Kenya trails its neighbours in the competitiveness of its horticultural sector.
According to a progress report on the horticultural sector released by the Kenya Horticulture Competitiveness Programme, the country lags behind its peers in credit and financial access, labour costs, sea and air freight costs.
Of the countries sampled — Kenya, Uganda, Tanzania, Ethiopia, Egypt and Ecuador — access to credit by growers in the sector was hampered by high interest rates, at 18 per cent as of February this year, compared with 7.58 per cent in Tanzania, 10 per cent in Ethiopia, 9.25 per cent in Egypt and 8.17 per cent in Ecuador.
Uganda had the highest cost of credit at 22 per cent as of February, negating efforts to promote crop production through cheaper financing options.
In Kenya, the poor state of affairs is despite the government’s allocation of Sh700 million under the credit guarantee system to producers in the sector.
Ministry of Agriculture permanent secretary Romano Kiome, however, said that of the Sh700 million allocated under the credit guarantee scheme to five commercial banks, to be issued at 12 per cent interest, only Sh250 million has so far be given out.
This is due to the fact that banks, instead of imposing only 12 per cent interest, are charging over 18 per cent interest, he said.
“Most of the banks have not disbursed the money. It is only Equity Bank, which we gave Sh250 million, that has given out the money. The rest of the banks have not lent out anything,” Mr Kiome said, adding that his ministry has written to banks that have not disbursed the money to return it.
Other than the financing costs, Kenya also has the highest labour expenses, with workers demanding close to Sh255 ($3) a day, compared with less than Sh212.5 (2.5) a day by workers in Tanzania, Uganda, Ethiopia and Egypt.
It also costs producers in Kenya Sh510,000 to transport horticultural produce by sea, compared with about Sh425,000 for South Africa and less than Sh153,000 for Egypt for a 40-foot container to the source market in Europe.
According to the project director of the Horticulture Competitiveness Programme, Mr Ian Chesterman, Kenya, despite being the most successful producer and exporter of fresh cut flowers in sub-Saharan Africa, risks losing this position.
This is because of high costs of doing business, punitive taxation regimes and poor access to credit by the producers, the majority of whom are smallholders.
In 2011, the horticulture industry earned the country Sh91 billion, up from Sh36 billion in 2010.
However, the country scored well in other areas. Compared to others, general skills and knowledge levels
in Kenya’s horticulture sector is higher. Seeds are cheaper compared with countries in the region. Fertilizers are cheaper due to access the sea through Port of Mombasa. Road network in Kenya good and cold storage facilities are available for use by farmers.
BY JOSHUA MASINDE
Daily Nation September 11, 2012.