212919 biwerk:212919 biwerk - Bibliotheca Alexandrina · 212919_omslag:212919_omslag 03-08-2007...

The flower industry in Kenya and Ethiopia

trade matters!

www.bothends.orgwww.iucn.nl

212919_omslag:212919_omslag 03-08-2007 08:39 Pagina 1

TRADE MATTERS!The flower industry in Kenya and Ethiopia

Introduction: page 1 - 2

1 The policy environment Regulations and barriers:page 3 - 6

2 The socio-economic impact of the flower industry: page 7 - 11

3 The environmental impact of the flower industry: page 12 - 14

Recommendations and conclusion:page 15 - 16

The following sources were used for the present report

• Barrientos, S, C. Dolan and A. Tollontire (2001) Genderand Ethical Trade: a Mapping of the Issues in AfricanHorticulture• Bech N. (2004) Floriculture Development in Ethiopia:Water availability and environmental impacts, DHV WaterBV, Amersfoort• Becht, R., Odada, E.O. and Higgins, S. (2005) LakeNaivasha: experience and lessons learned brief. In: Lakebasin management initiative : Experience and lessons lear-ned briefs. Kusatsu : International Lake EnvironmentCommitte Foundation (ILEC), 2005. pp. 277-298.• Both ENDS (2005) Information Pack Nr. 18 Sustainableproduction of cut flowers• Both ENDS (2006) Bloemen, weelde met een geurtje• Both ENDS (2007) Atradius DSB and the DutchGovernment• Both ENDS (2007) Balancing Risk: What Export CreditAgencies can do for sustainable development• CBI (2004) EU Market Survey 2004: Cut flowers andfoliage• CBI (2005) EU market survey 2005 cut flowers and foliage, November 2005• Dolan, C., J. Humphrey and C. Harris-Pascal (IDSWorking Paper 96); Horticulture Commodity Chains: TheImpact of the EU market on the African Fresh VegetableIndustry• Dolan, C., M. Opondo and S. Smith (2002) Gender,Rights & Participation in the Kenya Cut Flower Industry• FIAN, FES, IUF (2001) Flowers for Justice: implemen-ting the International Code of Conduct• Forum for the Environment (2005) Laying the Foundationfor Bringing about Corporate Social and EcologicalResponsibility in the Floriculture Industry of Ethiopia:Project Proposal• Humphrey, J., N. McCulloch and M. Ota (2004); TheImpact of the European Market Changes on Employmentin the Kenyan Horticulture Sector, journal of InternationalDevelopment, vol. 16, 63-80

• Madeley, J. (1999) Trade and the Hungry: howInternational Trade is causing Hunger• Odada, E, R. Becht, (?)Lake Naivasha RiparianAssociation (LNRA), University of Nairobi, ITC Enschede;Experience and Lessons Learned Brief for Lake Naivasha• Ouma, S. (2005) Inventory of the Flower Industry inKenya (report written on behalf of Kenya Human RightsCommission, Nairobi)• Rabobank (2005) World Flower Map• Sikoyo, G.M. (2004) Southern Agenda on Trade andEnvironment Phase II Regional Consultation- Eastern/Southern Africa, Background Paper• Smith, S., D. Auret, S. Barrientos, C. Dolan, K. Kleinbooi,C. Njobvu, M. Opondo and A. Tallontire (2004) Ethicaltrade in African Horticulture: Gender, Rights andParticipation, IDS Working Paper 223• Union Fleurs (2005) Flowers and Plants• Vos. R. de (2003); Coherence between Dutch SPSrequirements and development policy: a Case Study ofthe Kenyan Cut Flower Industry• Wiertsema, W. (2003) Overheidssteun voor buitenland-se handel en investeringen • Wijnands, J. (2003) Internationalisering van hetNederlandse sierteeltcluster in Oost-Afrika: Bevindingenvan een studiereis naar Kenia, Tanzania en Oeganda, aan-gevuld met desk-research, LEI, Den Haag• Zachariasse, L.C. (2000) Challenges for the Kenyan-Dutch Flower Business in the Years ahead (Introduction atthe seminar at the occasion of the HORTEC, Nairobi,Kenya, March 15. 2000)

Newspapers

• The Independent-UK (27-06-2004) The Battle of the RiftValley• The Nation-Nairobi (17-03-2005) Lake Naivasha givesup its Tilapia• New Vision-Uganda (11-11-2003) Lake Naivasha beingpolluted by flower farmers and the poor• The Nation-Nairobi (01-02-2001) Who is Kiling LakeNaivasha

This case study was written by: Nathalie van Haren,

Saskia Berends, and Wiert Wiertsema of Both ENDS;

Pieter van der Gaag and Stefan Verwer of IUCN NL.

It depended greatly on the expertise of Burghard Ilge and

Ilma Kramer of Both ENDS. We would like to thank the

authors of the sources quoted in this document for their

research.

We realise that this data is difficult to gather.

English Language Editing Nicholas Parrott

TextualHealing.nl (Wageningen)

Design and images Margo Vlamings (Arnhem)

Printing Drukkerij Roos en Roos, Arnhem

Printed on: Reviva silk, FSC.

© February 2007

This document has been produced with the financial

assistance of the Dutch Ministry of Foreign Affairs (BuZa);

the Dutch Ministry of Housing, Spatial Planning and the

Environment (VROM) plus the European Commission (EC).

The views expressed herein are those of Both ENDS and

IUCN National Committee of the Netherlands and cannot in

any way be taken to reflect the official opinion of BuZa,

VROM and/or the EC.

Readers are encouraged to quote or use text from the

Trade Matters series for their own publications or articles,

but we insist on acknowledgements and appreciate to

receive a copy of the publication. However, the copyrights

on design and images remain.

Credits


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Trade Matters!rade and foreign direct investment areimportant instruments in the fight

against poverty and ecological degrada-tion. It is an undisputed fact that trade andinvestment flows can play a positive role in reducing poverty and in halting biodiversi-ty-loss. What is disputed, however, is howthese flows should be regulated and organised. Finding ways to maximise thepositive contribution of trade and invest-ment flows for sustainable development iscertainly one of the greatest challenges ofthis decade.

The following case study is part of aseries produced by IUCN-National Com-mittee of the Netherlands (IUCN NL) andBoth ENDS to provide more insight intothe relationships that exist between eco-nomic policy (such as trade and invest-ment policies), the achievement of sustain-able livelihoods in poor countries, and halting the loss of biodiversity. Each case

Introduction

describes a specific example, and offersrecommendations on how to move for-ward. The cases are intended to supportthe current discussions worldwide on howglobalisation can benefit all life on earth.

The flower industry: global productionand trade; the Netherlands, Kenyaand Ethiopia

"An environmental impact assessment helps theflower producer to choose the safe technologies.Regular environmental auditing after starting togrow the flowers enables the flower producer tokeep humans and the environment safe and alsohis pocket filling, free from the risk of being emp-tied by the impacts of pollution."Tewolde Berhan Gebre Egziabher, DirectorGeneral, FDRE Environmental ProtectionAuthority - Ethiopia

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an undersupplied market, world cut flowersupply, especially for the most commonvarieties, has now expanded to match orexceed what has been relatively slowgrowth in demand during the past fewyears. Especially, the price decline forroses has been more pronounced than forany other major type of flowers. In fact, prices for several relatively minor flowervarieties have increased in recent years.2

This case study focuses on the socio-economic and ecological impact of flowerproduction and trade in two East Africancountries, Kenya and Ethiopia, and relatesthis to international trade agreements de-signed to liberalise the market and specifi-cally addresses the role of Dutch foreigndirect investments facilitated by Dutchgovernment support programmes.

On a global scale, the flower industry isbooming: world consumption of flowers isgrowing at a rate of 6 to 9% a year withhighest growth rates in Japan and theUSA. It is estimated that the EuropeanUnion consumes 50 percent of the world’straded flowers. In 2004, consumers in theEU spent over €12.000 million on cut flowers and foliage. Some of the EU mar-kets show some saturation, while flowerconsumption in other EU countries is stillgrowing. Within the EU, Germany is thebiggest consumer, followed by the UK,France and Italy in order of importance.1

The global production pattern of cut flowers is currently undergoing importantchanges. Next to the traditional centres ofproduction (The Netherlands, Japan, Italy,and the USA, ), new production centresare steadily becoming important. In Africaand Latin America, the industry is growingvery quickly. However, after many years of

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The increased competition for certaintypes of flowers will have effects on theeconomic sustainability of each productioncentre.

International trade in cut flowers is largelyorganised along South-North lines. Asia-Pacific countries like Thailand, China,Malaysia and New Zealand are the mainsuppliers to Japan and Hong-Kong. Africancountries like Kenya, Ethiopia, Zambia andZimbabwe export to Europe. Central andSouth American countries like Colombia,Costa Rica and Ecuador supply the UnitedStates.

The Netherlands being the world’s leaderproducer and the flower distribution hub isa mayor supplier to all flower consumingareas. The Netherlands constitutes themajor market for developing countriesbecause of its massive trading role indistributing imported flowers throughoutEurope.3 The main countries involved inthis trade through the Netherlands areKenya (37,7% share in 2004), Israel(15%), Zimbabwe (11,39%) and Ecuador(7,8%).4 Colombia is also a significantexporter of flowers to Europe.5 Thus theNetherlands plays a pivotal role in the global flower trade and its auctions are ofimportance as they play a crucial role ininternational standard setting.

1CBI, 2005.

2CBI, 2005.

3CBI, 2005

4Union Fleurs, 2005.

5Yearbook of the international horticultural statistics, 2005

0

100

200

300

400

500

600

700

800

1992 1994 1996 1998 2000 2002 2004

Others Uganda Thailand

Zambia Zimbabwe Ecuador

Colombia Israel Kenya

Trade from non-EU to EU countries,1992-2004 (in million Euro)

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t is not easy for developing countries to trade with Europe. In many sectors there

are still tariff and non-tariff barriers thatimpede the free flow of goods. Non-tariffbarriers include quality standards, pack-aging requirements and measures relatedto production processes. In addition tothese barriers, the European economy,particularly the agricultural sector, receivesa great deal of official support throughsubsidy schemes, fiscal measures andexport guarantee schemes.

Sanitary and Phyto-Sanitary require-ments (SPS), which regulate the basicrules for food safety and animal and planthealth standards, can be significant barriers to trade. These are set out in TheAgreement on the Application of Sanitaryand Phyto-Sanitary measures (SPS), oneof the agreements made within the WorldTrade Organisation (WTO). This agree-ment specifies that import requirementsmust comply with international standardsand should not be used as an unneces-sary barrier to international trade.

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1 The policy environment:

Regulations and barriers

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Nonetheless for most developing countries,and specifically smallholders in developingcountries, SPS standards form the mostsignificant barrier to trade.6

Dutch SPS requirements are largely for-mulated in accordance with the WTO SPSagreement. Despite this, a 2003 studyfound that the Kenyan flower industry suffers from these standards. Smallholdersfind it especially difficult to meet theserequirements, as they lack the financialresources for the necessary investments to comply with the standards.7

The SPS agreement allows for exemp-tions to these trade rules, to take intoaccount the particularities and specificconditions faced by individual countries(article 6, WTO SPS agreement). From adevelopment perspective, it is interestingto explore this exemption to differ from thenorm. For example, the SPS requirementsfor a specific pest that is only found incooler climates, should not be a require-ment for a product that originates fromwarmer climates where this pest is not prevalent. From an ecological perspective,exemptions on the prohibition on the use of specific pesticides and chemicals mightnot be desirable.

Reform of government support program-mes proves to be a difficult task. Theimplementing agencies operate in a highlycompetitive environment, and argue thatinformation given prior to a decision tosupport an enterprise will harm it’s owncompetitive position and that of the applicant. The application of sustainabledevelopment principles is generally seenas to unnecessarily adding to the admin-istrative burden and costs of doing business.9

With a focus on reducing financial risks,government support programmes for inter-national business transactions have evolved into institutions with a weakrecord regarding sustainable development.Yet as the largest source of public finan-cial support for corporate involvement incommercial projects abroad, such pro-grammes have major impacts on thesustainability of development processes.

Dutch government supportThe Dutch government has different

programmes to support private corpora-tions to do business abroad. Such supportmay be provided in the form of subsidies,credit guarantees or insurances, especiallyfor business in developing countries andemerging markets.

Information on such government suppor-ted transactions and their impact onsustainable development is difficult toobtain as there is a relative lack of trans-parency in this area. Moreover, local stake-holders are rarely consulted prior to trans-actions being made. In this setting, it ishard to obtain a clear understanding of theimpacts of government supported busin-ess transactions on the environment andlocal livelihoods.

6Henson, 2000.

7De Vos, 2003.

8De Vos, 2003.

9Wiertsema, 2003.

10Programme for Cooperation with Emerging Markets

Arguing for special conditions does,however, require scientific justification,which is a prohibitively expensive exercise.8

Investing in pest and disease control measures that comply with European standards could reduce and minimise the impact on the natural ecosystem andhuman health, and is probably a more advisable route.


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PSOMPSOM (Programma Samenwerking

Opkomende Markten10) is one financialinstrument available to Dutch investors inemerging markets, particularly in devel-oping countries. It is financed from theODA budget (Official DevelopmentAssistance) and managed by Senter/EVD,a public agency that distributes Dutchsubsidies. The maximum PSOM subsidy is€1,5 million. Compared to other financialinstruments for business abroad, PSOMsupports fairly moderate transactions andits impact is rather small. PSOM has an explicit objective of stimulating sustainableeconomic development in emerging markets. The applying business proposalsmust be commercially feasible in mediumor long-term and have a positive effect onthe local economy of the recipient countryin terms of creating additional employ-ment, introducing new technology, im-proving livelihoods, strengthening smalland medium sized businesses and/orresulting in improved environmental condi-tions.

The programme involves pilot invest-ments from Dutch companies that set upnew business ventures together with localcompanies in eligible countries (see box).The projects are expected to contribute topoverty alleviation (www.evd.nl).

PSOM Criteria• You are a Dutch company and a company in the PSOM country with an aimat setting up a new activity in partnership with each other in one of the PSOMcountries• You and your local partner are financially sound, have relevant expertise andexperience in the market and enter into a long term trade or investment relation • The applicant should be a company registered in the commercial register atthe Chamber of Commerce in the Netherlands. The recipient should be a private company, officially registered in the recipient country. There is no limitation in the percentage of shares of the recipient company, which areowned by Dutch companies. • You do not have the financial means to implement your plans nor can youobtain funds from a bank to finance your business plan.• Your proposal is commercially feasible in medium or long term and has a positive effect on the local economy of the recipient country in terms of creating additional employment, introducing new technology, improving livelihoods, strengthening small and medium sized businesses and/or resulting in improved environmental conditions. • Your project leads to additional investments and increase in turnover.• You are both capable to finance your own contribution.

PSOM countriesAfrica: Benin, Mozambique, Burkina Faso, Rwanda, Cape Verde, Senegal,Egypt, South Africa, Ethiopia, Tanzania, Ghana, Uganda, Kenya, Zambia, MaliAsia: Afghanistan, Palestinian Authority, Bangladesh, Philippines, China, SriLanka, India, Thailand, Indonesia, Vietnam, Mongolia, Yemen, PakistanLatin America: Bolivia, Nicaragua, Colombia, Peru, Guatemala, Suriname, Central and Eastern Europe: Albania, Macedonia, Armenia, Moldova, Bosnia-Hercegovina, Romania, Bulgaria, Russian Federation, Croatia, Serbia andMontenegro, Georgia, Turkey, Kazakhstan, Ukraine

Source: www.evd.nl


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Dutch government support for business abroadFor a small country like The Netherlands, foreign investments and internationaltrade play a very important role in its economic survival. Especially in the last15 years, foreign direct investment and international trade have grown substan-tially. Annually the Dutch government supports business transactions abroad bydomestic corporations with at least € 280 million in subsidies, and insurancecover for export and investment transactions worth more than € 2.000 million.

The business support of the Dutch government is provided via different agencies. Atradius Dutch State Business (DSB) is in charge of insurance instruments. Senter/EVD and the Dutch Development Bank FMO provide subsidies and grants. Since there are quite a number of different policy instru-ments and agencies involved, it is not very clear who manages the work of thesedifferent institutions and who makes sure that important development standards, transparent procedures or debt problems of host countries are takeninto account.

It is difficult to get specific information on government supported transactionsand their impacts on sustainable development:• It is unclear which government ministry is responsible for which policy instrument, while the implementation thereof is outsourced to different privateagencies; • None of the different facilities has a transparent communication policy and ex-ante information for local stakeholders is not available;• The implementation of Corporate Social Responsibility criteria is recommended but not well enforced;• There are few evaluations on the development impacts of the different facilities.

Source: Wiertsema (2003)

Ethiopia has been eligible for PSOMsince 2003. Since that time the interest ofthe Dutch private sector, including fromthe flower industry, has grown. Dutch flow-er growers and traders have had an inter-est in Kenya’s flower industry since the1980s. When the country became eligiblefor PSOM projects in 2004 this interestincreased. The flower industries in thesetwo countries are now the focus of muchPSOM-supported Dutch private sectorinvestment. In 2005, three projects in Kenya were supported by PSOM, to atotal value of €1,925 million. The projectsthat were sponsored ranged from suppor-ting a flower farm that produces consumerready flower-bouquets to setting up hi-tech facilities for environmentally friendlyflower production. Three projects in


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Ethiopia were also supported to a totalamount of €1,548 million. These projectsare also aimed at setting up modern flowerfarms, as well as seed production, and acoldstore facility for keeping the flowersfresh.

Although PSOM includes severalCorporate Social Responsibility criteriabased on the OECD guidelines for trans-national corporations,11 and includes social, environmental and anti-corruptioncriteria, assessments of PSOM applica-tions are carried out by the EVD withoutany consultation of local stakeholders.Moreover, it is not clear how the impactsof PSOM supported transactions on liveli-hoods, environment and society of aPSOM project are monitored and evalu-ated during and after the processes ofimplementation.

11www.oesorichtlijnen.nl

2 The socio-economic impact

of the flower industry


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Statistics of the Dutch, Kenyan and Ethiopian industry*

Facts about the Kenyan and Ethiopian flower industry**

*Sources: CBS (The Netherlands),EVD (The Netherlands), www.wiki-pedia.org, www.cia.gov/cia/publica-tions/factbook/

**Sources: Inventory of the flowerindustry in Kenya, Steve Ouma(2005), CBI, EVD, CBS and KFC(www.kenyaflowers.co.ke/industry-info/flori.php)

General Statistics The Netherlands Kenya Ethiopia

16.321.789

41.526 km2

(18,41% water)

1,3

38.320

6,6

252,7 billion f.o.b.

(2004 est.)


(2004 est.)

2,3

3,5

31.600.000

582.650 km2

(2,3% water)

1,8

414

50

3,9 billion

4,19 billion f.o.b.

(2004 est.)

2,4 billion


(2004 est.)

24

80

66.500.000

1.127.127 km2

(0,7% water)

-3,8

94

NA

2 billion


(2004 est.)

0,5 billion

562,8 million f.o.b.

(2004 est.)

44

85

Population size

Area

Economic growth (% per year)

GDP per head (USD)

Unemployment rate (%)

Total imports (USD)

Total exports (USD)

Share agriculture in GDP (%)

Employment in agriculture (%)

General Statistics The Netherlands Kenya Ethiopia

Exports of flowers

Share export horticultural products

Share total exports in value (%)

Number of people employed

Surface flower production

Number growers

Exports in tons

€ 2.293.819.000

$ 3.112.483.001

(2004)

-

1,01

42.000 direct

5.478 ha

6.853

20.762

KSh. 19 billion

$236 million (2005)

Flowers account for 8% of

Kenya’s total export earning

46

8

70.000 people directly and

another 500.000 people

indirectly

2.180 ha

140

41.400

$ 20million

(2005)12

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-

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Facts about the Kenyan flowerindustry

enya is the longest established and largest African exporter of cut flowers

and is the fourth largest exporter in theworld.13 Cut flowers account for 46% ofKenyan horticultural exports. After tea andtourism, flowers are the most importantsource of foreign income; with an exportvalue of US$ 236 million they account for8% of all exports. Cut flowers are not onlyan important source of foreign income.The industry directly employs 70.000 people and indirectly another 500.000,which is very important for a country likeKenya with an unemployment rate ofalmost 50%.14

Kenya has a long history in the producti-on and export of cut flowers and as such,it has built up experience with the princip-les of “Good Agricultural Practice”.15

Kenyan producers have become familiarwith the conditionalities that the EuropeanUnion sets for imported products and withthe quality-demands of European super-markets and retailers, such as those for-mulated by EurepGAP. Kenya’s otherstrengths include its relatively well-devel-oped infrastructure (roads, cold store facilities and a busy international airport), aproduction volume that allows for efficientlogistics, cheap land and labour and a

favourable climate for flower production.Moreover, the Kenyan government sup-ports the cut flower industry through itsfavourable policies and a range of incenti-ve-schemes.16

The Kenyan cut flowers industry alsofaces some more general structural pro-blems, such as corruption, the struggle foraccess to water and the HIV/AIDS crisis.In addition, the industry still finds that therequirements set forth in EU policies, likethe Sanitary and Phytosanitary standards,the instability or insecurity in the EUimport tariff schemes pose many challen-ges. The same can be said about the bloo-ming forest of certification programmesand codes of conduct required by the mar-ket. With a likely increase in competitivepressures (from African countries such asEthiopia, but also China) in the future,improving entrepreneurship, knowledgeand infrastructure are aspects that willrequire attention of the Kenyan flowerindustry.17

Facts about the Ethiopian flowerindustry

The cut flower industry in Ethiopia still isin its infancy and reliable data about thesector is difficult to find. Coffee is present-ly Ethiopia’s major source of foreign income, but since world prices for coffeeare decreasing, the country is looking for

Kways to diversify its agricultural exports.Flower production is regarded as one ofthe most promising sectors with an exportpotential.18 Because of the higher alti-tudes and the stable hours of sunlight, climatic conditions in Ethiopia are evenmore favourable than in Kenya. This incombination with the availability of land,low labour costs, a favourable investmentclimate and a relatively shorter distance tothe European market (compared to Kenya)make Ethiopia a strong competitor. But, asthe Ethiopian cut flower industry is still inits infancy, there are still important barriersto be overcome. For the export of cut flowers, an efficient handling and distribu-tion centre, and adequate potential tohandle airfreight are all crucial and stillunderdeveloped. Furthermore, education,training and research in the field of floricul-ture are needed as is the development oflocally suitable varieties and cultivars.19

12http://www.ethiopianembas-sy.org/news021606_3.shtml

13Ouma, 2005.

14Ouma, 2005.

15LEI, 2003.

16LEI, 2003 and Ouma, 2005.

17LEI, 2003.

18EVD, 2005.

19Bech, 2004.


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Labour conditionsExtensive research on labour conditions

in the Kenyan flower industry (mostly in“progressive” enterprises) has shown thatthere have been recent improvements inlabour conditions but that further improve-ments are still needed, particularly forwomen who comprise 75% of the labourforce.20 Other conclusions include:

• Job insecurity still is a major concern of Kenyan workers, even though casual andtemporary workers are legally required tobe given permanent status after eight months employment. Research findings showed that while employers have begun to issue more permanent contracts for seasonal and casual workers, 33% of the sampled workforce remained in insecure jobs.

• Payment and working hours still need to be improved; as wages still fall short of aliving-wage level, even though they exceed the government minimum wage. Overtime was found to be often compulsory. Employees frequently work longer than allowed in codes and national law and are not compensated properly for this.

• Chemical exposure remains an importantconcern to workers.

• Even though there has been an increase in union membership over the past years,membership is still low and excludes temporary and seasonal workers.

• Women still face sexual harassment, discrimination and occupational segregation.

No equivalent studies have yet been donein Ethiopia.

SmallholdersIt is not sufficient to discuss the

contribution of the flower industry inEthiopia and Kenya solely in aggregatefigures. It is important to disaggregate theeffects and differentiate between thosesocial groups that have benefited from thecut flower trade and production and thosegroups that are excluded or have beendisadvantaged by it. This allows us to seethe real effects of flower industry in reducing poverty.

Research on horticultural commoditychains, which includes the cut flowerchain, shows that they are strongly buyer-driven and operate at a global level.Retailers and supermarkets have substan-tial power and determine which types ofproducers and processors are able to gainaccess to the chains and the activitiesthey must carry out in order to get access.They set requirements with regard to cost,

quality, delivery, product standardisation,innovation, and quality systems. Theserequirements may act as an active barrierto participation in the commodity chain bysmall exporters and producers.21

In the Kenyan flower industry, the 25 biggest flower companies are responsiblefor about 75% of all exports. These figureshave not been collected in Ethiopia, butsome claim that the contribution of the flower trade to poverty alleviation is limitedto the employment of workers and someother indirect spin-off effects.22 Theindustry has limited effects on povertyreduction. Smallholders are not able toraise the investments needed to participa-te in the global market.

There are a number of major trends in theKenyan flower industry: the rising value ofexports, increased post-harvest proces-sing within Kenya, and a shift from small-holder production. Overall these are likelyto enhance the poverty reducing impact ofthe industry, with the positive impact ofcontinued export growth and increasedpost-harvested processing likely to morethan offset any likely reduction in employ-ment resulting from the shift away fromsmallholder production. While changingproduction patterns may lead to increasesin monetary incomes there are also non-


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monetary related impacts to take intoaccount. These relate to working condi-tions, such as long working days, lack ofsecurity of income and lack of freedom topursue other activities during free time,which may all adversely affect individualwelfare.23

Access to natural resourcesFlower production requires space for the

greenhouses, packinghouses and auxiliarybuildings and the development of theindustry impacts on land use and tenure.In both Kenya and Ethiopia, floriculturalinvestments are located on leased or rented land. In Ethiopia, in theory all landbelongs to the state. To facilitate floricul-tural investments the Ethiopian govern-ment has expropriated land from small farmers and leased it to investors for peri-ods of 30 years.24 Farmers are compen-sated for their land with a cash sum equiv-alent to five times the value of their previ-ous annual harvest.

Flower production can also create othersocial conflicts. In the Laikipia district inKenya for example, there have been manyconfrontations over land so far betweenthe Massai, a Nomadic East African tribe,and non-native flower growers (originatingfrom other Kenyan regions, descendantsfrom European colonists or ‘new’ foreignproducers).

Competing demands on water also giverise to social conflict. Flower production isas many other agricultural practices, awater thirsty sector and it competes withother water uses, including other agricul-tural activities, domestic water supply andecosystem requirements. Especially in acountry as Ethiopia that has experiencedthe last 20 years recurring droughts followed by food shortages and famines,this is an important issue to take intoaccount. In Kenya, the growth of the cutflower industry in certain areas has created tensions between local communi-ties and investors.25 Lake Naivasha is onearea where the growth of the flowerindustry is thought to have increased pressure on water resources and the number of conflicts between various waterusers, land users and other stakeholdershas been steadily increasing.26 Fisher people, cattle breeders, flower growers,tour operators and the growing municipali-ties (because the flower industry is attract-ing many people from all over the countrywho are hoping to find a job in theindustry) are increasingly competing foraccess to the lake and water.27

Food securityRelated to these two issues, is the

question of the effect of flower productionon food security. With a shift in land useaway from the production of food, it becomes more difficult for people to secure an adequate food supply, especial-ly for those who have been displaced fromtheir land or who experience declines inwater availability. In Ethiopia 85% of thepeople live in rural areas and depend on a traditional mixed subsistence farmingsystem. A large part of the population livesin poverty and an intermittent if not permanent state of food insecurity.28

Turning over lands from food to flower production is unlikely to have a positiveeffect on this situation. In effect, flowerproduction might even push food production to remote or marginalisedlands.

20Dolan et al, 2002.

21Humphrey et al, 2004.

22Bech, 2004.

23Humphrey et al, 2004.

24Bech, 2004.

25Ouma, 2005.

26Bech, 2004. Page 2.

27http://news.bbc.co.uk/2/hi/africa/3241049.stmhttp://www.netwas.org/newsletter/articles/2005/01/7

28Bech, 2004.


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3 The environmental impact

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Water extractionne major concern for different stake-holders within the flower industry is

the impact of the flower industry on the hydrology of regions where it operates, asits demands for water are high and it places pressure on water resources, espe-cially where water resources are scarce.

The Lake Naivasha region in Kenya isone area where flower production isthought to be leading to serious pressureon the ecosystem and social conflicts.Since the first flower farm was establishednear Lake Naivasha in the 1980s, the areahas experienced a floricultural boom andhas attracted many people to the lake,which has put additional stress on thelake’s water resources. The level of thelake is currently falling and some have blamed the flower industry, although theprecise impact of water extraction for flower growing has not yet been proven.The hydrological functioning of the lake isstill poorly understood because of thecomplex hydrology and geology of the Rift

Pesticides and Lake Naivasha“Water, sediment, red swamp crayfish and largemouthbass were collected from five sampling stations around thelake. All the organic chlorine residues being investigatedwere detected in both black bass and crayfish. This was anindication that farm pesticides such as dieldrin, aldrin,lindane and endosulfane were in use in the lake’s watercatchments. The report said it was deduced that the residues existed in the system at low concentrations andmanifested in living tissue mostly because of the chemicalsaffinity to fat.”

Source: the Nation, 2005

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Valley. Historical information shows thatwater levels have varied greatly over thelast century, by more than 12 metres. Inthe 1880s the lake was almost dry andbetween 1930s and 1950s, the waterlevels were so low that no water extractionpermits were issued. This was long beforeany flowers were produced in the area (inthe early 1980s, a vegetable grower decided to switch to flower productionand became the first commercial flowergrower in Kenya). In the Naivasha catch-ment, the area under irrigation is 4.800 haof which 800 ha is under flowers and4.000 ha under dairy and vegetables. Intotal, there is an irrigation demand of 39million m3, which is granted by the DistrictWater Resource Department, while thesafe yield (in order to maintain all the functions of the lake) is estimated at 16.5million m3 per year. Flowers consume 8million m3 water through very efficient dripirrigation systems and diary and vegeta-bles use 31 m3 through open-air sprin-klers. Although flowers take more waterper hectare than the vegetable and dairy production, the profit of flower productionis much higher than the vegetable and/ordairy profits. Therefore strategic planningtowards water is a very important issue.29

In Ethiopia, the impact of irrigated agri-culture on the hydrology of important

water resources needs to be taken seri-ously. An arid country like Ethiopia needsto make strategic decisions on water useand management. Research shows a dan-gerous trend in the Awash basin, wherealmost half of its natural capacity is beingextracted for open-air irrigation schemesresulting in low efficiency due to evapo-ration. All the existing irrigated agricultureand horticulture schemes in the area(covering some 70.000 ha) have ambitiousplans for expansion, to up to 150.000 ha.Together with the flower industry ambitions, this is likely to cause serious problems in the future if no strategic decisions are being made.30

ChemicalsOne of the characteristics of the flower

industry is its use of agrochemicals, whichcan be dangerous to human health andthe environment. Around Lake Naivasha inKenya, there are serious concerns aboutthe impact of chemical use on the waterquality of the Lake, especially since LakeNaivasha was designated as a Ramsar sitein 1995. Environmentalists and fisherfolkfear that the chemicals washed into thelake end up in the food chain. Yet thereare very few available analyses on pesti-cides in the lake water. According to research, the large flower farms and themany smallholders in the upper catchment

clearly have an effect on the lake’s waterquality. Nevertheless, the trophic status ofthe lake is still acceptable.31

The impact of chemicals on water qualityis one concern; other concerns includetheir impact on the broader environment;on human beings, animals and the soil.According to other research,32 codes ofconduct have brought considerable im-provements in occupational health andsafety particularly with respect to the safeuse of chemicals and the provision of protective clothing, toilets, washing facil-ities and drinking water. However, seriousproblems persist, with workers com-plaining about health problems related topesticide use (coughs, sore chests, skinirritation and dizziness). According to workers, these problems are due to work-ing with freshly sprayed plants, workingunprotected in the greenhouse while chemicals were sprayed or entering green-houses before re-entry times have expired.

Sustainable productionSince the 1990s, there have been

serious concerns voiced about the labourand environmental conditions at flowerfarms throughout the world. In order towork on better labour and environmentalconditions in the flower industry, tradeunions, social and environmental organisa-


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Women and exposure to harmful chemicalsWhile management in all companies said that women didnot work with chemicals (usually in accordance with acode of practice), some workers claimed that women wereexposed to them on a regular basis. According to onegroup of flower workers in Zambia, ‘Women are also present when spraying is being done. Some of them havechildren who are sucking and when they go home, theyjust start breast-feeding their children. We don’t have aplace for washing our clothing or bodies after work’.

tions have started to work together. Thishas resulted in an International Code ofConduct (ICC) for the production of flowers with standards to which the flowerfarm should adhere in order to reduce thenegative impact of flower production.

Because industry was searching toimprove its image and NGOs and tradeunions had developed a tool for accepta-

ble flower production, a multi-stakeholderdialogue started on how to make the flower production sustainable.

NGOs, trade unions and industry gathered around the table and discussedthe problems in the flower industry and thepossibilities to integrate the ICC in flowerfarms. The ICC has been accepted by theinternational industry united in Union

Fleurs. In several countries, multi-stakehol-der dialogues have emerged and have fedthe discussion on sustainable flower pro-duction. Moreover Fair Flowers Fair Plants,a label for consumers, is created and isbased on this code and is supported byNGOs, trade unions, producers and traders organisations throughout theworld.

29Bech, 2004.

30Bech, 2004.

Source: Smith et al (2004)

The International Code of Conduct for the productionof cut flowers (ICC)The main objective is to promote more sustainable pro-duction of cut flowers worldwide. Minimal conditions forsustainable production of cut flowers are defined in thiscode:1 Freedom of association and collective bargaining2 Equality of treatment3 Living wages4 Working hours5 Health and safety6 Pesticides and chemicals7 Security of employment8 Protection of the environment9 Child labour is not used10 No forced labour

Source: Both ENDS (2005) Information Pack Nr. 18 Sustainable production ofcut flowers

31Odada et al.

32Smith et al, 2004.


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Recommendationsand conclusion

In both Kenya and Ethiopia, the produc-tion and export of cut flowers plays a veryimportant role in the economy; in Kenya,cut flowers account for 8% of all exports.Furthermore, the industry generates muchemployment, very important in a countrywith an unemployment rate of almost 50%.In Ethiopia, the cut flower sector providesan attractive alternative to coffee, its mainexport product. Even though the industrystill is in its infancy, the flower industry isregarded as one of the most promisingexport sectors.33 The flower industry alsogenerates employment for the poor in ruralareas in Ethiopia.

The Dutch government supports Dutchinvestments in the flower sector in boththese countries. One of the main toolsthrough which this is done is PSOM, oneof several instruments that the Dutchgovernment uses to support international

trade and investments. Ethiopia has beeneligible for support through PSOM since2003 and Kenya since 2004. AlthoughPSOM has several Corporate SocialResponsibility criteria referring to theOECD guidelines for transnational corpo-rations,34 social criteria, environmental criteria and anti-corruption, the assess-ment of PSOM applications is done by theEVD without consulting local stakeholders.Moreover, it is not clear how the impact onlivelihoods, environment and society of aPSOM project is monitored and evaluatedduring and after the processes of imple-mentation.

This series of documents explores therelationship between economic policy, theachievement of sustainable livelihoods inpoor countries, and halting the loss of bio-diversity. This case study focuses on thesocial-economic and environmental impact

of the flower industries in Kenya andEthiopia, and how these are related this toDutch policy for supporting direct foreigninvestments, through instruments likePSOM. While the study is not a critique ofPSOM per se, it does show that there areserious social-economic and environmentalimpacts related to the production of cutflowers and argues that Dutch governmentsupport for business should take theseinto account in their decision-making.

33EVD, 2005.

34www.oesorichtlijnen.nl

For further reading, pleasecheck the following websites:www.flowercampaign.orgwww.fairflowersfairplants.comwww.cbi.nl

Dutch government supportwww.evd.nl

Naivashawww.worldlakes.orgwww.ramsar.orgwww.lakenaivasha.org


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The flower industry can have positivesocio-economic impacts with reducedenvironmental risks. However these do notfollow automatically and need to beencouraged through proper businessplans that take into account the social andeconomic impacts.

The Dutch government is strongly in-volved in supporting investments in the flower industry in East African countries,such as Kenya and Ethiopia as well inother developing countries. Given theNetherlands’ role as the major producerand trader in cut flowers within the worldthis is an entirely legitimate and justifiedinterest. However, Dutch authorities thatsubscribe to the principles of sustainabledevelopment should ensure that their sup-port enables the delicate balance betweeneconomic gain, social improvement andenvironmental protection to be maintained.Therefore, we recommend the followingconditions:• Greater attention should be paid to

labour conditions on flower farms supported by the Dutch government. Participation of workers and other stake-holders in decision-making processes should be a condition of granting financial support, in order to improve conditions in the industry. Particular attention needs to be paid to the

position of women since they form the majority of the workforce in this industry and often are subject to discrimination and harassment.

• More explicit attention needs to be paid to the processes through which small-holders are excluded from the cut flower trade and ways in which they can contribute and participate, thereby increasing the potential of the flower industry to alleviate poverty and strengthen livelihoods.

• Explicit attention needs to be paid to theways in which the growth in flower production is affecting land tenure and access to water and ways to alleviate such problems, where they are found to exist.

• Explicit attention needs to be paid to theenvironmental and health impacts of cut flower production, particularly with regard to chemical use. Ways to alleviatesuch problems, where they are found to exist, need to be identified.

• Practical implementation and enforce-ment of the existing PSOM criteria;

• An Environmental and Social Impact Assessment should be included as a criterion for Dutch governmental supportas PSOM;

• As part of this a monitoring and evaluation system that focuses on the actual environmental and social impact of the PSOM projects should be implemented.

Such measures can help avoid the situation where Dutch government sup-port, intended to encourage sustainableeconomic development in developingcountries, actually has the oppositeimpact.

With its long history in the flowerindustry, as producer, trader and broker,the Netherlands is well placed to play apivotal role in stimulating flower industriesin developing countries that is economical-ly viable, environmentally sustainable andsocially equitable.


TRADE MATTERS!The flower industry in Kenya and Ethiopia

Introduction: page 1 - 2

1 The policy environment Regulations and barriers:page 3 - 6

2 The socio-economic impact of the flower industry: page 7 - 11

3 The environmental impact of the flower industry: page 12 - 14

Recommendations and conclusion:page 15 - 16

The following sources were used for the present report

• Barrientos, S, C. Dolan and A. Tollontire (2001) Genderand Ethical Trade: a Mapping of the Issues in AfricanHorticulture• Bech N. (2004) Floriculture Development in Ethiopia:Water availability and environmental impacts, DHV WaterBV, Amersfoort• Becht, R., Odada, E.O. and Higgins, S. (2005) LakeNaivasha: experience and lessons learned brief. In: Lakebasin management initiative : Experience and lessons lear-ned briefs. Kusatsu : International Lake EnvironmentCommitte Foundation (ILEC), 2005. pp. 277-298.• Both ENDS (2005) Information Pack Nr. 18 Sustainableproduction of cut flowers• Both ENDS (2006) Bloemen, weelde met een geurtje• Both ENDS (2007) Atradius DSB and the DutchGovernment• Both ENDS (2007) Balancing Risk: What Export CreditAgencies can do for sustainable development• CBI (2004) EU Market Survey 2004: Cut flowers andfoliage• CBI (2005) EU market survey 2005 cut flowers and foliage, November 2005• Dolan, C., J. Humphrey and C. Harris-Pascal (IDSWorking Paper 96); Horticulture Commodity Chains: TheImpact of the EU market on the African Fresh VegetableIndustry• Dolan, C., M. Opondo and S. Smith (2002) Gender,Rights & Participation in the Kenya Cut Flower Industry• FIAN, FES, IUF (2001) Flowers for Justice: implemen-ting the International Code of Conduct• Forum for the Environment (2005) Laying the Foundationfor Bringing about Corporate Social and EcologicalResponsibility in the Floriculture Industry of Ethiopia:Project Proposal• Humphrey, J., N. McCulloch and M. Ota (2004); TheImpact of the European Market Changes on Employmentin the Kenyan Horticulture Sector, journal of InternationalDevelopment, vol. 16, 63-80

• Madeley, J. (1999) Trade and the Hungry: howInternational Trade is causing Hunger• Odada, E, R. Becht, (?)Lake Naivasha RiparianAssociation (LNRA), University of Nairobi, ITC Enschede;Experience and Lessons Learned Brief for Lake Naivasha• Ouma, S. (2005) Inventory of the Flower Industry inKenya (report written on behalf of Kenya Human RightsCommission, Nairobi)• Rabobank (2005) World Flower Map• Sikoyo, G.M. (2004) Southern Agenda on Trade andEnvironment Phase II Regional Consultation- Eastern/Southern Africa, Background Paper• Smith, S., D. Auret, S. Barrientos, C. Dolan, K. Kleinbooi,C. Njobvu, M. Opondo and A. Tallontire (2004) Ethicaltrade in African Horticulture: Gender, Rights andParticipation, IDS Working Paper 223• Union Fleurs (2005) Flowers and Plants• Vos. R. de (2003); Coherence between Dutch SPSrequirements and development policy: a Case Study ofthe Kenyan Cut Flower Industry• Wiertsema, W. (2003) Overheidssteun voor buitenland-se handel en investeringen • Wijnands, J. (2003) Internationalisering van hetNederlandse sierteeltcluster in Oost-Afrika: Bevindingenvan een studiereis naar Kenia, Tanzania en Oeganda, aan-gevuld met desk-research, LEI, Den Haag• Zachariasse, L.C. (2000) Challenges for the Kenyan-Dutch Flower Business in the Years ahead (Introduction atthe seminar at the occasion of the HORTEC, Nairobi,Kenya, March 15. 2000)

Newspapers

• The Independent-UK (27-06-2004) The Battle of the RiftValley• The Nation-Nairobi (17-03-2005) Lake Naivasha givesup its Tilapia• New Vision-Uganda (11-11-2003) Lake Naivasha beingpolluted by flower farmers and the poor• The Nation-Nairobi (01-02-2001) Who is Kiling LakeNaivasha

This case study was written by: Nathalie van Haren,

Saskia Berends, and Wiert Wiertsema of Both ENDS;

Pieter van der Gaag and Stefan Verwer of IUCN NL.

It depended greatly on the expertise of Burghard Ilge and

Ilma Kramer of Both ENDS. We would like to thank the

authors of the sources quoted in this document for their

research.

We realise that this data is difficult to gather.

English Language Editing Nicholas Parrott

TextualHealing.nl (Wageningen)

Design and images Margo Vlamings (Arnhem)

Printing Drukkerij Roos en Roos, Arnhem

Printed on: Reviva silk, FSC.

© February 2007

This document has been produced with the financial

assistance of the Dutch Ministry of Foreign Affairs (BuZa);

the Dutch Ministry of Housing, Spatial Planning and the

Environment (VROM) plus the European Commission (EC).

The views expressed herein are those of Both ENDS and

IUCN National Committee of the Netherlands and cannot in

any way be taken to reflect the official opinion of BuZa,

VROM and/or the EC.

Readers are encouraged to quote or use text from the

Trade Matters series for their own publications or articles,

but we insist on acknowledgements and appreciate to

receive a copy of the publication. However, the copyrights

on design and images remain.

Credits


The flower industry in Kenya and Ethiopia

trade matters!

www.bothends.orgwww.iucn.nl


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