Actors in Kenya’s multibillion tea and horticultural industry are hoping for a smooth transition even as the United Kingdom, a key market for their produce, exits the European Union bloc today.
The UK is a key export destination for Kenyan flowers, most of which are auctioned in the Netherlands.
Currently, Kenyan flower exports enjoy zero tariffs on cut flowers sold to the EU. This is courtesy of an interim arrangement, which Kenya secured through the signing and ratification of the Economic Partnership Agreement (EPA) between the EU and the East African Community (EAC).
The deal is temporary until the three other members of the EAC sign up so it can come into full effect.
Other major Kenyan exports such as tea, fruit and vegetables also enjoy the same preferential terms.
Tea and horticultural exporters in Kenya say although the UK has assured them of retaining the preferential trade deal, there were concerns of the effects of the expected changes in trade terms between Britain and the rest of Europe post-Brexit.
“Tariff would be a bit of challenge on our flowers once Britain leaves the EU, we might see a decrease in market or our produce will sell at a higher price for the clients to recover the cost, a thing that could it on our market share,” says Ojepati Okesegere, chief executive at Fresh Producers Consortium of Kenya.
The UK has also been a major buyer of Kenyan tea and it is among the top three purchasers of the beverage over the years. In 2019, Britain bought 46 million kilos of tea worth Sh12 billion to make it the third-largest buyer of the commodity last year.
cost of production
Britain normally re-exports the tea it buys from Kenya to other countries in Europe. According to industry players, the UK might cut on the volumes of the beverage that it buys from Kenya.
The tariff implies that Kenyan flowers will become expensive in the market and it might not compete favourably with other countries with a lower cost of production.
Mr Ojepati says stakeholders from the sector will be in Europe next week where they will visit several countries to assess the situation after Brexit.
He says, however, the UK mission in Kenya has assured them that Brexit will not affect trade between Kenya and Britain.
“We have had a discussion with the UK mission locally and have told us that Brexit will not have a negative impact on our trade with that country,” he said.
Flowers made the bulk of the earnings in 2018 bringing in Sh113 billion with fruits emerging second by raking in Sh27 billion followed by vegetables at Sh12 billion.
Earnings from horticulture dropped by Sh6 billion in eight months to August signalling a bad year for flower and vegetable farmers in 2019.
Statistics from the Kenya National Bureau of Statistics (KNBS) show that the earnings in the review period dropped from Sh103 billion in the corresponding period last year to Sh97 billion this August with only two months before the end of the year.
The move implies that government will also earn less foreign exchange from the produce due to depressed income. The cut-flower exports remain the largest earner of horticulture, contributing more than 70 per cent of the total fresh produce annual earnings.
Britain buys tea from Kenya to resale to other UK countries with Ireland being one of its major buyers of the commodity.
Kenya’s tea exports to Ireland have been growing in recent months as a result of direct purchases of the commodity in the wake of Brexit, over uncertainties at the border point once Britain exits the European Union.
Data from the Tea Directorate indicate that volumes of tea bought by Ireland in nine months to September 2019 rose to 2.9 million kilos from 1.9 million kilos in the corresponding period last year, an increase of 52 percent.
The figures from the directorate also indicate that the numbers went up in nine months to September last year to reach a high of 3.1 million kilogrammes from two million kilos in the same period last year, a growth of 50 percent.
“Brexit could be a motivation for the increase in direct purchases of tea by Ireland, it is one of the factors that could have led to increase in purchases,” says East Africa Tea Traders Association managing director Edward Mudibo.
At present, goods and services are traded between the two countries with few restrictions. That is because the UK and Ireland are part of the EU’s single market and customs union, so products do not need to be inspected for customs or standards.
But after Brexit, all that could change — the two parts of Ireland could be in different customs and regulatory regimes, which could mean products being checked at the border.
The EU had indicated it would involve Northern Ireland alone remaining in the EU’s single market and customs union, leaving Great Britain (England, Scotland and Wales) free to strike trade deals.