available, and the firms operate under a single licence.

Earlier this year, the Government asked the Uganda Flower Exporters Association (UFEA) to develop a suitable and attractive incentive package for existing and new investors.

Uganda only offers 50% capital allowances on plant and machinery, 25% on start-up costs spread over the first four years and 100% on training, scientific and mineral exploration expenditure.

However, in the investment and free zone bill, the Government proposed a 10-year corporate tax holiday, no stamp duty and duty exemption on raw materials, plants and machinery, relief from double taxation on dividends repatriated and scrapping export tax.

Uganda’s growers under UFEA have petitioned the President and the finance ministry to guarantee similar conditions or lose new investments to the neighbouring countries.

This week, President Yoweri Museveni told the growers during a meeting at State House in Nakasero that the issue was resolved by Cabinet and the Government would grant them full incentives by July.

He said some of the incentives have financial implications so they have to be listed in the Budget.

The new package is expected to boost the industry’s annual earnings by $80m (sh140.8b) in two years.

The sector will expand to 600 hectares from 210 by encouraging new investments and more people to invest in high-altitude rose-growing. It will also employ 20,000 people from the current 6,000.

Last month, the finance minister, Dr. Ezra Suruma, tabled a memorandum about the growers’ concerns to Cabinet and recommended that a study be made on the incentives in Kenya, Tanzania and Ethiopia.

“It is important to evaluate whether the neighbouring countries are offering more incentives and then a rational decision made as to whether the Government should attempt to match them,” Suruma said.

“The Government’s role in aiding the sector’s growth is by providing a favourable investment climate with incentives through which long-term sustainability of the sector and continued expansion on equal or better terms. Uganda’s investment opportunities have been sucked up by neighbouring countries,” said one member.

UFEA also wants the Government to provide investors with land free of squatters like Ethiopia as well as build basic infrastructure like roads and airport cold storage facilities, provide utilities like power and water and avail security for property.

The member said there is great potential for success, but breaking through requires close collaboration with the Government in attracting new investments.

Uganda’s air freight charges are said to be the highest in the region; $2.20 (sh3,872) is charged per kilogramme compared to Ethiopia’s $1.5 (sh2,640) and Kenya’s $1.75 (sh3,080).

source : www.newvision.co.ug