**[SECTOR STUDY OF THE HORTICULTURAL EXPORT SECTOR IN
KENYA]{.underline}**

**A Study made on behalf of USAID, Kenya**

# September 2001

**FKAB *Feldt Consulting***

# Table of Contents

  ------------------------------------------------------------- ---------
                                                                Page

  **Part I. Executive Summary**                                 3

  **Part II. 1. Introduction**                                  8

  **2. Present Export Performance of the Sector**               9

  2.1. Flower Export Performance                                9

  2.2. Vegetable/Fruit Export Performance                       10

  2.2.1. Fresh Vegetables and Fruits in Europe                  12

  2.2.2. Kenya's Position as a Fresh Produce Supplier           13

  2.3. Structure of the Horticultural Export Sector             13

  2.3.1. The Floricultural Sector                               13

  2.3.2. The Vegetable/Fruit Sectors                            15

  2.4. Marketing                                                16

  2.4.1. EU Market Overview                                     16

  2.4.2. Marketing in the EU                                    17

  2.4.3. Regional and Middle East Markets                       18

  2.4.4. Cut Flowers                                            18

  2.4.5. Vegetables and Fruits                                  20

  2.5. Competitiveness of the Sector                            20

  2.5.1. Advantages                                             20

  2.5.2. Disadvantages and Threats                              21

  2.6. Regulation Framework                                     25

  2.7. The Status of the Exporter Associations                  28

  2.8. The Status of the Shipping Possibilities from Kenya      28

  2.8.1. Nairobi                                                29

  2.8.2. Eldoret                                                30

  2.8.3. Mombasa Airport and Port                               31

  2.9. Pesticide Management and Framework                       32

  **Part III. Recommendations for USAID**                       35

  Appendix 1. Abbreviations used                                38

  Appendix 2. Companies and officials visited                   39

  Appendix 3. EU Standards for Vegetables and Fruits            40

  Appendix 4. EU Standards for Floricultural Products           45

  Appendix 5. The EU market Situation for Selected Vegetable    49
  and Fruit Species.                                            

                                                                

                                                                

                                                                

                                                                
  ------------------------------------------------------------- ---------

**Part I. EXECUTIVE SUMMARY.**

1\. **Introduction.** The USAID of Kenya contracted Mr. U. Feldt, FKAB
*Feldt Consulting*, Sweden, to undertake a Sector Study of the
Horticultural Sector in Kenya in order to identify areas for program
support directed towards increasing productivity and competitiveness of
the sector, increasing exports and improving rural household income. In
order to define those areas, the consultant should identify the present
and past performance of the sector as well as its future potential.
Furthermore he should identify major cost areas such as airfreight and
the viability of those, marketing conditions, restrictive regulation
framework and standards as well as competitiveness of the sector and
present and future major threats.

The consultant subcontracted one vegetable/fruit consultant in the UK
and two local consultants in Kenya for the mission, which was undertaken
in July-September, 2001. The consultant also held a seminar presenting
his findings during his last week in Kenya and which was not included in
the SOW.

**Part II. PRESENT SITUATION AND EXPORT PERFORMANCE OF THE SECTOR.**

2\. **Flower exports performance.** Kenya became for the first time the
major exporter of floricultural products into the EU markets in 1999,
followed by Israel, Costa Rica, Colombia, USA, Ecuador and Zimbabwe. The
total export value in 1999 was Ksh 7,2bn (36.992 tons), up from Ksh
3,6bn (29.376 tons) in 1995. The flower sector has undergone a dramatic
change during the 1990's moving away from a rather limited assortment of
low value, open field crops to a wider assortment of high value/high
tech, greenhouse crops. This development also shows in the increased
value per ton exported flower products (Ksh 123.000/ton in 1995 and Ksh
195.000/ton in 1999). The main reasons for this successful export
development are that Kenya has developed a good reputation as a reliable
supplier of good quality flowers, improved marketing systems and
improved assortment. The main export products are roses (67%),
carnations (8%), statice (6%), alstroemeria (5%), mixed (2%) and cut
foliage (2%).

3\. **Vegetable export performance.** The vegetable export sector has
experienced a similar development as the floricultural sector. The total
vegetable export value was Ksh 5,7bn (46.377 tons) in 1999, up from Ksh
2,8bn (32.404 tons) in 1995. Beans and peas make out the bulk of the
exports (65% in value in 1999), and the trend in those export products
has been one towards finer grades and which Kenya, with its long export
experience in vegetables, has been able to provide and, hence, has been
able to defend and improve its market position. During the 1990's,
pre-packs for the supermarkets in mainly UK and Asian vegetables have
become increasingly important products. This trend is expected to
continue in the future and also expand into other EU markets.

4\. **Fruit export performance.** The fruit exports show a different
development than that for the flower and vegetable sectors. While the
volume export statistics show a rather unchanged volume over the last
five years (varying from 13.865 tons in 1995 to 15.595 tons in 1999 and
with a peak in 1996 of 16.746 tons), the export value has increased over
the years. However, the export values are uncertain, but the export
value was Ksh 1,3bn in 1999. The major problem for the fruit sector has
been the competition from Israel and Central America, which countries
have had access to cheap sea freight. Kenya has lacked that opportunity
in the past, but recently there is a direct connection for reefer
containers into Marseilles and which has strengthened this sector
significantly. The main export products are avocado (60%), mango (26%)
and passion fruit (6%).

5\. **Structure of the floricultural sector.** The floriculture export
sector is dominated by a 4-5 very large companies, which have a
developed vertical integrated system of producing, transporting and
marketing flowers through their own chartered cargo space and their own
marketing organizations, both in the Netherlands, Germany and the UK.
However, the introduction of rose exports in the late 1980's opened up a
possibility for small to medium sized companies to invest in rose
production, transport the flowers with the cargo planes into the
Netherlands and selling under their own name at the flower auctions in
the Netherlands. This sector developed quite rapidly during the 1990's
and represents today an important part of the whole industry.

There is a major change of the sector during the 1990's, when brokers
and out-growers became less important as suppliers of export products,
due to both the stricter implementation of breeders rights on
Alstroemerias but also due to a declining market for open field
low-value crops. This has had a rather serious effect on rural household
income in many areas, since the out-grower production was quite
significant during the late 1980's-mid 1990's.

6\. **Structure of the vegetable sector.** This sector is dominated by
5-9 major exporters, who control approx. 85% of the total exports of
vegetables from Kenya. The increasing demands on issues such as label
programs, MRLs, traceability etc. from the EU and from the individual
markets within the EU, as well as the high investment cost of
pre-packing facilities have resulted in a declining small to medium size
export sector. The broker/briefcase exporters have also declined for the
same reasons.

There is a distinct trend in this sector towards contracting more rather
large farmers and less of the traditional out-growers. This development
is largely caused by the stricter regulations concerning traceability,
MRLs and other conditions by the large UK based supermarket chains, but
also by the introduction of the CoP and other labels. Out-growers, who
wish to continue to produce for the export vegetable sector, will most
probably have to form larger groups of 30-50 members in the future,
controlling a rather large piece of common land, which can be managed as
a farm jointly by the members, maybe as a co-operative arrangement, and
which is suitable for adequate production planning and supervision by
the exporter. The traditional out-grower will, most probably decline in
the future.

7\. **The structure of the fruit sector.** The fruit sector is mainly
dependent on brokers/agents and the out-grower system and is controlled
by a few major vegetable exporters for avocados/passion fruit and a
couple of exporters of mango/passion fruit. The mango is produced along
the coastal areas whereas avocado and passion fruit are produced in the
highlands. The passion fruit is produced mainly by larger production
units, whereas the avocado and mango are produced almost exclusively by
out-growers. This structure is not conform to the regulations of the
CoP, but there should be an understanding of the conditions for the
fruit sector.

8\. **EU market overview.** The EU is he major market for Kenya
horticulture exports. The EU, with its population of 450 million people
is the largest importer of fresh horticultural products from non-EU
countries in the world. In 1999, imports to the EU from non-EU countries
of fresh vegetables exceeded US\$ 1bn, imports of fresh fruits reached
US\$ 5,5bn and imports of flowers was almost US\$ 1bn.

The EU market is, however, increasingly competitive and, in principle,
saturated which has resulted in lower profit margins for non-EU
suppliers of fresh horticultural products during the 1990's. The EU and
its individual markets are also progressively introducing conditions and
regulations to the non-EU suppliers which have made the previous easy
access to the market more difficult and resulted in new costs being
imposed on the suppliers. These measures cover areas such as
traceability, MRLs, quarantine issues, packaging recycling, human well
fare and --safety etc.

9\. **Regional and Middle East markets.** These markets are overall
quite small, apart for mango exports to the Middle East, and represent a
very small percentage of the total exports of horticultural products
from Kenya. In 1999, the total exports of horticultural products to
those markets were 1,5% of the flower export volume, 0,4% of the
vegetable exports and 19% of the fruit exports. More than 50% of the
mango exports are directed towards the Middle East markets.

10\. **Marketing of cut flowers.** The marketing systems for cut flowers
are very well developed in Kenya, although there are some issues to
develop in the future. Of the total exports of floricultural products
into the EU from Kenya, 64% is sold to the Netherlands, 22% to the UK,
8% to Germany, 3% to Switzerland and the rest (3%) sold to the other EU
markets. The Netherlands is the major distributor to other EU countries
of floricultural products and their import market share to those markets
is approx. 55%. In the consultant's opinion, Kenyan flower exporters
will have to increase their efforts to export directly into the direct
EU markets, in order to reach an import volume equal to or lower than
the distribution capacity of the Netherlands of 55%. However, Kenya has
been much more successful in its marketing efforts than most African
countries, but less successful than Latin American exports, which have
an American export trade tradition of not trusting to export anything
without a fixed price. The Kenyan exporter obviously trusts the Dutch
auction system to provide him/her with a decent profit.

It is expected that the Kenyan flower exporter will have to focus more
on direct exports and also to expand the assortment in order to remain
competitive in the future.

11\. **Marketing of vegetables/fruits.** The marketing of vegetables and
fruits is very different from marketing flowers, where the main
marketing channel is the Dutch flower auctions. Fruits and vegetables
are mainly sold on fixed export contracts and at fixed export prices,
where the exporter knows the profit margin before shipping the product.
The main markets for the vegetable exports are the UK (53%), followed by
France (24%), the Netherlands (7%) and Germany (4%). The main markets
for the fruit exports are France (25%), followed by Dubai (14%), the
Netherlands (13%) and UK (11%).

The marketing of vegetables has been focused on the UK supermarket
chains, from which rigorous regulations concerning traceability, MRLs,
business conduct, human safety and --conditions, etc. have developed,
but also added value products such as mixed salads, pre-packs etc. It is
expected that the same development will occur also in other northern EU
countries in the future, and which will present a major challenge but
also a major market opportunity for Kenyan vegetable exporters.

The fruit export market has been under pressure from competing countries
for a number of years, mainly because of the lack of functioning seaport
facilities and lack of adequate sea connections to the EU markets.
However, recently there is a rather feasible direct connection to
Marseilles in France, and which has promoted exports by sea, and hence,
allowed the Kenyan exporters of fruits to be competitive to the exports
from Israel and Central America. However, this advantage seems, at
present, to be partly lost because the port authorities have decided to
delay transfer at the port with 4-5 days because all forwarding agents
have to make use of the port's equipment which are not appropriate to
the needs. This is most unfortunate, and the forwarding agents should be
allowed to use their own equipment, which is in place, without paying
the Kenya Port Authority the equivalent for the use of KPA's equipment.

12\. **Competitiveness.** Kenya has the following major competitive
advantages:

-   A strong and well-organized private sector.

-   A variety of suitable climates for a large variety of species.

-   A rather good main road infrastructure and good local supplies of
    inputs and implements.

-   Access to good air cargo handling facilities and airport services,
    adequate cargo space to major destinations.

-   Rather simple export documentation procedure.

-   Incentives for exporters through repayments of VAT and duty free
    imports of most inputs and implements.

13\. **Negative aspects and threats.** In spite of the present obvious
strength of the sector there are a number of issues that require
immediate improvements in the near future, in order to keep the positive
development of the sector and increase of rural household income, and
also represent major constraints and serious future threats of the whole
sector.

The issues representing constraints and require improvements are:

-   Water shortage for irrigation purpose is a major constraint in many
    areas and is an issue that should be addressed properly.

-   There is a general shortage of skilled labor and qualified
    management staff.

-   Improvements are needed on airfreight rates, increased cargo
    capacity to London, Paris and Frankfurt. Infrastructure improvements
    on communications, power supply, rural road net work as well as
    improved technical competence.

-   Contract farmers as well as out-growers are not exempt of VAT and/or
    import duties, since the products are exported through a third
    party, but the products are export products.

> The threats to the sector are major and presented below:

-   There is a general fear in the private export sector that taxes and
    fees will be increased in the future, without their ability to
    influence the decisions.

-   The decision to apply import duties on horticultural imports to the
    EU after 2007 will have a major effect on the horticultural
    industry. The present import duties into the EU will have the
    following net effects on the horticultural export sector in Kenya:

1.  The present import duties would increase the costs on the present
    fob value with 22% (winter) and 32% (summer) for flowers, 31% for
    vegetables and 11% for fruits. The profit margins to assimilate
    these additional costs are not available, and this will result in a
    serious decline of Kenyan horticulture exports over the next few
    years. The timetable for the expected results of this decision is
    largely under-estimated in Kenya.

2.  The timetable for successful negotiations between Kenya and the EU
    is shorter than the interested parties in Kenya is generally aware
    of. If information containing a possible positive outcome of these
    negotiations is not presented to the sector within a rather short
    period of time, there will be serious effects on the developments of
    the sector already from 2003 and onwards, mainly for the following
    reasons:

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a.  Investments in the floriculture sector will probably decline
    significantly in 2003, because the repayment period is 3-5 years.

b.  Exporters will start looking for alternative production areas within
    the LDC countries, which is already happening.

c.  Financing institutions will probably restrict financing to the
    sector by at the latest 2004

It will, however, take some years for the sector to adapt to the new
regulations, but on long term it will be devastating for the Kenyan
horticulture export sector.

-   There is also a Horticultural Bill, which expands the mandate for
    HCDA to implement major changes of its operation in the fields of
    extension service, marketing, research etc, and which costs will be
    collected from the private sector. After meetings with the private
    sector, they understand the Bill as a copy of what they are already
    doing and the program presented by HCDA will not add anything of
    value for the sector, only impose a cost. The private sector also
    feels that this is a first attempt of the government to organize the
    sector under increased government. The private sector oppose the
    Bill strongly.

-   HCDA has invested in some 7 storage- and handling facilities for
    vegetables, fruits and flowers from out-grower sources throughout
    the major production areas. They have contracted approx. 400
    out-growers to join a system, where HCDA will store, grade and
    transport their products, and sell them through HCDA's market
    channels. HCDA has also the mandate to export the produce. The
    private sector has serious difficulties in accepting that HCDA can
    be both a competitor and a regulatory body. However, the storage
    facilities could be made available for the private sector on a
    contractual basis inclusive of transport and local collection of
    merchandize, and in which case the facilities may become an asset
    for the sector. However, these facilities should have been built
    10-15 years ago, when they would have served the sector much more.

14\. **Freight rates.** The airfreight rates from Nairobi are reasonable
competitive. However, landing- and navigation costs are 30% higher in
Nairobi when compared to neighboring airports. In the consultant's
opinion, cargo rates could be negotiated down with approx. 7-10% from
the present rates if exporters would work together and plan appropriate
shipping volumes and timetables. It is highly unlikely that exporters
will operate their own cargo flights in the future, due to the
complexity of such an operation. Cargo rates depend very much on the
composition of the freight and if Kenyan exporters could identify a high
value/high density export cargo, rates would most probably be much more
negotiable. The reefer container rates from Mombasa to Middle East are
inflated, mainly because of the difficulty to recover the reefers from
the Middle East. The rates are also inflated to Marseilles, mainly
because of little competition.

14\. **Regulation framework.** In principal, the standards and grade
requirements of horticultural products are set by the importing country.
There are standards in Kenya for seed and packaging, but it is the
contacts with the markets that regulate these issues.

Exporters in Kenya require an export license to be able to export, and
the cost of such a license as well as the performance level of the
applicant will increase in the future. The sector strongly opposes an
increase of the fees.

15\. **The status of exports organizations in Kenya.** There are two
major organizations for the exporters in Kenya; FPEAK who mainly focuses
on the vegetable- and fruit export sector and KFC, who focuses on the
floricultural sector. KFC is seen to be the stronger of these
organizations, but FPEAK is undergoing a major restructuring and will
probably become as strong as KFC in a short period of time. The two
organizations co-operate very well.

**Part III. USAID assistance options.**

In the consultant's opinion, USAID should focus on the following issues,
in order to assist the industry and improve rural household income:

-   Marketing: There will be a need for marketing assistance, partly via
    the existing exporter organizations, KFC and FPEAK, but also based
    on individual company market efforts. This assistance should be
    limited to small- medium sized export companies.

-   Out-grower assistance. There is a need to re-organize the
    out-growers into co-operative groups of suitable entities to be
    interesting for the exporters in the future. There is need for both
    technical assistance, funding of inputs and implements such as
    irrigation equipment and coolers.

-   The implementation of the CoP will require training of pre-auditing
    personnel, and there is, at present, no organization undertaking
    this cost.

-   There is a need for an organization to undertake the external
    requirements of training of personnel in the private sector on
    issues required by the CoP and/or other label programs.

It is recommended that USAID initiate bi-annual meetings with the major
aid organizations working the horticultural sector in Kenya in order not
to duplicate or compete with one another in the same area and to make
best use of the funds available.

**Part II. 1. INTRODUCTION.**

Kenyan horticulture exports have come a long way from the situation when
the consultant visited Kenya for the first time in 1983. Today, people
may have forgotten the situation in those days, when an exporter had to
pass via one of the big exporters in order to get cargo space on the air
crafts since the major exporters controlled most of the cargo space. To
get space on the regular flights involved the exporter's presence at the
airport's handling facilities and it was a fight to get the shipment on
the airplane and not being left behind.

The present situation is very different and changed dramatically with
the introduction of small to medium sized exporters of roses in the
early 1990's. These improvements also spread into the vegetable- and
fruit export sector, and which allowed for smaller companies to export
at reasonable rates and to obtain the cargo space they needed. The
present situation is that, if you are working together with other
exporters and well organized on freight planning, an exporter may very
well reach almost the same freight benefits as the bigger exporters.

The situation has also changed in other aspects. It is no longer only a
few stakeholders who have all the knowledge and benefits. Knowledge is
much more freely available and it is up to the individual entrepreneur
to find his way forward. The inputs and knowledge are available to
anyone.

The horticultural sector export value was, according to HCDA statistics,
Ksh 14,2 bn in 1999, of which 7,2 bn were cut flower exports, 5,7 bn was
vegetable exports and 1,3 bn was fruit exports. The export value has
doubled since 1995.

Some 10-15 major exporting companies dominate the sector. These
companies are very well organized, often with an integrated system of
production/processing/transport/ marketing. There is also a quite well
developed small/medium size exporter sector who are well organized on
production/transporting level, but less on processing and marketing due
to their size of operation. There is a third level of exporters who
still perform more or less in an ad hoc manner, and rely on the
prevalent market situation and brokers for their existence. However, the
latter group has almost disappeared from the flower export sector in the
last five years, and will, most probably decline also in the vegetable
sector in the next few years due to the effects of the Code of Practice
to be implemented. However, brokers make out an essential part of the
fruit export sector and will continue to be important if Kenya is going
to remain a fruit exporting country in the future.

The trend during the last ten years has been one towards an increased
responsibility for worker health and living conditions, improving rural
income, safety, maximum residue levels of products (MRLs),
environmentally suitable production methods etc. and many companies
provide housing, medical care etc. to their work force. This is a
consequence of the rather recently introduced label systems in Europe
and mainly UK supermarket chain requirements but also a result of the
National Code of Practice being implemented in Kenya. It will be very
important to achieve an acceptance of the National CoP by the new
EUREGAP code of practice for EU as a whole, which will be presented in
September 2001.

The present situation of the whole sector is one of strength due to both
climatic advantages, labor availability, air cargo availability, private
sector achievements and government non-involvement in the private
sector. The horticultural export sector has been able to stay
competitive over the last 20 years, in spite of heavy competition from
other African countries, Israel and from Latin American countries.
However, there are presently a number of threats to the industry which
may cripple the industry over the next 3-5 years and which, if not acted
upon in time and successfully, will place the Kenyan export industry in
a very difficult position with a dramatic decline of export.

II\. PRESENT EXPORT PERFORMANCE OF THE SECTOR.

2.1. **Flower Export Performance**.

Kenyan flower exports have developed very well over the last decade and
Kenya is presently the major non-European supply country into the EU for
cut flowers. Kenya has developed into a reliable supplier of high
quality flowers into the EU.

Below follows both the export development as well as the import
development to the EU from Kenya. Both statistics are presented due to
the uncertainty of both import figures to the EU and of the export
figures from Kenya. The import figures represent CIF value and the
export figures represent fob values, and are, therefore, not directly
comparable.

For the first time, Kenya has become the major supplier of floricultural
products into the markets in Western Europe in 1999, followed by Israel,
Costa Rica, Colombia, USA, Ecuador, Zimbabwe, Guatemala and South
Africa. The EU statistics below are rather accurate on volume basis from
non-EU suppliers, but very uncertain in value terms since there are many
different systems for invoicing depending on import duties, local
taxation etc. Over the years the assortment of cut flowers exported from
Kenya has expanded and covers today a wide range of cut flowers. There
has been a trend towards producing flower crops that require much more
expensive planting material and/or production techniques/ installations,
and this trend seems to continue. These developments will increase
Kenya's competitiveness in the future. The export assortment has, during
the same period, changed from the bulk being open field, low value cut
flower crops, into more sophisticated cut flowers such as roses,
Zanthedeschia, Eustoma etc. The trend is clearly towards more high value
products and less low value, risky products. For the low value
assortment, the production is dominated by a few players to ascertain a
price level equal to the risk taken by the exporter, and which has
stabilized the market situation for species such as statice, delphinium,
solidaster, solidago etc.

**[Imports of cut flowers, cut decorative foliage, flower bulbs and live
plants to Western Europe 1985-99 (\'000 US\$ and \'000
KGs)]{.underline}:**

<table style="width:100%;">
<colgroup>
<col style="width: 9%" />
<col style="width: 7%" />
<col style="width: 6%" />
<col style="width: 8%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"><strong>1985</strong></td>
<td colspan="2"><strong>1995*</strong></td>
<td colspan="2"><strong>1996*</strong></td>
<td colspan="2"><strong>1997*</strong></td>
<td colspan="2"><strong>1998*</strong></td>
<td colspan="2"><strong>1999**</strong></td>
</tr>
<tr class="even">
<td></td>
<td><strong>'000 US$</strong></td>
<td><strong>'000 KGs</strong></td>
<td><p><strong>'000</strong></p>
<p><strong>US$</strong></p></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 US$</strong></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 US$</strong></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 US$</strong></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 US$</strong></td>
<td><strong>'000 KGs</strong></td>
</tr>
<tr class="odd">
<td><strong>Cut flowers</strong></td>
<td>912.666</td>
<td>250.975</td>
<td>2.463.885</td>
<td>450.469</td>
<td>2.897.506</td>
<td>512.424</td>
<td>2.793.277</td>
<td>570.382</td>
<td>3.043.340</td>
<td>577.149</td>
<td>2.753.113</td>
<td>613.739</td>
</tr>
<tr class="even">
<td><strong>Cut foliage</strong></td>
<td>62.088</td>
<td>22.758</td>
<td>387.055</td>
<td>114.694</td>
<td>438.553</td>
<td>130.637</td>
<td>456.664</td>
<td>145.522</td>
<td>473.481</td>
<td>155.685</td>
<td>484.877</td>
<td>175.185</td>
</tr>
<tr class="odd">
<td><strong>Flower bulbs</strong></td>
<td>249.165</td>
<td>127.917</td>
<td>369.851</td>
<td>105.674</td>
<td>375.333</td>
<td>94.939</td>
<td>357.902</td>
<td>99.230</td>
<td>400.662</td>
<td>110.137</td>
<td>361.828</td>
<td>129.563</td>
</tr>
<tr class="even">
<td><strong>Live plants</strong></td>
<td>826.227</td>
<td>534.687</td>
<td>1.919.790</td>
<td>712.649</td>
<td>2.071.026</td>
<td>767.430</td>
<td>2.200.628</td>
<td>873.606</td>
<td>2.687.088</td>
<td>997.848</td>
<td>2.444.842</td>
<td>1.077.406</td>
</tr>
<tr class="odd">
<td><strong>Total</strong></td>
<td><strong>2.101.897</strong></td>
<td><strong>954.566</strong></td>
<td><strong>5.140.580</strong></td>
<td><strong>1.383.486</strong></td>
<td><strong>5.782.418</strong></td>
<td><strong>1.505.430</strong></td>
<td><strong>5.951.768</strong></td>
<td><strong>1.688.740</strong></td>
<td><strong>6.604.571</strong></td>
<td><strong>1.840.819</strong></td>
<td><strong>6.044.661</strong></td>
<td><strong>1.995.893</strong></td>
</tr>
<tr class="even">
<td><strong>Of which from</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Africa</strong></td>
<td><strong>41.340</strong></td>
<td><strong>16.666</strong></td>
<td><strong>230.340</strong></td>
<td><strong>53.338</strong></td>
<td><strong>294.330</strong></td>
<td><strong>63.310</strong></td>
<td><strong>257.798</strong></td>
<td><strong>62.500</strong></td>
<td><strong>282.344</strong></td>
<td><strong>64.141</strong></td>
<td><strong>306.463</strong></td>
<td><strong>76.403</strong></td>
</tr>
<tr class="even">
<td><strong>Asia</strong></td>
<td>28.860</td>
<td>5.300</td>
<td>76.472</td>
<td>18.228</td>
<td>85.499</td>
<td>21.795</td>
<td>85.451</td>
<td>23.178</td>
<td>80.062</td>
<td>22.031</td>
<td>83.725</td>
<td>24.700</td>
</tr>
<tr class="odd">
<td><strong>Middle East</strong></td>
<td>85.679</td>
<td>24.742</td>
<td>192.577</td>
<td>39.675</td>
<td>217.576</td>
<td>48.290</td>
<td>211.974</td>
<td>52.208</td>
<td>229.655</td>
<td>58.711</td>
<td>171.734</td>
<td>67.073</td>
</tr>
<tr class="even">
<td><strong>Latin America</strong></td>
<td>63.391</td>
<td>26.094</td>
<td>300.874</td>
<td>76.312</td>
<td>309.893</td>
<td>78.871</td>
<td>349.107</td>
<td>93.116</td>
<td>371.766</td>
<td>101.827</td>
<td>368.607</td>
<td>115.988</td>
</tr>
<tr class="odd">
<td><h2 id="kenya">Kenya</h2></td>
<td><strong>N/A</strong></td>
<td><strong>N/A</strong></td>
<td><strong>110.081</strong></td>
<td><strong>26.545</strong></td>
<td><strong>118.358</strong></td>
<td><strong>29.893</strong></td>
<td><strong>125.132</strong></td>
<td><strong>32.331</strong></td>
<td><strong>136.136</strong></td>
<td><strong>30.806</strong></td>
<td><strong>156.548</strong></td>
<td><strong>37.812</strong></td>
</tr>
</tbody>
</table>

Sources: National statistics compiled by the consultant (-92) and AIPH
(Int. Ass. of Hort. Prod.).

\* In the 1993-97 statistics, Austria is not yet available, and there
are still trade statistics missing for parts of the year for other
countries.

\*\* The statistics for 1999 are provisional, but rather accurate for
overseas' imports.

[Exports of cut flowers from Kenya 1995-1999 (HCDA
statistics):]{.underline}

<table style="width:100%;">
<colgroup>
<col style="width: 10%" />
<col style="width: 10%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 0%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 7%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"><strong>1995</strong></td>
<td colspan="2"><strong>1996</strong></td>
<td colspan="3"><strong>1997</strong></td>
<td colspan="2"><strong>1998</strong></td>
<td colspan="2"><strong>1999</strong></td>
</tr>
<tr class="even">
<td></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 KSH</strong></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 KSH</strong></td>
<td><strong>'000 KGs</strong></td>
<td colspan="2"><strong>'000 KSH</strong></td>
<td><strong>'000 KGs</strong></td>
<td><strong>'000 KSH</strong></td>
<td><strong>'000 KGs</strong></td>
</tr>
<tr class="odd">
<td><strong>Cut flowers</strong></td>
<td>3.642.319</td>
<td>29.376</td>
<td>4.364.981</td>
<td>35.212</td>
<td>4.891.039</td>
<td>35.653</td>
<td colspan="2">4.865.934</td>
<td>30.229</td>
<td>7.226.300</td>
<td>36.992</td>
</tr>
<tr class="even">
<td><p id="of-which" class="heading">Of which </p></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>Roses</strong></td>
<td>1.766.033</td>
<td>14.242</td>
<td>1.876.095</td>
<td>N/A</td>
<td>2.499.313</td>
<td>18.263</td>
<td colspan="2">3.361.656</td>
<td>17977</td>
<td>5.519.865</td>
<td>24.620</td>
</tr>
<tr class="even">
<td><p><strong>Carnations</strong></p>
<p id="section" class="heading"></p></td>
<td>288.201</td>
<td>4.521</td>
<td>315.668</td>
<td>N/A</td>
<td>270.041</td>
<td>2.771</td>
<td colspan="2">362.283</td>
<td>2.842</td>
<td>332.159</td>
<td>2.979</td>
</tr>
<tr class="odd">
<td><strong>Statice</strong></td>
<td>493.693</td>
<td>3.981</td>
<td>581.002</td>
<td>N/A</td>
<td>463.302</td>
<td>3.389</td>
<td colspan="2">310.323</td>
<td>3.267</td>
<td>243.401</td>
<td>2.208</td>
</tr>
<tr class="even">
<td><strong>Alstroemeria</strong></td>
<td>331.022</td>
<td>2.670</td>
<td>518.470</td>
<td>N/A</td>
<td>343.541</td>
<td>2.687</td>
<td colspan="2">343.541</td>
<td>1.910</td>
<td>231.438</td>
<td>1.689</td>
</tr>
<tr class="odd">
<td><h2 id="mixed">Mixed</h2></td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td>N/A</td>
<td colspan="2">4.504</td>
<td>42</td>
<td>91.578</td>
<td>721</td>
</tr>
<tr class="even">
<td><h2 id="cut-foliage">Cut Foliage</h2></td>
<td>270.319</td>
<td>2.180</td>
<td>736.965</td>
<td>N/A</td>
<td>901.651</td>
<td>5.494</td>
<td colspan="2">901.651</td>
<td>1.176</td>
<td>120.574</td>
<td>740</td>
</tr>
</tbody>
</table>

The consultant has chosen a few important species in the above
statistics. The floriculture exports from Kenya has changed in the last
few years towards a much bigger exports of cut roses and a decline in
the traditional cut flower exports from Kenya. The traditional exports
consisted of mainly Spray carnations (declined with more than 50% in the
last five years), statice (declined with 45% in the last five years),
solidaster (declined by a third over the same period), solidago (lost
half of the export volume over the same period). Other flowers have
increased over the same period such as roses (almost doubled over the
last five years), standard carnations have become more important than
spray carnations, mixed bouquets has become an important export product,
Zanthedeschia, lisianthus (eustoma) are increasing together with a
number other cut flowers such as gypsophila, rudbeckia, lilies,
lisianthus, hypericum, veronica etc. There seem to be much more
opportunity today for the flower producers than a few years ago, and
there is probably opportunities for a lot of development of the
assortment.

The HCDA statistics 1995-99 shows that the floriculture exports from
Kenya has increased with 26% in volume and 98% in value, much due to the
change from low value open field crops to higher value crops produced in
greenhouses. The EU statistics from 1995-99 shows and increase of both
value and volume to 42%. The HCDA statistics include also regional and
Middle East exports. Both statistics show a rather significant export
increase. It is likely that Kenyan floriculture exports will continue to
increase at a pace that at least conforms to the expected growth of the
EU markets, or approx. 4-7% in volume annually over the next 5-10 years,
provided that the export companies proceed without government
involvement as has been the case during the past few years.

The floriculture exports from Kenya represents approx. 51% in value and
37% in volume of the total horticultural exports in the year 1999,
compared to 40% in value for vegetables (47% in volume) and fruits 9% in
value (16% in volume). The volume of vegetables and fruits is important
for the floriculture air cargo rates, since a cargo plane has to mix the
three categories in order to arrive at the optimum weight/volume ratio.

2.2. **Vegetable/Fruit Export Performance.**

##  {#section-1}

The vegetable exports from Kenya show a similar development over the
last five years as the floriculture sector, with an export increase of
43% for vegetables but only 12% for fruit in volume according to the
HCDA statistics (the EU import statistics show a volume increase of 125%
and 95% respectively in volume) and which is a good achievement. It is
expected that the vegetable export will increase with 7-10% in volume
and fruit exports will increase with 2-4% in volume annually during the
next few years.

As can be seen in the tables below, the major export items into the EU
from Kenya are peas, beans, and Asian vegetables. The main reason for
the export success is the close co-operation with the supermarket chains
in the UK, a smooth adaptation to the new criteria concerning MRLs and
other criteria defined in the various label and other programs
implemented by the supermarkets and other market sources, and also the
rather rapid transformation into pre-packs by the major Kenyan
exporters.

[Exports of vegetables/fruit from Kenya 1995-1999 (HCDA
statistics):]{.underline}

<table>
<colgroup>
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"><strong>1995</strong></td>
<td colspan="2"><strong>1996</strong></td>
<td colspan="2"><strong>1997</strong></td>
<td colspan="2"><strong>1998</strong></td>
<td colspan="2"><strong>1999</strong></td>
</tr>
<tr class="even">
<td></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
</tr>
<tr class="odd">
<td><strong>Vegetable</strong></td>
<td>2.822.184</td>
<td>32.404</td>
<td>2.566.131</td>
<td>32.110</td>
<td>3.028.145</td>
<td>33.113</td>
<td>4.052.231</td>
<td>36.795</td>
<td>5.712.772</td>
<td>46.377</td>
</tr>
<tr class="even">
<td><strong>Fruit</strong></td>
<td>617.349</td>
<td>13.865</td>
<td>769.520</td>
<td>16.746</td>
<td>805.464</td>
<td>15.454</td>
<td>819.528</td>
<td>11.349</td>
<td>1.256.805</td>
<td>15.595</td>
</tr>
<tr class="odd">
<td><strong>Of which</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Avocado</strong></td>
<td>394.377</td>
<td>9.859</td>
<td>417.178</td>
<td>10.429</td>
<td>495.437</td>
<td>11.290</td>
<td>286.505</td>
<td>6.367</td>
<td>498.581</td>
<td>9.233</td>
</tr>
<tr class="odd">
<td><strong>Mango</strong></td>
<td>104.750</td>
<td>2.277</td>
<td>195.291</td>
<td>4.245</td>
<td>195.570</td>
<td>2.525</td>
<td>162.848</td>
<td>2.505</td>
<td>311.591</td>
<td>3.995</td>
</tr>
<tr class="even">
<td><strong>Passion</strong></td>
<td>72.081</td>
<td>901</td>
<td>78.562</td>
<td>983</td>
<td>67.108</td>
<td>842</td>
<td>60.741</td>
<td>636</td>
<td>106.235</td>
<td>932</td>
</tr>
<tr class="odd">
<td><strong>Beans</strong></td>
<td>1.140.199</td>
<td>14.932</td>
<td>1.193.922</td>
<td>16.432</td>
<td>1.650.098</td>
<td>14.519</td>
<td>1.774.423</td>
<td>14.476</td>
<td>2.849.942</td>
<td>19.086</td>
</tr>
<tr class="even">
<td><strong>R. beans</strong></td>
<td>106.410</td>
<td>1.819</td>
<td>235.234</td>
<td>2.179</td>
<td>272.880</td>
<td>1.519</td>
<td>436.370</td>
<td>2.215</td>
<td>436.829</td>
<td>2.951</td>
</tr>
<tr class="odd">
<td><strong>Peas</strong></td>
<td>265.618</td>
<td>2.630</td>
<td>303.013</td>
<td>3.904</td>
<td>474.623</td>
<td>4.278</td>
<td>458.992</td>
<td>4.189</td>
<td>428.717</td>
<td>4.422</td>
</tr>
<tr class="even">
<td><strong>Asian</strong></td>
<td>293.654</td>
<td>4.664</td>
<td>273.546</td>
<td>4.984</td>
<td>306.256</td>
<td>5.643</td>
<td>316.333</td>
<td>4.934</td>
<td>510.351</td>
<td>6.352</td>
</tr>
</tbody>
</table>

The development in the fruit sector is mainly due to the exports of
avocados, which cover 90% of the total fruit exports from Kenya to the
EU, and 60% of the fruit exports from Kenya. Other fruit exports have
declined due to cheaper sea freight possibilities from other supply
countries, mainly the Caribbean and Latin America. However, sea
shipments of Avocado and Mango are being done successfully now, both
into the EU and the Middle East from Kenya. Below follows statistics of
the major vegetable/fruit export products from Kenya.

**[Exports of vegetables/fruits by country from Kenya 1995-1999 (HCDA
statistics):]{.underline}**

<table>
<colgroup>
<col style="width: 10%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
<col style="width: 9%" />
<col style="width: 8%" />
</colgroup>
<tbody>
<tr class="odd">
<td></td>
<td colspan="2"><strong>1995</strong></td>
<td colspan="2"><strong>1996</strong></td>
<td colspan="2"><strong>1997</strong></td>
<td colspan="2"><strong>1998</strong></td>
<td colspan="2"><strong>1999</strong></td>
</tr>
<tr class="even">
<td></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KSH</strong></p></td>
<td><p><strong>'000</strong></p>
<p><strong>KGs</strong></p></td>
</tr>
<tr class="odd">
<td><strong>Vegetable</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>UK</strong></td>
<td>---</td>
<td>16.630</td>
<td>---</td>
<td>18.153</td>
<td>---</td>
<td>19.978</td>
<td>---</td>
<td>19.365</td>
<td>---</td>
<td>24.391</td>
</tr>
<tr class="odd">
<td><strong>France</strong></td>
<td>---</td>
<td>7.626</td>
<td>---</td>
<td>4.684</td>
<td>---</td>
<td>3.775</td>
<td>---</td>
<td>9.385</td>
<td>---</td>
<td>10.932</td>
</tr>
<tr class="even">
<td><strong>Germany</strong></td>
<td>---</td>
<td>927</td>
<td>---</td>
<td>864</td>
<td>---</td>
<td>1.697</td>
<td>---</td>
<td>1.513</td>
<td>---</td>
<td>1.860</td>
</tr>
<tr class="odd">
<td><strong>Holland</strong></td>
<td>---</td>
<td>2.761</td>
<td>---</td>
<td>1.070</td>
<td>---</td>
<td>2.631</td>
<td>---</td>
<td>1.463</td>
<td>---</td>
<td>3.374</td>
</tr>
<tr class="even">
<td><strong>Other EU</strong></td>
<td>---</td>
<td>2.902</td>
<td>---</td>
<td>7.089</td>
<td>---</td>
<td>5.018</td>
<td>---</td>
<td>2.080</td>
<td>---</td>
<td>2.137</td>
</tr>
<tr class="odd">
<td><strong>S. Arabia</strong></td>
<td>---</td>
<td>10</td>
<td>---</td>
<td>8</td>
<td>---</td>
<td>12</td>
<td>---</td>
<td>16</td>
<td>---</td>
<td>19</td>
</tr>
<tr class="even">
<td><strong>Djibouti</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>29</td>
<td>---</td>
<td>2</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
</tr>
<tr class="odd">
<td><strong>Other ME</strong></td>
<td>---</td>
<td>92</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
</tr>
<tr class="even">
<td><strong>S. Africa</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>72</td>
<td>---</td>
<td>234</td>
<td>---</td>
<td>2.200</td>
<td>---</td>
<td>89</td>
</tr>
<tr class="odd">
<td><strong>Other</strong></td>
<td>---</td>
<td>1.457</td>
<td>---</td>
<td>774</td>
<td>---</td>
<td>816</td>
<td>---</td>
<td>774</td>
<td>---</td>
<td>3.575</td>
</tr>
<tr class="even">
<td><strong>Total</strong></td>
<td>---</td>
<td>32.404</td>
<td>---</td>
<td>32.743</td>
<td>---</td>
<td>33.113</td>
<td>---</td>
<td>36.796</td>
<td>---</td>
<td>46.377</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Fruit</strong></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td><strong>France</strong></td>
<td>---</td>
<td>4.232</td>
<td>---</td>
<td>5.450</td>
<td>---</td>
<td>6.916</td>
<td>---</td>
<td>2.207</td>
<td>---</td>
<td>3.976</td>
</tr>
<tr class="even">
<td><strong>UK</strong></td>
<td>---</td>
<td>1.438</td>
<td>---</td>
<td>907</td>
<td>---</td>
<td>1.406</td>
<td>---</td>
<td>810</td>
<td>---</td>
<td>1.667</td>
</tr>
<tr class="odd">
<td><strong>Holland</strong></td>
<td>---</td>
<td>3.163</td>
<td>---</td>
<td>3.278</td>
<td>---</td>
<td>4.369</td>
<td>---</td>
<td>3.139</td>
<td>---</td>
<td>1.984</td>
</tr>
<tr class="even">
<td><strong>Germany</strong></td>
<td>---</td>
<td>976</td>
<td>---</td>
<td>914</td>
<td>---</td>
<td>743</td>
<td>---</td>
<td>726</td>
<td>---</td>
<td>509</td>
</tr>
<tr class="odd">
<td><strong>Other EU</strong></td>
<td>---</td>
<td>326</td>
<td>---</td>
<td>956</td>
<td>---</td>
<td>524</td>
<td>---</td>
<td>176</td>
<td>---</td>
<td>2.164</td>
</tr>
<tr class="even">
<td><strong>S. Arabia</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>781</td>
<td>---</td>
<td>792</td>
<td>---</td>
<td>519</td>
<td>---</td>
<td>675</td>
</tr>
<tr class="odd">
<td><strong>Djibouti</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>14</td>
<td>---</td>
<td>4</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
</tr>
<tr class="even">
<td><strong>Dubai</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>2.229</td>
</tr>
<tr class="odd">
<td><strong>Other ME</strong></td>
<td>---</td>
<td>2.387</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>---</td>
</tr>
<tr class="even">
<td><strong>S. Africa</strong></td>
<td>---</td>
<td>---</td>
<td>---</td>
<td>242</td>
<td>---</td>
<td>241</td>
<td>---</td>
<td>218</td>
<td>---</td>
<td>30</td>
</tr>
<tr class="odd">
<td><strong>Other</strong></td>
<td>---</td>
<td>1.343</td>
<td>---</td>
<td>4.327</td>
<td>---</td>
<td>2.456</td>
<td>---</td>
<td>3.555</td>
<td>---</td>
<td>2.371</td>
</tr>
<tr class="even">
<td><strong>Total</strong></td>
<td>---</td>
<td>13.866</td>
<td>---</td>
<td>16.869</td>
<td>---</td>
<td>17.454</td>
<td>---</td>
<td>11.349</td>
<td>---</td>
<td>15.595</td>
</tr>
</tbody>
</table>

**[EU Imports of Fresh Fruit, Units: tons]{.underline}**

  ------------- ------------- ------------- --------------- ---------------
                **1990**                    **1999**        

                **EU Imports  **Total EU    **EU Imports    **Total EU
                from Kenya**  Imports (from from Kenya**    Imports (from
                              outside EU)**                 outside EU)**

  **Avocado**   2.845         78.829        9.738           88.960

  **Total Fresh 5.425         7.250.506     10.592          8.479.640
  Fruit**                                                   
  ------------- ------------- ------------- --------------- ---------------

-   Avocados now account for over 90% of Kenya's fruit exports to the EU

-   Other products such as mangoes and pineapples that were more
    important in 1990 have faded as sea-freighting origins gained market
    share.

EU Imports of Fresh Vegetables , Units: tons.

  --------------------- ------------- ------------- --------------- ---------------
                        **1990**                    **1999**        

                        **EU Imports  **Total EU    **EU Imports    **Total EU
                        from Kenya**  Imports (from from Kenya**    Imports (from
                                      outside EU)**                 outside EU)**

  **Onions/shallots**   \-\--         330.019       427             273.072

  **Garlic**            \-\--         28.362        210             40.177

  **Peas**              27            5.282         7.766           17.044

  **Beans**             14.271        39.333        21.358          76.295

  **Other Legymes**     321           921           226             1.366

  **Aubergine**         112           5.668         62              2.697

  **Capsicum**          284           39.962        1.295           80.244

  **Spinach**           \-\--         140           112             420

  **Sweetcorn**         1             3.805         108             10.307

  **Courgette**         9             3.118         13              14.308

  **Other Vegetable**   3.347         20.821        9.568           46.217

  **Total Fresh         18.300        1.335.042     41.167          1.389.883
  Vegetable**                                                       
  --------------------- ------------- ------------- --------------- ---------------

-   Other vegetables probably refers mostly to Asian vegetables from
    Kenya

-   The important exports to the EU are peas, beans, capsicums and Asian
    vegetable

-   Sweetcorn from Kenya refers to babycorn, and total EU imports are
    more likely 4,000 tons. The total figure here includes the big
    sweetcorn from USA and Israel.

-   See app.5. for more detailed information about major vegetable and
    fruit species**.**

### 2.2.1. Fresh Fruit and Vegetables in Europe.

-   The EU is an important producer of fruit and vegetables.

-   There are major regional differences in consumption patterns.

-   The EU food market is broadly saturated. Fresh vegetable consumption
    is declining slowly, perhaps in consequence to the move away from
    formal meals and food preparation to ready made meals, snacking and
    eating out. Fresh fruit consumption is rising, perhaps through the
    increase in snacking and interest in healthy eating.

-   There is little advertising in fresh produce. The only significant
    marketing initiatives tend to be governmental, with campaigns, for
    example, among children to develop the healthy eating habits, or the
    more generic five-a--day efforts to encourage daily consumption of
    five portions of fruit and vegetables.

-   Conversely, the competing products, such as confectionery items in
    the snack market, enjoy some of the strongest consumer advertising
    campaigns in the food market.

-   However, retailers expect the suppliers to support promotional
    campaigns in terms of money off, or more for less, which promotes
    the store image to the consumer.

-   Fresh fruit and vegetables are imported to Europe for climatic
    reasons, for example tropical fruits, seasonal reasons, such as the
    seasonal temperate fruits, or labor cost such as the fine
    vegetables.

-   The EU imported 1.4bn tons of vegetables and almost 8bn tons of
    fruit in 1999. These figures only relate to imports from outside the
    EU, not trade between member within the EU.

-   Products showing growth in imports include the carrots, legumes,
    'other vegetables' among the vegetables, and in the fruit trade
    imports of tropical fruits such as pineapples, mangoes, litchis as
    well as grapes, melons, stonefruit and 'Other Fruit' are increasing.

-   The major importers and consumers in the EU are located in the
    northwest: France, United Kingdom and Germany. The Netherlands and
    Belgium are also important importers but in their role as
    distributors across northern Europe.

-   In southern Europe, the climate is more suited to the production of
    a wider range of fresh produce over a longer season, and there is a
    preference among consumers for locally grown products in their
    appropriate season. Where north European consumers now expect year
    round supply, southern European consumers tend to purchase local
    products in season and don't expect year around supply.

-   Kenya supplies 41,000 tons of vegetables and 10,500 tons of fruits
    to the EU. The most important products are beans, mangetout,
    avocados and Asian vegetables. The UK is the largest importer of
    fresh fruit and vegetables from Kenya.

## 2.2.2. Kenya's Position as a Fresh Produce Supplier

-   In fresh produce, Kenyan exports have achieved remarkable strength
    in supplying the European markets with peas and beans.

-   The solid position in Europe in these products is, however, confined
    to the UK. There is poor penetration in continental markets.

-   Kenya is dependent on air freighting. Currently, sea freighting is
    too slow and too expensive to be truly competitive with other
    suppliers, although avocado/mango exports by sea are significant.

-   The comparative advantages of the Kenyan exporters lie in the
    climate and the range of climates in tropical conditions, the
    comparatively low cost of airfreight, the advanced technology,
    particularly in legume production and the reputation in the market.

-   The position of Kenya as a supplier may be eroded if the preferences
    given to Kenyan exports in gaining duty free access to the EU are
    withdrawn. The preferences, given to Kenya as an ACP exporter, are
    not consistent with the WTO agreement and are the subject of
    discussion. It is possible that the preferences may be withdrawn by
    2008.

2.3. **Structure of the Horticulture Export Sector.**

The horticultural export sector has developed into its present state
without any harmful involvement from the government. However, it is
wrong to say that it has happened without government involvement, since
government involvement is required from a phytosanitary point of view as
well as from legal point of view. A number of issues have evolved during
the work with this report, and it seems that the government will try to
get more direct control of the sector in the future and which the
exporters anticipate will be a serious threat to the future development
of the sector. However, at present, purely private companies manage the
sector and future expectations below are on the assumption that the
situation will remain unchanged over the next ten years.

2.3.1. **The Floriculture Sector.**

The floriculture export sector is dominated by a few very large
companies, which have a developed vertical integrated system of
producing, transporting and marketing flowers through their own
chartered cargo space and their own marketing organizations, both in the
Netherlands, Germany and the UK. However, the introduction of rose
exports in the late 1980's opened up a possibility for small to medium
sized companies to invest in rose production, transport the flowers with
the cargo planes into the Netherlands and selling under their own name
at the flower auctions in the Netherlands. This sector developed quite
rapidly during the 1990's and represents today an important but also a
vulnerable part of the whole industry.

Below follows a description of the structure of the sector and recent
developments as well as developments expected in the future.

-   Large companies: There are presently 3-5 large companies, often
    owned by international investors, who partly dominate the sector and
    are presently increasing their dominance through offering
    co-operation contracts to smaller exporters. They have a very high
    level of production technical expertise, and are often managed by
    mainly expatriates. They manage their own production, cold chain,
    handling facilities at the airport, transport to Europe and also the
    marketing in Europe. These large companies represent a significant
    strength of the sector and have found solutions to many
    technical/transport/marketing-related issues, which information
    eventually leaks to the small to medium size companies. When
    analyzing the companies contracted to these larger companies, the
    contracted companies have quite a number of benefits through the
    co-operation contracts and also higher revenues. These large
    companies have also been the spearheads to develop a rather high
    level of operation for pesticide usage, pesticide handling,
    -application, safety and medical care for workers, female safety and
    other concerns etc., especially in rural areas. There is, however,
    less distinction today between the very large companies and major
    companies than was the situation some ten years ago.

-   Small to Medium Size Exporters: This sector consists mainly of
    exporters producing roses for exports on from two to some 20-30
    hectares of mainly roses, but also producers of Eustoma,
    Alstroemeria, Zanthedeschia a/o. species. This sector is the one
    that has been mostly hit by the declining prices at the Dutch flower
    auctions, and which have had very limited possibilities to change
    their market position, but also a sector that has expanded very much
    in the 1990\'s. They are often too small to collect adequate market
    information or they are, in general, not geared towards the
    challenges of direct marketing. There are companies within this
    sector, which are quite profitable, and there are companies, which
    make substantial losses. During the last decade, the profitability
    within this sector has declined from approx. 50% profitability
    during the late 1980's to 10-15% in the late 1990's, and the latter
    is valid only for companies with proper technical assistance and
    provided that no mistakes are made. If the expansion of cut flower
    exports from not only Kenya but the whole of Africa continues as it
    has done during the last decade, a lot of companies in this sector
    will have serious problems, and, already, quite a number face
    serious financial problems. The major problems in this sector are
    lack of adequate technical assistance, lack of appropriate market
    information and market contacts and poor financing. Qualified
    management of the farms is another serious problem of this sector.
    Major recent changes of the sector are:

```{=html}
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```
-   The out-grower sector: The out-grower sector in Kenyan floriculture
    exports was quite important back in the 1980's, but the consultant
    has found a substantial decline in this sector, especially during
    the last five years. Very few of the exporters presently use
    out-growers under own contract or through brokers and the system is
    expected to decline further over the next decade. The reasons for
    this development are that the export assortment is moving towards
    more high investment cost/high value crops, which the out-growers
    cannot afford and which are too expensive for the exporters to
    supervise with small out-growers. The second main reason is that due
    to royalty charges on imports of mainly Altroemeria, the exporters
    found this trade to be non-profitable.

```{=html}
<!-- -->
```
-   The broker system is likely to decline in the future due to the
    conditions set out in the National Code of Practice.

-   As a result of increasing export volumes from Africa designed for
    the auctions in the Netherlands coupled with the Dutch growers'
    improved production methods, the prices for African cut flowers and
    in particular roses have declined in the last decade. This
    development have resulted in an expansion of existing farms into
    bigger units in order to remain competitive, but also a reduced
    interest from financial institutions to finance new projects, not
    only in Kenya but in Africa as a whole. The declining profits in
    especially rose production will most probably lead to a declining
    export growth rate to the EU markets of roses from Africa.

2.3.2. **The Vegetable/Fruit Sectors.**

A few, rather big exporters also dominate the vegetable/fruit sector,
and there are two sub-sectors of small to medium sized exporters working
mainly with out-growers but on a regular basis and a broker sector that
either supplies the above sector or exports when they have orders and
not on regular supply contracts. However, the latter sector is declining
due to the stricter import regulations being implemented in the EU and
also as a result of an increasingly strict contractual commitment
between the exporters and the out-growers. In general, the vegetable
sector exports is moving towards less dependency on small out-growers,
but rather contracting larger producers and/or groups of out-growers,
whereas the fruit export sector is still highly dependant on the
out-grower system. In total, considering the increasing demands for
traceability and the MRLs, and also owing to the increasing competition
from competing countries of the staple products such as Ethiopia,
Burkina Faso, Uganda, Ghana, Egypt etc. with lower air freight rates,
Kenya will most probably decline as a supplier for these products in the
future. It is the consultant's opinion that Kenyan vegetable exports
will move towards added value products such as ready-packed products,
strip marked and ready for supermarket sales in Europe, especially UK
but also other EU countries, and also specialize in the finer grades of
beans and peas. The fruit sector will continue to be highly dependent on
out-growers also in the future, but since avocados and mangos are grown
almost without the use of chemicals, it will pose less of a problem in
relation to the CoP and MRLs. The sector is structured as follows:

-   There are some 9 companies, which control 85% of the fresh
    vegetable/fruit exports from Kenya. These companies do direct
    exports to the major supermarket chains in the UK and to a certain
    extent to other major supermarket chains in mainland Europe, as well
    as to individual importers. The UK supermarket chains have been
    leading in imposing strict measures regarding pesticide usage,
    workers safety, social safety and medical care of workers etc. and
    those regulations have been employed by all the major
    vegetable/fruit exporting companies in Kenya. It is expected that
    also other supermarket buying centers in the EU, such as in Germany,
    France, the Netherlands, Scandinavia etc. will follow the UK
    experience in the next 10 years, and that the whole of the Kenyan
    export trade of vegetables/fruits will have to comply with the same
    regulations. This will result in less dependency on the out-grower
    system, because of the difficulties to keep control of this sector
    together with difficulties in getting an approval for the system
    from the importers. This will reduce the number of brokers in the
    exports of vegetables/fruits. For the vegetable sector, these
    developments are not deemed to have a negative influence, and for
    the fruit export sector, the conditions of the sector will have to
    be taken into consideration.

-   There is a number of small- to medium size exporters in the
    vegetable sector that depend only on out-grower groups and/or on
    brokers. These exporters are expected to experience more
    difficulties in the future with the increasingly stringent
    regulations on MRLs and the CoP being implemented and also through a
    stricter policy from HCDA on issuing export licenses. This will
    affect the out-grower sector negatively in the years to come and
    restrict their access to the export market.

-   The out-grower sector consists of some 4.000 growers with a
    production area of everything less than 2 acres each under
    contracts. There is probably an additional some 1.000-2.000
    out-growers working for the broker system, i.e. totally 5-6.000 in
    the vegetable sector with a production area of some 4-6.000 acres
    (1-1.500 hectares). The major crops are French beans, Runner Beans,
    baby corn and Peas. The systems employed by the exporters for this
    sector is that the exporter supplies the seed, technical advice and
    production planning. Most of the out-growers work under rather
    strict contracts and are excluded from future contracts if they
    don't comply with the conditions in the contract. It is up to each
    individual group or out-grower to supply other inputs such as
    chemicals and fertilizer. This latter aspect is a problem for the
    system, but a result of the distrust that the out-grower will, in
    the end, abide by the contract conditions.

-   The vegetable/fruit export sector is to a large extent depending on
    out-grower production at present, but an increasing market demand
    for finer grade vegetables coupled with the market regulations and
    the increasing costs for maintaining technical input and probably
    the risks of providing also fertilizer and pest control in the
    future, will most probably force the exporters into contracting
    larger producer units as is what happens presently in Kenya. These
    larger units consist of up to 60-80 acres or more, which produce
    under contract for a specific exporter. These units are easier to
    control, and the size of the units provides for a better financial
    position to pay for inputs themselves. At present, such a system
    seems to be very difficult to implement in the fruit sector, since a
    large share of the export production is collected from rather small
    out-growers.

2.4. **Marketing.**

#  {#section-2}

# 2.4.1. EU Market Overview.

The European Union now integrates the economies of 15 member states:

  ------------- -------- ------------- --------- -------------- ---------
  **Member**    **Pop.   **Member**    **Pop.    **Member**     **Pop.
                mn**                   mn**                     Mn**

  Austria       8,1      Germany       82,0      Netherlands    15,8

  Belgium       10,2     Greece        10,5      Portugal       10,0

  Denmark       5,3      Ireland       3,7       Spain          39,4

  Finland       5,2      Italy         57,6      Sweden         8,9

  France        59,0     Luxembourg    0,4       United Kingdom 59,2
  ------------- -------- ------------- --------- -------------- ---------

Almost all of Western Europe is included in the EU; only Norway and
Switzerland are not members. A number of other countries have applied to
join and are at various stages of negotiation: Turkey is an official
candidate, and Cyprus, Malta and 10 East European neighbors of the EU
are in discussion with the Commission.

The EU is the largest market in the world for imported fresh produce. In
1999, imports to the EU from non-EU countries of fresh vegetables
exceeded US\$ 1bn while imports of fresh fruits reached US\$ 5.5bn.
Imports of floricultural products from non-EU countries were almost US\$
1 bn.

Unification of the member states into the EU has had a significant
effect on the fresh horticultural trade. In particular:

-   The customs union means that imports are only controlled at the
    point of entry to the EU and are thereafter free to circulate

-   Freedom of movement of goods allows perishable products to move
    within the EU without unnecessary border delays.

-   The monetary union will have important implications for the business
    system in the EU and exporters must be prepared for the Euro.

-   External relations, support for the ACP countries for example, is
    common to all EU members in preferential tariffs for import duties
    (present situation).

-   In legislation the progression of harmonization has led to a
    reduction of national trade barriers so that individual member
    economies can no longer distinguish between locally produced and
    imported goods. However, the process of harmonization of legislation
    is leading to a new generation of food regulation covering a
    diversity of aspects from standards, through hygiene to labeling and
    packaging waste.

While the economies and legislation of Europe are becoming unified the
markets remain quite diverse. Each country has its own culture,
tradition, climate and economy influencing consumer spending and
behavior. While we can recognize regions of similarity such as the
affluent band of Northern France, South East England, Belgium,
Netherlands and Northern Germany, even within member states there can be
strong regional differences in tastes and customs. This is not
surprising in view of the varied historic, cultural and climatic
backgrounds. The social diversity of Europe is further expanded by the
influence of immigration from former colonies and territories, and where
those colonial links have been maintained there are often marked trading
connections. The geographical range of the EU also has implications for
agricultural production. The diversity of territories and climates, from
arctic north to Mediterranean south and from sea level to the high
mountains, allows for a wide range of crops to be grown over an
extensive season.

Thus, the EU presents an opportunity to the exporter of being the
largest import market in the World for fresh horticultural products,
with access becoming progressively more straightforward as legislation
is harmonized albeit with new regulations, but where a diversified
marketplace still exists. The market prospects seem even better in the
future when some 10-12 new members are joining the EU, which countries
are not saturated, and which will present exporters with a significant
market opportunity. However, for the fresh produce exporter it is an
increasingly difficult market:

-   The EU food market is saturated and a new entrant must displace an
    existing product. The same is mainly true also for fruit and flower
    exporters. There are, however, still small sector opportunities to
    be explored.

-   The market is ever more competitive and narrowing margins raised by
    the entry barriers, and exporters must handle increasing volumes to
    maintain income.

-   The structure of EU food retailing has undergone a revolution over
    the last 10 to 15 years. With control increasingly focused in the
    hands of relatively few chains of large format retail stores,
    supermarkets and hypermarkets.

-   This consolidation has led to new and more direct supply linkages
    where the produce supplier must be able to respond immediately to
    the competitive issues in the consumer markets: price, consumption
    trends, fashion and the consumer concerns on issues from food
    preparation time to product safety and ethical policy. The same
    issues are becoming increasingly important also to the flower
    exporters.

-   Flower exporters have experienced increased difficulties in
    achieving adequate profit levels through the easy Dutch auction
    sales, and will be required to develop their marketing systems in
    the future to remain competitive and profitable.

## 2.4.2. Marketing in the EU.

Flower marketing in the EU was traditionally based on sales through the
Dutch auction system, which is still the main marketing system. However,
the big exporters in Kenya and also some of the small- and medium size
flower exporters have developed a combination of direct and auction
sales, which has resulted in higher revenues for those companies and
lower marketing costs. This trend is expected to further develop in the
future. In most EU countries, the major flower volumes are sold by the
specialty flower shops and by street vendors. The supermarket sales,
which were expected to increase significantly in most EU countries a few
years ago, remain rather stable in sales volumes of 3-15% of the whole
market. The exception is UK, where supermarket sales of flowers are
increasing steadily and also Switzerland, where supermarket sales
represent some 30-55% of the total market.

The vegetable and fruit market is very different from the flower market.
Food marketing in the EU has become sophisticated and highly integrated.
Over the last 15 years a highly efficient distribution system has
evolved, as the operating environment has become increasingly
competitive. The changes to the distribution and retailing of food in
Europe are quite revolutionary; the large retail chains, the
hypermarkets and supermarkets, now dominate more and more of the EU
market. This process is most advanced in Northern Europe where the
supermarkets and hypermarkets control at least 70% of the grocery retail
trade. This, in turn, has led to radical changes to the supply and
distribution systems.

The traditional systems of suppliers feeding produce to wholesale
markets that sold to local shops and traders, with the trade handled by
a number of intermediaries, has been replaced by a close linkage between
the retail chains and their suppliers. The position of the wholesale
markets has been seriously weakened. The present structure still
requires intermediaries, but their roles are now no longer wholesaling
and breaking bulk, but orientated towards a range of services:

-   Chilled distribution across the country

-   Controlled atmosphere storage facilities

-   Pre-packing facilities

-   Flotation systems for sorting

-   Ripening facilities

-   Blast chilling

Southern Europe lags behind in this process, but the changes are
happening here too as the retail chains gradually build up a controlling
share. The exporter must adjust to these changes. In order to succeed,
the exporter must be able to supply the major retail chains, no longer
dispatching produce to Europe for sale through the wholesale markets on
a consignment basis. Exporters must work with importers capable of
accessing the multiples as well as able to place product in the
wholesale markets or sell to the food processors. The retail chains are
gaining competitive advantage through the economies of scale in
purchasing and through the efficiencies of their supply chain
management.

Simultaneously, shopping and eating habits are changing. Supermarkets
and hypermarkets satisfy the consumer demand for the convenience of
buying the week's groceries in one shop rather than visiting a number of
specialist stores. Further, less and less time is spent on meal
preparation, and there is more emphasis on convenience in terms of
prepared foods for home consumption, snacking and eating out. The fresh
produce market may show limited growth in volume but the value is
increasing.

###  {#section-3}

2.4.3. **Regional and Middle East markets.**

The regional and Middle East markets are quite insignificant for the
horticultural exports from Kenya. Only mango is exported in significant
volumes to the Middle East, and presently accounts for approx. 50% of
the mango exports. The total exports of flowers to the Middle East and
the regional markets, especially South Africa, was approx. 1,5% in 1999
of the total cut flower export volume. Exports of vegetables were 0,4%
and fruits 19% in 1999, and where the major export specie is mango to
the Middle East. These markets may very well be more exploited in the
future, but they represent very small markets at present. Saudi Arabia
has restricted imports of Mango from Kenya due to the weevil larvae
problem and if that could be solved it is expected that both export
potential and profitability for the Middle East export market would
increase significantly.

There is a distinct difference between the marketing of cut flowers and
vegetables/fruits since cut flowers can be sold through the auction
system in the Netherlands, whereas vegetables/fruits must be sold
directly to importers. This means that in most transactions for
vegetables/fruits the export price and the trade margin is known prior
to the actual export takes place, whereas for cut flowers the price is,
in general, not known until the product is sold in the Netherlands. This
means that there is a certain risk involved in cut flower exports since
the trade margin is unknown when consuming the expensive task of
transporting the flowers to the Netherlands. There are approx. 120
regular exporters in the horticultural sector in Kenya but there is a
significant influence from a few players in the sector.

2.4.4. **Cut Flowers.**

The main export product is roses accounting for approx. 65% of the total
cut flower exports to the EU. Kenya is the biggest non-European exporter
of cut flowers into the EU, and also the biggest non-European supplier
of roses to the EU, followed by Ecuador, Zimbabwe, Israel and Zambia.
The marketing methods between the above countries show distinct
differences:

**[Marketing pattern from major non-EU suppliers of cut
flowers:]{.underline}**

  -------------- --------------- --------- --------- --------- ----------- --------- ------------- --------- --------------- ---------
                 **% to the                **% to              **% to                **% to other            **% to          
                 Netherlands**             UK**                Germany**             EU                      Switzerland**   
                                                                                     countries**                             

                 **-95**         **-99**   **-95**   **-99**   **-95**     **-99**   **-95**       **-99**   **-95**         **-99**

  **Kenya**      60              64        10        22        24          8         3             3         3               3

  **Israel**     64              72        12        5         13          9         7             13        4               1

  **Colombia**   13              13        44        51        17          10        24            24        2               2

  **Ecuador**    27              40        3         1         20          17        41            32        9               10

  **Zimbabwe**   72              80        8         3         11          5         2             9         7               7
  -------------- --------------- --------- --------- --------- ----------- --------- ------------- --------- --------------- ---------

The above table shows the different market strategies for the major
supply countries of cut flowers to the EU-markets and Switzerland. Kenya
depends heavily on the Dutch auction system, but it has managed to stay
rather stable on the Dutch market in spite of the declining German
market and increased its exports to UK but remained stable on other
markets. In 1995 a large share of the German imports were re-exported to
the Netherlands for auction marketing and those re-exports have almost
ceased in 1999. The increase on the UK market is partly due to the
successful supermarket sales of pre-packs made in Kenya, ready labeled
and with a vase life guarantee.

Israel, who used to have a very effective marketing organization back in
the 19970's-80's, have lost their direct marketing force to a large
extent and depend increasingly on auction sales.

Zimbabwe has by tradition mainly sold at the Dutch auctions, since Dutch
agents introduced an developed the production in Zimbabwe and whose only
marketing channel was the auction system. Zimbabwe has grown into an
important cut flower export country over the years. They still rely
heavily on Dutch agents, but the situation has changed over the years
from being a situation where the exporters depended wholly on one agent
for both technical assistance and marketing into a situation where agent
commissions have been reduced significantly and an exporter can work
with one or several agents.

When comparing the marketing system between Kenya, Israel and Zimbabwe
on one hand and Colombia and Ecuador on the other, their marketing
pattern is very different. The Latin American entrepreneurs come from a
US trade tradition and don't rely on auction distribution. They act more
like companies in other industries, i.e. they seek direct importers, and
they seek firm market contracts at firm prices. They wish to know the
market price and the profit level before they export. They have a much
more widespread marketing strategy into all the markets in Western
Europe. Colombia, which main product is carnations, has increased its
efforts into UK, which is the last main market in Europe for carnations.
Ecuador, which produces a very high quality of roses, has spread its
marketing efforts in an almost perfect way. They export 40% to the
Netherlands, but not through auction sales but merely through direct
exports to wholesalers, and hence utilizing the Dutch distribution
system well. They also have a direct distribution system into all the
markets in Western Europe as have the Colombian exporters. This makes
the Latin American flower exports to Europe very strong and they don't
depend on daily variations on the auction market.

The Kenyan flower exporters will have to take the following aspects into
consideration in the future:

-   Assortment: There is a distinct trend among florists and traders in
    the EU to use a wider assortment of cut flowers. It will be
    increasingly important for flower exporters in Kenya to follow
    market trends and also to initiate new flower species to the
    markets. This will represent a major challenge to Kenyan flower
    exporters in the future. The nisches that have been exploited up to
    date are Zanthedeschia, Hypericum, Eustoma, outdoor roses etc., but
    there will be other opportunities provided that exporters in Kenya
    put their interest and focus on these matters. In the consultant's
    opinion, this issue is of utmost importance to the future of
    floriculture exports from Kenya.

-   Marketing: The Kenyan exporter typically exports their produce to an
    auction in the Netherlands, which cost approximately 15-20% of the
    sales price. Furthermore, the products are sold together with Dutch
    products, which have not been packed and transported. The products
    from Kenya are 2-5 days older than the competing Dutch products and
    also packed in cartons, and which results in lower prices. The
    Kenyan flower exporters sell approximately 65% of their products
    into the Dutch market, mainly because of the safety and simplicity
    of selling there. However, the Netherlands is only responsible of
    55% supply into the rest of the EU on average, which means that
    Kenyan cut flowers are over-represented at the Dutch auctions.
    Kenyan cut flowers, and especially roses and carnations should have
    a presence of 55% or less and which would be equal to the Dutch
    exporter's market presence in the EU. The rest should be supplied
    into the markets directly through direct exports, and which would
    give the following advantages:

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-   \- Both the Dutch and the Kenyan flower would have been packed and
    transported.

\- Both origins would have the same handling time from harvest to
reaching the client.

> \- The costs of the auction and the margin of the buyer/exporter in
> the Netherlands would create a margin for the exporter in Kenya of
> some 30-40% in fob value.

In the consultant's opinion, Kenyan flower exporters will have to take
some risks on the marketing issue in the future. The present marketing
costs for the small- to medium sized flower exporter are too high and
probably not viable in the future. However, Kenyan exporters have been
more successful in direct marketing than most other African countries,
but not by far as successful as the exporters from Latin America. There
are logical reasons for this, such as that the African cut flower
exports are mainly targeted for the mass consumption market, whereas the
Latin American exports are targeted to the upper level of the market.
The main reason, however, is the management skill of small to medium
size flower export companies in Kenya.

2.4.5. **Vegetables and Fruits.**

The vegetable and fruit export sector function in a very different way
than the floriculture sector. The trade is based upon exports on fixed
prices and their main market is the supermarket chains in the UK. The UK
market is responsible for approx. 53% of the vegetable imports, followed
by France, Germany and the Netherlands. The major export market for
fruits is France, followed by UK, the Netherlands and Germany. However,
the sector has to a large extent focused on the UK market and the
penetration into the other markets is poor, apart from for beans and
avocados. Fruit exports have penetrated the Middle East rather well for
mangos, but restrictions on mango imports to Saudi Arabia due to a
problem with live weevil larvae in 30-40% of the mango stones, has put a
pressure on the prices in Dubai, which has negatively affected both
export volumes and profitability. The problem with the weevil larvae
could most probably be solved through identifying a sticky compound
and/or a repellent to paint at the trunks of the mango trees during the
flowering season, and hence preventing the weevils to climb the trees.
Mr. Haller at Baobab Farm should be contacted to solve that issue.

2.5. **Competitiveness of the Sector.**

2.5.1. **Advantages.**

Kenya has managed to become a major supplier of horticultural products
into the EU markets over the last decade, and unless one or several of
the threats presently facing the sector are implemented, Kenya will most
probably defend its leading position and further strengthen it. The main
reasons for Kenya's strong position are:

-   A very strong and well organized private sector, which has over the
    years managed to implement a vertical structure of production,
    post-harvest handling, transport to the target markets and the
    marketing function. This is true for both the floriculture and the
    vegetable/fruit sector. Of the different product groups, the fruit
    sector appears to be most vulnerable to changing market
    conditions/demands due to the fact that this sector does not control
    the production, neither from a quantitative aspect nor from a
    traceability/MRL aspect. However, the main export species, avocado
    and mango, are not subject to any chemical application during
    production.

-   Absence of government involvement and the absence of a difficult
    regulatory framework.

-   The variety of climates available in Kenya together with the
    availability of labor and a long history of producing horticultural
    products for export.

-   A rather good infrastructure for road transports within the main
    production areas and good local supplies of inputs, implements and
    maintenance, which has been built up over the years, especially when
    compared to competing countries.

-   Access to good air cargo handling facilities and good airport
    services in Nairobi. Sufficient air cargo space availability to
    major destinations and working under competitive business
    conditions.

-   A rather simple export-documentation procedure and access to imports
    of inputs without any serious delay in procedures.

-   Incentives for exporters concerning exempt of import duty on most
    investments and inputs and repayment of VAT for export companies.

2.5.2. **Disadvantages and threats.**

The above major competitive issues are quite important and have been
major catalysts to the present state of the horticulture export-sector.
However, there are also negative factors and major threats facing the
export-sector and those are:

-   There is a general shortage of water for irrigation purposes in
    Kenya, and this is a major constraint in many areas for an expansion
    of the sector.

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-   There is a general shortage of skilled labor and well-trained
    agronomists as well as management level staff. The companies train
    their own staff since well-trained staff is not readily available.
    This is acceptable for the large companies, but is a constraint for
    the small to medium size exporters in the whole sector.

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-   There is a realistic fear that existing taxes and fees will increase
    or new ones will be imposed.

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-   Contracted farms and out-grower groups are not exempt of VAT for
    inputs in spite of the fact that their products are exported.

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-   Areas for improvement: Lower air freight charges and improved cargo
    capacity to some destinations such as London, Paris and Frankfurt,
    improvements of the infrastructure (telephone, power supply and
    country roads), product quality and market information, especially
    among the small to medium size exporters.

A number of major threats are facing the industry as well, which may put
the whole sector at risk within the next few years unless they are
successfully negotiated. The consultant could not get any indication as
to the probable success of such negotiations during his visit. The
threats are:

-   That the EU/WTO/Lome agreement will be in effect from 1.1.2008, from
    which date Kenyan exports will pay import duty to the EU markets.
    The present import duty to the EU is 20% (1 June- 31 Oct.) and 14,2%
    (1 Nov.-31 May) for flowers and the present import duties for
    vegetables/fruits are presented in the table below. All import
    duties are payable on the CIF value. The profitability of the Kenyan
    horticulture export sector has declined dramatically over the last
    10 years. The present profit margins within the flower sector is
    approx. 10-15% for very well managed companies with very well
    defined production/post harvest handling/transport/ marketing
    systems, but that knowledge is only present in a few large
    companies. The small- to medium size export sector shows a range
    from good profitability to red figures. In the vegetable sector, the
    average profitability is approx. 3-7% and in the fruit sector
    approx. 10-15%, depending on product group and how the company has
    solved the above issues of production etc. There is reason to
    believe, that the import duty can not be assimilated within existing
    profit margins, and that this may seriously harm a large part of
    Kenya's existing horticulture exports and that many companies will
    move to northern Tanzania, Uganda or other countries in order to
    avoid the import duty. Duty free imports to the EU will be effective
    only from LDC countries after 2007, and LDC countries in the region
    are Ethiopia, Lesotho, Malawi, Sudan, Tanzania, Uganda and Zambia.

**[Present Import Duties in the EU for Vegetables and
Fruits:]{.underline}**

  ---------------- ---------------- -------------- ----------------- ----------------- ---------- -----------------
  **Tariff Code**  **Product**      **Dates**      **General         **ACP**           **LDDC**   **GSP**
                                                   Tariff**                                       

  **0708.10-00**   **Peas**         01.01-31.05    8%                FREE              FREE       6.8%

                                    01.06--30.06   13.6%             FREE              FREE       10.2%

                                    01.07--31.08   13.6%             FREE              FREE       11.5%

                                    01.09--31.12   8%                FREE              FREE       6.8%

  **0708.20-00**   **Beans**        01.01--30.06   10.4%             FREE              FREE       8.8%

                                    01.07--30.09   13.6%             FREE              FREE       11.5%

                                    01.10--31.12   10.4%             FREE              FREE       8.8%

  **0708.90-00**   **Other          All Year       11.2%             FREE              FREE       9.5%
                   Legumes**                                                                      

  **0709.20-00**   **Asparagus**    15.08--15.01   10.2%             FREE              FREE       8.6

                                    16.01--31.01   10.2%             6.1%              FREE       8.6

                                    01.02--14.08   10.2%             8.6%              FREE       8.6

  **0709.60-99**   **Capsicum**     All Year       6.4%              FREE              FREE       4.4%

  **0709.90-60**   **Sweet corn**   All Year       Euros9.4/100/kg   Euros9.2/100/kg   FREE       Euros9.4/100/kg

  **0709.90-90**   **Other          All Year       12.8%             FREE              FREE       8.9%
                   Vegetables                                                                     
                   (inc.Asian                                                                     
                   veg)**                                                                         

                                                                                                  

  **0804.30-00**   **Pineapples**   All Year       5.8%              FREE              FREE       4.9%

  **0804.40-00**   **Avocados**     01.01-31.05    4%                FREE              FREE       1.4%

                                    01.06-30.11    5.1%              FREE              FREE       3.5%

                                    01.12-31.12    4%                FREE              FREE       1.4%

  **0804.50-00**   **Mango, Guava   All Year       FREE              FREE              FREE       FREE
                   Mangosteen**                                                                   

                                                                                                  

  **0807.19-00**   **Mangoes**      All Year       FREE              FREE              FREE       FREE

  **0807.20-00**   **Papaya**       All Year       FREE              FREE              FREE       FREE

  **08 1090        **Passion        All Year       FREE              FREE              FREE       FREE
  40-10**          Fruit**                                                                        

  **08109085**     **Other tropical All Year       8.8%              FREE              FREE       6.1%
                   fruit**                                                                        
  ---------------- ---------------- -------------- ----------------- ----------------- ---------- -----------------

Prepared from the Tariff Schedule issued 01.07.01

If the preference is lost to Kenya, there is a potential impact on the
legume exports. Here Kenya enjoys a significant advantage over other
potential suppliers paying the full tariff. If this advantage were lost
while other potential LDC suppliers, such as Ethiopia or Gambia,
Tanzania, Uganda or Zambia, maintained their preference Kenyan exporters
would be at a significant disadvantage. in this sector.

Note, however:

-   All tariffs are being gradually reduced. The advantage of the
    preferences is therefore diminishing.

-   Relatively few companies control the majority of Kenyan exports.
    Their capability is so far advanced that they could replicate the
    production in other territories more efficiently than any other
    existing or potential competitors. The choice of production location
    for such operations is not simply an issue of tariff but a whole
    suite of considerations from agronomic, through fiscal to
    logistical.

-   The impact on Kenyan output of any change to the tariff structure
    therefore rests in the hands of a few companies and their selection
    of production location.

-   The smaller players will, of course, be threatened by these
    developments in tariff structure, but their concerns are likely to
    be more immediate than the seven-year timescale of the evolving
    negotiations.

The introduction of import duty tariffs would result in the following
fob cost increases:

  ------------------ ------------- ------------- --------------- -------------
                     **Cut         **Cut         **Vegetables,   **Fruits, 4%
                     Flowers,      Flowers,      11% (average)** (average)**
                     14%**         20%**                         

  **Selling price,   100           100           \-\--           \-\--
  auction**                                                      

  **CIF value        80            80            100             100
  (deducted with 20%                                             
  auction cost for                                               
  flowers)**                                                     

  **Import duty**    11,2          16            11              4

  **Transport cost** 30            30            65              65

  **Fob value**      38,8          34            24              31

  **% duty on fob    29%           47%           46%             13%
  value**                                                        

  **% duty on        22%           32%           31%             11%
  present fob                                                    
  value**                                                        
  ------------------ ------------- ------------- --------------- -------------

As can be seen in the table above, the effects of the import duty will
be very serious for most of the horticultural export sector.

There will be negotiations between Kenya and the EU with the target to
get the import duty lifted also after 2007. The problem for the sector
is primarily to evaluate the probable success of those negotiations, and
secondly to evaluate the effects of the time schedule involved:

a.  The negotiations will be successfully conducted and the export
    sector will in 2003 have guarantees of duty free exports to the EU
    after 2007. In this case, the sector will continue to prosper and
    there probably will be an annual volume increase of exports of
    approx. 4-7% annually for flowers, 7-10% annually for vegetables and
    2-4% annually for fruits. The whole sector is considered to be very
    strong and with a determined policy to remain competitive over the
    next ten years.

b.  It the negotiations will not be productive within the next 1-2
    years, a number of things are, most probably, going to happen. These
    all incorporate negative effects for Kenya as a horticultural
    exporting country and are identified below:

-   In the flower export sector, an investment can be paid off in 3-5
    years. It can be expected that investments within that sector will
    decline significantly in 2002-03. The vegetable sector will have
    about the same parameters for investments.

-   The financial institutions will look more closely at the future
    situation of the sector and long term financing will be more
    difficult to obtain. The closer we get to 2008, also short term
    financing will probably become increasingly difficult as well.

-   By the year 2003-4, a lot of the exporters will probably start
    looking for alternative production areas within the LDC countries,
    and for the Kenyan export sector, that means mainly Tanzania but
    also, to some extent, Uganda and other countries. The extent of the
    transfer of production areas will be dependant on a number of
    issues:

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-   If the government of Kenya will allow the existing packing and
    handling companies of both vegetable/fruits and flowers to be
    considered as Export Processing Zone units, free of VAT. This would
    enable the companies to operate their packing and processing
    functions in Kenya with produce from Tanzania and without losing
    their non-tariff status in the EU.

-   The above effects on investments would, over a period of time,
    result in a decline in exports. The decline in supplies to the
    markets will, most probably, increase prices but it is not expected
    that the price increase would compensate the import duty fully.
    However, a positive price development would increase profitability
    and hence production in competing LDC countries, which would affect
    the prices negatively. This whole procedure may take some 4-5 years
    but is very likely to happen. The unknown factor about this scenario
    is whether neighboring countries will accept this influx of
    companies without implementing other restrictions and/or taxes,
    which will counter the import duty effect.

-   In order to achieve a price increase of 15-20% in CIF value, the
    production of flowers would most probably have to decline with some
    30-40%. It is expected that the whole small- to medium size sector
    will start to experience problems from 2004-05. The larger companies
    will be less affected on short term, but it is likely that they will
    relocate the whole or part of their production and the sector will
    probably be much smaller within 3-4 years after 2008. The situation
    for vegetable/fruit exports is a bit different, because the all
    shipments are on firm orders. It is likely that the fruit exports
    will come to a halt, due to competition from Israel and from Latin
    America. It is also likely that the vegetable exports would loose
    the bean and pea exports to other countries such as Egypt, Ethiopia,
    Burkina Faso etc. due to lower prices from those countries. For
    especially pre-packed vegetables and salads, Kenya may probably be
    able to recover the import duty because of the fact that
    installations are in place as well as the technical know-how on
    short term, but on long term the profitability within the LDC
    countries will be very tempting for companies to start operations
    there. On the whole, the sector is probably looking at a decline in
    vegetable exports of 30-40% on short term, i.e. up to 2010-12, but
    on long term an exodus of the industry from the country.

-   A decline in export volume from 2004-05, will result in excess air
    cargo space and hence less cargo space available, and it is likely
    that exporters will not get the space they require and on the days
    and to the destinations they require. This will result in more
    unrest from the part of the exporters. This situation will
    accelerate with time.

The second major threat to the horticulture export sector is the
Horticultural Bill, which many exporters in Kenya sees as an even larger
threat than the import duty to the EU. This is largely due to the fact
that the Bill has a much closer time perspective than the import duty,
and also because many exporters expect that the import duty will never
be implemented, whereas the Bill can be implemented on short term.

The Horticultural Bill contains a significant expanded power for HCDA in
the regions of technical assistance, research and control functions,
which will be paid by the private sector according to the costs of the
operations. The private sector claims in principal that these activities
to be undertaken by HCDA are already undertaken by the private sector.
The private sector can manage these functions better than HCDA, that
they don't require these services, and that it will only increase their
costs and not result in increased export earnings to pay for the costs.

At the same time, HCDA is launching an out-grower scheme, with the
assistance of Japanese funding, in order to collect, handle and sell
produce from out-growers to the export and/or canning sector. HCDA is
also empowered to act as an exporter for the produce. Initially HCDA has
contracted some 400 out-growers of beans into this project. The joint
reaction from the private sector is that HCDA can not function both as a
regulatory body and as a competitor. None of the issues of the bill
seems to be acceptable for the private sector. Furthermore, the bill has
triggered a suspicion that this is the first step towards increased
government control of the sector.

Other concerns from the private sector are:

-   That there will be too many label systems implemented in the EU
    markets, which the exporters will have to join, which will increase
    the costs rather significantly. Most of these label systems also
    introduce regulations, which only have to be followed by Kenyan (and
    other non-EU suppliers), and which will burden the exporters with
    costs that are not experienced by the European growers. The EU will
    launch a new, joint code of practice, EUREGAP, in September 2001.
    Hopefully, the EU will impose that this is the only label required,
    and that its regulations are required also from the European
    growers, as well as accept that the Kenya CoP is conform to the
    requirements of the EUREGAP.

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-   EU will impose stricter quarantine inspections, which may result in
    disinfecting of shipments with methyl bromide, and which will have a
    negative effect on quality and vase life but also may delay
    clearance of the shipment significantly. It may also involve
    increased testing of vegetable- and fruit shipments. The cost for
    the new system will be imposed on the exports directly. It is
    estimated to cost the flower export sector 300.000 Euro per year in
    additional costs, and possibly the same for the vegetable/fruit
    sector. The cost will be invoiced in Europe, but the cost will
    reflect on the sales price and hence, be returned to the exporter's
    price. The market price as such is unlikely to change because of
    this new cost.

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-   Flower growers in Kenya are complaining about high costs for
    planting material, which is often caused by royalty charges.
    However, there is not much to do to lower the cost of planting
    material in general. In order to facilitate the adaptation to
    changing market preferences, it was suggested that KFC should
    negotiate a new royalty system with especially rose breeders, where
    the growers paid an annual fee instead of one time fee when buying
    the plants. The annual fee should be based on an expected life span
    of 6-7 years for the plant. This would facilitate the expansion of a
    project, reduce capital needs and facilitate changing into new, more
    profitable varieties. It seems also that rose plants propagated as
    cuttings instead of grafted plants are doing quite well, even though
    it remains to be seen if the life span of those plants are
    comparable to the grafted plants. Rooted rose cuttings would
    significantly reduce investment costs of a rose farm.

2.6. **Regulation Framework.**

In principal, the standards and basic minimum grades of horticultural
products exported from Kenya are set by the importing countries in the
EU and by the customers. The supermarket chains in the UK have been
spearheading the development of very strict regulations for
vegetable/fruit imports, and they monitor the implementation of those
regulations closely through control visits to the exporters audited for
their systems. There are standards set for imports of horticultural
products into the EU (see app. 3 and 4). A National Code of Practice has
been developed in Kenya, which is being implemented, and which is
harmonized to most label systems in Europe. Accreditation to the CoP
will become a necessary instrument to obtain an export license in Kenya
in the future. It is of utmost importance that the CoP will be accepted
by the various label systems in Europe, especially the new EUREGAP, in
order for the Kenyan exporter to abide by only the CoP and not have to
join a large number of label systems.

KEBS has set standards for certain fruits and vegetables through its
technical committee but there is no evidence that these are being
implemented and there is doubt whether there should be such standards.
The only important issue for the exporter is that his exported quality
is conform to his customer's requirements without taking any local
regulations into consideration. The standards set for the local market
are mainly according to size and that seems to be adequate according to
local demand.

The current practical standards and grades are described below.

-   Phytosanitary standards and grades: These are set by the importing
    country and are mandatory and there will be a more stringent
    application of these regulations in the future by the EU quarantine
    inspection. This is still under negotiation, but the new regulations
    are likely to be imposed in 2002, and which will increase the costs
    of importation from non-EU countries. The MRLs regulations are
    mandatory for the whole sector and will require an upgrading of
    analyzing facilities in Kenya at KEPHIS for small to medium size
    exporters to follow up on these issues.

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-   Quality: Grades and standards that relate to quality, such as size,
    color, taste, appearance etc. are set by the buyer and vary from
    buyer to buyer and over time. These standards are mandatory for each
    individual exporter and depend on market preferences and trading
    practices.

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-   Code of Practice and Code of Conduct: Standards that relate to
    social and environment issues as well as business ethics are
    becoming increasingly important. These standards have been voluntary
    in the past but are becoming mandatory, and will be mandatory in
    Kenya in the near future through the implementation of the National
    CoP. This will probably result in preventing some small exporters
    from operating.

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-   Organically Produced Fruits/Vegetables: There is an increasing
    demand for these products in the EU, and there are certifying
    bodies, such as IFOAM, that will inspect and certify an individual
    grower/exporter. The criteria for certification are totally
    controlled by the importing countries.

-   An exporter in Kenya will require an export license, which is issued
    by HCDA. The license has been quite easy to obtain at a cost of Ksh
    5.000 for a three-year license. HCDA is proposing increase he fee to
    Ksh 25.000 for a one year license and they will also follow up on
    the exporter's compliance with the Code of Conduct and may, in the
    future, refuse to give an export license to exporters that do not
    comply with these conditions. The sector is strongly opposed to the
    increased fee, and considers this to be another instrument to
    collect more funds for HCDA. They would prefer the existing charge
    and a simple register of exporters instead of a license and which
    could be maintained at the existing fee. The increased market
    demands will automatically exclude non-serious exporters from
    exporting.

There are standards set for seed, but the reality is that the grower
will depend totally on his connection with the seed supplier. Attempts
to claim from the supplier on the grounds that the seed did not conform
to Kenyan standards will be very lengthy and most probably fruitless.
The standards set concern purity of the seed, max. weed content, min.
germination capacity, max. moisture content. In general, these issues
are a solved between the seed supplier and the client, since it is
impractical to conduct tests prior to the actual sowing of the seed for
practical purposes.

There are also standards of packaging. Kenya has an intrinsic advantage
over neighboring countries that it has a paper and board manufacturing
industry, based largely on trees grown locally on a renewable basis.
There are also several packaging factories in Kenya, a situation which
has created a competitive situation and which has resulted in declining
packaging prices over the last few years. However, the packaging
industry in Kenya is protected by a 45% import duty and packaging
material in Kenya is still quite expensive. Packaging has been a very
big issue for Kenyan exporters of horticulture produce. There was a
rather big study made by PriceWaterhouseCoopers in 1999, which stated
that most of the problems related to Kenyan cartons were to be found in
the airport handling system and not caused by the quality of the
packaging. The standards for Kenyan packaging are to be found in the
directives from Kenya Bureau of Standards, KS 03-948 of Jan. 1991. The
EU regulations covering the basic cartons etc. state that:

-   The materials used should be clean, new and harmless to food.

-   There should be no print on the internal surfaces in contact with
    food.

-   The packaging should provide adequate protection for the content

-   No straw should be used as packaging material on phytosanitary
    grounds

-   The heavy metal content of the cardboard should not exceed certain
    specified levels (this is rarely a problem)

-   Re-cycling of packaging is mandatory in the EU, and cartons should
    be possible to re-cycle without extra cost. There are extra charges
    for re-cycling waxed or plastic filmed cartons.

In principle, the floriculture exporters use either what is known as the
Kenyan box, or a larger box, known as the Zimbabwean box:

-   The Kenyan box measures 100x33x20 cm, and with a volume weight of 12
    KGs, but with a real weight of 10,5 KGs for flowers.

-   The Zimbabwean box measures 100x50x20 cm, and with a volume weight
    of 17 KGs but a real weight of 13,5-14 KGs for flowers.

Cartons used for vegetable/fruit exports are more complex and with a
greater variation in sizes and appearances. The traditional bean box of
2 KGs is widely used, and also a larger box of 4 KGs.

The important issue of the packaging problem is that the construction is
telescopic, that the cartons are properly assembled and that the cartons
are stacked in proper piles on the pallets. If this is done properly,
the Kenyan cartons are quite good and prevail well during the transport,
provided that they are stored in a low humidity environment. There are a
number of comments from the market side on the presentation of Kenyan
products. Major comments are that the packaging is dull, old fashioned,
ordinary, basic or cheap. The present packaging for most horticulture
products from Kenya is based on re-packing in the target markets and not
for presenting the products directly to retailers or consumers. In the
consultant's opinion, the above comments are correct, but it is doubtful
that Kenya would be more competitive on the markets with a more
expensive packaging presentation and if that extra cost would be
recovered in higher prices. However, some markets and some importers
would certainly react positively to an improved packaging and
presentation of the products and which would, eventually, result in
higher prices or strengthen business relations with that market or
importer.

A major complaint is labeling, where many exporters fail. The minimum
legal requirements for export into the EU include

-   Quality grade and size

-   Nature of product (such as beans) and variety

-   Name and address of packer and/or exporter

-   Country of origin

-   Net weight

Supermarket buyers often have additional demands such as

-   Supplier/traceability code

-   'Sell by', 'Use by', Best before' or 'display until' dates

-   A bar code for stock control in the supermarket depots

-   The name of the supermarket

-   Often pricing is also done prior to shipping the products

Often the inner labels will contain information concerning storage and
cooking instructions, serving suggestions, nutritional information etc.
Some pre-packs are very stylish and quite expensive but the main
pre-packs used include poly-bags and over-wrapped trays.

2.7. **The Status of Exporters Associations**.

There are two exporter associations in Kenya, Kenya Flower Council (KFC)
and Fresh Producers Export Association of Kenya (FPEAK).

2.7.1. KFC was formed in 1996 by the then five most important flower
exporters in Kenya and was a result of the ineffectiveness of FPEAK to
represent their interests. The association has, over the years gained a
very strong position as a negotiating and lobbying factor in Kenyan
internal and external policies. It is based on a voting power by size
and, therefore, represents very much what the major players in the
flower export sector find important. KFC has a rather small secretariat
and focus on the relations with the government, commenting on regulatory
instruments introduced by the government or its parastatal organizations
and significant marketing activities through Kenya Flower Days in the UK
and the Netherlands. It is considered as a stronger organization that
FPEAK. KFC is financed through a cess per ton exported produce from the
members.

2.7.2 FPEAK was developed from HCDA back in 1975. It was targeted to
represent the whole horticultural export sector and was financed through
a cess collected by HCDA and transferred to FPEAK of Ksh 0,05 per
exported kg. Membership was mandatory for all exporters of horticultural
products in Kenya. The mandatory membership was lifted in 1995, and the
association became dormant for various reasons, which is why KFC was
initiated. FPEAK has survived many changes over the years, but has not
been able to fulfill its mandate. However, FPEAK is presently being
transformed into an organization focused on the vegetable- and fruit
sectors and into an organization similar to KFC with voting power
related to size, and which means that the big stakeholders in the
vegetable/fruit export sector will take direct interest into the
organization. At present, it seems that FPEAK will become as important a
negotiating partner in Government and international negotiations as a
representative for the vegetable/fruit sectors as KFC has become for the
flower sector. In addition to the above, KFC and FPEAK is working
closely together and do not seem to compete with each other as was the
situation previously. This change is to a large extent a result of
USAID's involvement with FPEAK in the past.

2.8. **The Status of Shipping Possibilities from Kenya**.

Freight charges represent the single most important cost for the
horticultural exporters in Kenya. Freight rates vary with the exporter,
and depend especially on size of shipment, cargo composition, shipment
schedule, destination and negotiating power. It is obvious that a small
to medium size exporter has less chances of achieving a competitive
cargo rate than a larger exporter, who can guarantee minimum volume and
regular shipments. This has created a situation where the small to
medium size exporter is not fully competitive to the larger exporters in
the target markets and the small to medium size exporters are more
vulnerable to price fluctuations in the target markets.

In terms of volume, the most important means of exporting fruit to
Europe is by sea, whereas flowers and vegetables have to be
airfreighted. Costs are substantially lower in sea freight and the
penetration of a number of lines of fresh produce into the European
market has had to wait on the development to technology for shipping by
sea. Thus, the markets for mangoes, litchis and papayas have expanded as
prices have fallen through sea freighting.

A number of products, however, are too perishable to send by surface
transport and airfreight is the only means of export. In these cases
freight is the biggest single cost associated with the production and
export of the product and the availability of freight and the relative
cost, in comparison to other producers, will constrain a new project.

There are a number of advantages to air freighting:

-   Speed is not only essentially for the highly perishable products,
    but may also achieve a premium price in the market for delivering
    higher quality products such as mangoes or pineapples.

-   Smaller volumes can be handled. Usually exporters air freight on the
    basis of a pallet or air cargo container price where as the minimum
    unit for sea freight is the 20-foot container. Real savings are only
    achieved in sea freighting when hold space rather than container
    loads can be booked, and which boats are not available in Kenya but
    available in Central America.

-   Airfreight may give early access to a market right at the start of
    the season when premium prices are available.

As regards the cost of air freighting only the highest value produce can
carry the cost involved. The table below gives some comparative costs
between the important competitors to Kenya during peak season:

  -------------------- --------------- -------------------- ---------------
  **From**             **Rate          **From**             **Rate
                       US\$/kg**                            US\$/kg**

  **Kenya, Nairobi**   1,45-1,65       **Egypt**            0,70-1,00

  **Kenya, Mombasa**   1,10-1,30                            

  **Tanzania**         1,50-1,60       **Israel**           0,60-0,90

  **Zimbabwe**         1,55-1,65                            

  **Zambia**           1,30-1,50       **Bangladesh**       1,60-1,75

                                       **India**            1,30-1,70

  **South Africa**     1,57            **Sri Lanka**        1,50-1,70

  **Ghana**            0,70-1,00       **Thailand**         2,00-2,40

  **Gambia**           1,10            **Ecuador**          2,40-2,90

  **Senegal**          0,99            **Guatemala**        1,60

  **Burkina Faso**     1,07                                 
  -------------------- --------------- -------------------- ---------------

> Source: Accord Assoc. estimates and interviews

These rates are indicative only. Tariffs change and individual exporters
usually negotiate their own rates according to volume and seasonality of
traffic. The table does however clearly indicate the comparative
advantage of West Africa over East Africa.

2.8.1. **Nairobi.**

The present cargo capacity at Nairobi airport seems adequate to the
requirements of the exporters. However, there seem to be a need for
increased cargo space to mainly London, Paris and Frankfurt. The packing
centers at the airport are mainly built by the forwarding agents and the
cargo handling equipment from the cargo/palletizing centers to loading
the aircraft are fully modern and suitable. The airport in Nairobi is
presently equipped with a very functional service for the horticultural
sector, all achieved through the private sector in Kenya. When the
consultant discussed with the cargo handlers and the authorities, there
were no complaints about delays in documentation, quarantine handling or
other issues. The following is the cargo space available in the
chartered aircrafts for the 2001-02 export season:

DC10 -- 62-67 tons, 8-11 per week, totally 520-715 tons per week.

MD11 -- 75-80 tons, 7 per week, totally 560 tons per week.

747-200 -- 80-90 tons

747-400 -- 100-110 tons, 11 per week but 7 via Johannesburg, totally 860
tons per week.

707, DC8 -- 40 tons

767 -- 53 tons but for flowers 35-40 tons, 2 per week, totally 80 tons.

The above figures gives a total space availability on chartered
aircrafts from Kenya of about 2.020-2.215 tons per week plus the cargo
space in regular flights for the 2001-02 export season. The following
aspects of the J. Kenyatta airport should be taken into consideration
when judging air-cargo rates:

1.  Landing costs and navigation costs at J. Kenyatta airport are US\$
    3.054 per flight, and this cost is higher than most airports in the
    region (approx. 30% higher than KIA in Tanzania).

2.  Fuel costs are similar to those in the region (presently US\$ 1,08
    per US gallon). However fuel costs are cheaper in Khartoum and in
    Tripoli, up to 20-40% cheaper, and some cargo flights land in those
    cities to refuel.

3.  A very important factor for the cargo rate is if the aircraft has an
    incoming freight as well or if the cost will be based on a return
    flight. The south bound loads will always depend on the needs for
    importing materials and traditionally the trouble spots in Africa
    have provided the most return flights.

4.  The cargo rate applied will to a large extent depend on the
    percentage of the cargo that can represent more expensive rates
    and/or with a good density rate.

5.  Some major exporters in Kenya use returnable packaging material, and
    which provides a certain southbound cargo. If the aircrafts are
    leased on return flights, the south- bound load would be almost free
    of charge, and which makes this system profitable.

6.  It is unlikely that a grower/exporter in Kenya, apart from the
    biggest exporters, would operate his own chartered flights, in order
    to achieve a cost advantage. In the consultant's opinion, the only
    way to achieve a competitive cargo rate for small to medium size
    exporters is to act as a group, guaranteeing a certain space, i.e.
    20-30 tons three times per week, and negotiate from this point of
    strength. This would most probably result in a 7-10% saving on
    freight costs.

7.  General cargo rates are considered to be competitive even if the
    exporters would like to have access to lower rates. The present
    rates are for flowers, approx. US\$ 1,60-1,65 per kg in the peak
    season and, depending on the agreement down to US\$ 1,45 per kg in
    the low season. Fruits and vegetables pay less or approx. US\$
    1,45-1,55 in the peak season and US\$ 1,25-1,35 in the low season.
    The chartered cargo planes require a balance between vegetable/fruit
    exports and flower exports in order to be able to load the air
    crafts in an optimal weight/volume capacity, about 50% of each
    product group. The wide-bodied aircrafts combined with a good ratio
    on volume/weight has resulted in a pure weight rate from Kenya also
    for flowers. The flowers used to be charged on volume rate, which
    for the Kenyan carton is 12 KGs and for the Zimbabwean carton is 17
    kg. The actual weight for flowers is approx. 10,5 and 13-15 kg
    respectively, and this has resulted in an effective cargo rate
    reduction from only a few years ago.

On the whole, the study shows that the cargo services and the cargo
rates are competitive to neighboring countries and that a decline in
cargo rate would demand either an increase of more expensive cargo
and/or a significant commitment from the exporters on cargo volume
guarantee.

2.8.2. **Eldoret Airport.**

Eldoret airport has not been very successful in attracting export
volumes from the producers of horticultural products in the area, in
spite of the fact that there are quite a number of exporting companies
within a reasonable distance. The major problem with the airport is that
the altitude is quite high, 6.800 ft, and that the strip was made short
due to lack of funds to finalize the original plans. That means that the
strip is 500 m short to allow for full-loaded cargo aircrafts of the
series 767-747 to service the airport. These air-crafts will have to
take off with 20-40% less than their capacity and these air-crafts would
have to fill up their load in Nairobi or elsewhere.

The regular aircrafts servicing the airport are 35 seated airplanes
twice a day. The cargo warehouse capacity is 7000 sq.ft and the cold
storage capacity of 4000 sq.ft in two compartments. Palletizing
facilities are non-existent and aircraft loading facilities are
rudimentary. Landing charges are about 25% cheaper than Nairobi, but
navigation charges are the same. Fuel is slightly more expensive than
Nairobi. The met station has old computers, no power back up and is not
well connected to the navigators. There are no existing plans to either
expand the strip or the cold stores/warehouses. Incoming cargo has been
about 300 tons per week lately. 747's from United Arab Emirates with
electronic equipment for local sales and neighboring countries. These
flights are not expected to be regular. No 767 have ever landed at the
airport. The management of the airport seemed fairly good

## Cargo possibilities:

1.  French beans, snow peas, sugar snaps, passion fruits, summer flowers
    and roses.

```{=html}
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1.  Tradewinds has suggested flying 20 tons to the Middle East starting
    from 20^th^ July.

2.  Exporters would like to use the airport if it is competitive in
    rates and efficiency

3.  Tonnage of between 26-30 tons weekly is realistic from the zone but
    too small for a regular cargo service to the airport.

4.  There are some new farms /expansions being implemented in the area:

    -   New farm coming up 30 km away up to 10ha rose farm in planning
        stage

    -   There has been two new farms in the last 2 years

    -   All the flower farms have either expanded or are soon going to.

5.  Small growers can generate the tonnage consistently only with
    empowerment in groups and general organization.

However, the growers in the area will require supplies from Nairobi and
most of the trucks supplying exports to Nairobi will carry return inputs
of cartons, fertilizers, chemicals etc. Some are also working with other
exporters and transport their cargo to Naivasha or Nakuru only. Some
will have to utilize the handling facilities at Nairobi airport to
combine shipments from other units. Due to the short strip in Eldoret
and due to the present structure of the export sector, it is unlikely
that the airport in Eldoret will function as a direct export point of
horticultural exports from Kenya, but it may serve as a feeding airport
into Nairobi, provided that the charges would be less than road
transport charges.

2.8.3. **Mombasa Airport and Port.**

a.  Mombasa Airport: Kenya Airport Authority manages the airport
    handling and there are no private forwarding agents handling
    facilities at the airport. The facilities are adequate for the
    present volume, but there is a problem of capacity during peak
    seasons in January-April, mainly due to the declining tourism.
    Mombasa airport is only serviced by tourist flights and flights to
    Nairobi, and presently there are some 12-13 aircrafts landing at the
    airport per week. Approx. 8-10 flights accept cargo, each one of 15
    tons, which means a total capacity of 150 tons maximum per week.
    However, the attendance of tourism flights decline in the peak
    export season, when cargo space need is at a peak. The freight rates
    are lower than the rates in Nairobi, partly due to only high-density
    cargo leaving Mombasa but also due to the fact that freight is an
    added value product for the tourism charters. In total, the
    airfreight out of Mombasa seems to work well and according to the
    present requirements. There is clearly room for a cargo plane
    service from Mombasa to both Europe and the Middle East to service
    the industry. However, it is unlikely that such a service would be
    cheaper than the existing service from the tourism charters. If the
    exports by air were to increase from the area, cargo charters would
    have to be brought in and which would, most probably, increase the
    present rates.

> When the cargo space is not sufficient from Mombasa during the peak
> season or when the aircrafts don't land at the requested destination,
> the exporters have to use Nairobi. KQ will charge US\$ 0,37 for the
> transfer to Nairobi, and this rate is too high compared to road
> transport, which means that all transfer goods are transported by road
> to Nairobi. Cargo rates with KQ to Johannesburg are US\$ 0,70, SAA
> US\$ 0,52, to Dubai: KQ 0,90/kg, Emirates US\$ 0,55/kg. The freight
> rates with KQ seem set to avoid any freight on those routes and to
> discourage Kenyan exporters to use KQ for cargo.

b.  Mombasa Port: The port in Mombasa is a complex issue, since
    regulations and framework change rapidly and without prior notice.
    At present, the Kenya Port Authorities has implemented a regulation
    that handling of goods have to be done by the KPA's equipment and
    personnel, and, since they have inadequate capacity for handling the
    goods, port transfer time has increased from one day to 4- days.
    Private forwarding agents may use their own equipment to speed up
    the transfer, but they are liable pay KPA's costs anyhow. There is a
    maximum transfer time limit within which fresh products must be
    handled to be acceptable for the markets, and KPA's new regulations
    are harmful for the horticultural export sector.

The port facilities for plug-in reefer containers and back-up
electricity services have been improved and there are no longer any
problems in this respect. There is also a direct transfer to Marseilles
in France, which means that a reefer container with fruits can reach
Europe in 14-16 days including transfer at both Mombasa and Marseilles.
However, 4-5 days of that transfer time is spent in Mombasa due to the
new regulations. Otherwise, the transfer would be 10-11 days and the
Kenyan exports of Avocado and Mango would be quite comparable to the
exports from mainly Latin America. There are also weekly connections to
the Middle East, but the reefer containers are more difficult to recover
from that area.

Present freight rates from Mombasa to Middle East (Dubai) and Europe are
for 20-foot reefer containers US\$ 2.200 to Dubai and US\$ 2.800 to
Europe. These rates are too high in the consultant's opinion, and should
be reduced with approx. 25-30%, provided that the shipments were
regular.

2.9. **Pesticide Management and Framework.**

Pests and diseases are one of the most important factors in the
production and exports of flowers, fruits and vegetables and often
account for significant losses in the field as well as during post
harvest handling.

2.9.1. Legislation in Kenya.

All legislation is under the mandate of the Pest Control Products Board.

1\. The introductions of pesticides to Kenya: All pesticides introduced
from outside the country will have to be approved of the Board. To get
an approval from the Board, the applicant will have to bring in
experimental samples, and to submit data supporting efficacy,
toxicological and environmental data on the product. The procedure may
take up to 2 years.

2\. Immediately after approval comes a testing phase, which is
obligatory carried out at the agricultural centers of the Kenya
Agricultural Research Institutes. However, there is a more open and
practical approach to these issues and private companies as well as
consultants can carry out the tests and provide results to KARI.
Generally, the procedure will take 6-12 months

3\. Registration: There are three types of registration, temporary,
provisional and full.

-   Temporary is supposed to be allowed only in emergency case and in
    cases where the trader is to register for only one year. Presently,
    and due to a backlog of work, quite a few pesticides have been
    temporarily allowed.

-   Provisional is not a legal provision but merely allowing the product
    to be traded while the Board is waiting to meet and discuss. Most of
    the products without patents are in this category. The problems for
    this category are that the Board in general lacks sustainable data
    to support the product to be registered.

-   Full registration status is a 3-year guarantee to trade the product.
    This can be obtained when a product meets with all the criteria in
    Kenya and will take a minimum of 2 years to discuss and approve and
    can be renewed for 2 years at an additional charge.

Fees for pesticide trading in Kenya:

> Fees charged:

Introduction per formulation Ksh 10.000

Temporary per formulation Ksh 10.000

Provisional/Full Ksh 30.000

Renewal for 2 years Ksh 20.000

Imports and Exports:

Less than 1 mn Ksh Ksh 2.000

More than 1 mn Ksh 0,2% of value.

There are general complaints that a registration in Kenya is a longer
process than in neighboring countries in the region, since they have
less strict regulations on these matters.

2.9.2. For pesticide application, the situations, in general, is as
follows:

-   Big growers/exporters of vegetables are very serious in their use of
    pesticides regardless of price. They also have their own training
    programs and or use someone to do the training and dictate to their
    out-growers what to use and when.

-   Medium size growers/exporters are also very serious on choice and
    use of chemicals, but the price issue seems more relevant for this
    group. They dictate to out-growers what to use and when, but they
    often have less control over usage.

-   For small farmers and out-growers without a contract with an
    exporter, the control is much less. They normally know or have
    directives of what to use and when, but there are very little
    control of what is happening. These growers sell often to brokers.
    This sector represents a real risk, because traceability is often
    lost and it is expected that MRLs can not be controlled in this
    market sector.

2.9.3. General Problems of Pesticide Use in Kenya.

-   The wide range of chemical products available in Kenya makes it
    difficult for small to medium size farmers to choose the correct
    product. The big producers/exporters have sufficient technical
    expertise to make the selection and apply the product properly.
    There is also little understanding of the classification of a
    product in Kenya. This results in a situation where a producer
    believes that he is using the correct chemical while it is in a
    class that is not allowed.

-   Pesticides are considered to be the only solution to a specific
    problem regardless of available other means. The big
    producers/exporters' knowledge of alternative measures are company
    secrets and not available to the sector as a whole.

-   The application technology is underdeveloped in Kenya, especially
    among small to medium size farmers, and leaking tanks, booms etc.,
    inadequate coverage while spraying, spraying at the wrong time, poor
    or wrong nozzles etc. are frequent problems resulting in over use of
    chemicals and/or inadequate effects of the application.

-   There is a general lack of measuring the chemicals properly when
    mixing spraying solutions. This results in both over/under supplying
    chemicals and also the risks of creating an immunity and/or
    exceeding MRLs. MRLs tolerance for imports to the EU will most
    probably be at a level of detection which means a zero tolerance
    from July 2001 and onwards.

-   Most flower farms have a centralized spraying system, which has to
    be rinsed after each spraying. There are concerns about what to do
    with the rinsed solution and also the risks of forgetting to rinse
    which will harm the environment as well as harm the crop.

2.9.4. Institutional and Policy Issues.

There is obviously a lack of a single organization with the capacity to
take the overall responsibility of the management of pesticides. The
Pest Control Board is a regulatory organization. The Board

-   does not have a laboratory facility to undertake quality checks for
    products. KEPHIS is doing this on request and at a rather high fee,
    and which weakens the Board's position when in controversy with a
    company on quality.

-   Label recommendations on the use of chemicals in pre-harvest
    intervals are based on trials made outside the country, and it would
    be necessary to determine the PHIs relevant for the local conditions
    in Kenya. However, the big producers/exporters are doing this but
    that knowledge is not available for smaller to medium size
    producers/exporters in Kenya.

-   Basic chemical and physical tests on pesticides including quality
    control of formulations (suitability of solvents and filler
    materials for pesticides, emulsifiability of EC formulations,
    suspendability etc.) are not carried out, and which affect the
    suitability of a product for a certain purpose.

-   The Board does not have the facilities to assess the use of buffers,
    wetters, spreaders etc. in order to improve the effectiveness of a
    specific product. The Board does not have the capacity or even the
    procedures to register biological pesticides. A few pest control
    alternatives have been developed locally, but the Board is not able
    to assess them and make recommendations on their use.

-   There is no surveillance and monitoring to assess the status of
    residues in fresh and processed food.

There is a lack of national capacity to analyze for pesticide residues.
The Kenya Plant Health Inspectorate Service is the only organization
with a reasonable capacity to analyze some categories of pesticides. The
major problems being:

-   They have a capacity of 70 samples per week, but a larger number
    would be required for a realistic assessment of the export
    situation.

-   Lack of a complete range of standards.

-   The methodologies used are not developed for all the pesticides.

-   The issue of metabolites of residues has not been addressed at all,
    and the tests are done mostly for parent compounds only.

-   The analysis are quite expensive or ranging from US\$ 25-100, and
    also quite lengthy, which has forced the private sector to invest in
    their own analyzing facilities. It seems that the private sector has
    no need for an official analyzing capacity at present.

2.9.5. Farmer Training Issues.

There has been a lot of discussing of training in the country and. The
Global Protection Federation also sponsored some training for the last
5-6 years as well as other organization such as USAID, Care etc.
However, the emphasis was on safety and not on economical and
environmental basis of the use of chemicals. It is quite clear that an
improved knowledge of the use of pesticides and also on alternative
methods would reduce the total use of chemicals significantly.

Issues such as MRLs, correct measurement of chemicals, correct
application, both from a timing point of view as well as coverage, delay
before harvest etc. present a real problem to the MRLs issue and also to
the over use of chemicals. The big producers/exporters handle these
issues very well, but the small to medium size exporters, without their
own production and/or depending on brokers for their supply, may have a
problem to address these problems properly.

2.12.6. Disposal of Chemicals in Kenya.

The present regulations that burial of waste should be done 250 m away
from any water source are not viable since many farms are of 1-2 acres
or even less. There should be a stricter manufacturer responsibility of
taking back chemical packaging and destroying them.

2.9.7. Suggestions for improving the use of Pesticides in Kenya.

1.  The cost of pesticides is quite high in Kenya, and a product under
    international registered labels seems often higher priced in Kenya
    than on the international markets.

2.  Increase the capacity of PCPB to evaluate and approve of products in
    time.

3.  Training input to especially out-growers supplying the
    vegetable/fruit export trade.

4.  The introduction of special spraying teams/companies, which would do
    the pesticide application for the farmers.

5.  Monitoring the residue levels through an improved analysis capacity
    in export commodities.

6.  More specific research has to be done for introducing alternative
    methods of pest control, especially biological control or repellent
    plant function.

7.  There s a need for capacity building in the PCPB in the area of
    registering and evaluating biological treatments.

8.  Increased and accredited laboratory capacity for determining MRLs
    and with much more rapid results, which would require very
    sophisticated equipment to serve the industry. At present, most
    exporters rely on analysis results from the import country. The cost
    for local analysis is too high and not competitive, mainly due to
    poor equipment and lack of staff. This is an issue of great
    importance for the future of Kenya as a major horticulture exporting
    country.

# 2.9.8. Pesticide Residue Levels.

Exporters of fresh produce to the EU should be aware of changing
legislation in the application and permitted residue of pesticides. Two
initiatives are important here:

1\. The EC is reviewing the active ingredients authorized for sale in
the EU and intends to draw up a list of accepted substances by 2003. Any
active substance not defended, reviewed and authorized by 2003 will no
longer be permitted for use within the EU. Although overseas use cannot
be controlled, there will be "zero tolerance" of residues from
pesticides for which EU approvals has been revoked.

2\. Maximum Residue Levels (MRLs) are the permitted residue levels of
any pesticide on a fruit or vegetable product. Since 1976 a number of
directives have modified the legislation to incorporate a number of
crop/pesticide combinations. At present, over 17,000 MRLs have been set
for various commodities for 133 pesticides.

A list of MRLs already established can be found at

<http://europa.eu.int/comm/dg24/health/lqp/index_en.htm>

An ambitious project is underway that will set harmonized MRLs for every
combination of permitted pesticide and fruit or vegetable. The EU
horticultural research institutes have been actively assessing and
reviewing MRLs for crop/pesticide combinations applicable to EU crops.
If the experimental data required by the reviewers is not transmitted by
the due date, the MRL is set, by default, "at the limit of
determination". The consequences for exporters of tropical fruits are
serious. Analytical technology is now so advanced that "the limit of
determination" effectively sets the tolerance to zero residue, so unless
MRLs are established for each crop/pesticide combination, the MRL is set
at zero. In other words, unless an MRL is established for a
crop/pesticide combination, use of that pesticide, although permitted as
an active substance, must cease for that product since discovery of a
residue would prohibit import. COLEACP has prepared an action plan to
tackle these issues. Details can be found at
[www.coleacp.org](http://www.coleacp.org/).

**Part III. Recommendations for USAID.**

In the consultant's opinion, USAID should focus on the following issues,
in order to assist the industry and improve rural household income:

-   Marketing: There will be a need for marketing assistance, partly via
    the existing exporter organizations, KFC and FPEAK, but also based
    on individual company market efforts. The latter assistance should
    be limited to small- to medium sized export companies. This
    assistance should cover maximum 50% of the actual cost but could be
    lower and should be evaluated for each individual project and its
    importance for the whole sector as well as for the individual
    project.

-   Out-grower assistance. There is a need to re-organize the
    out-growers into groups of suitable entities to be interesting for
    the exporters in the future. There is need for both technical
    assistance, funding of inputs and funding of implements such as
    irrigation equipment and coolers. Funding of inputs should be
    determined as a cost per acre and with a maximum amount per group.
    Funding of implements should be set per acre for irrigation
    equipment and with a maximum amount per group. This value should be
    considered as the maximum amount for implements. The two funding
    issues are separate and should be treated as such, which means that
    the same group should be able to obtain funding for both issues.

-   Training of out-grower groups and small farmers in pest control. In
    previous training programs on pesticide use and --handling, emphasis
    was on safety and not on economical and environmental basis of the
    use of chemicals. It is quite clear that an improved knowledge of
    the use of pesticides and also on alternative methods would reduce
    the total use of chemicals significantly. Issues such as MRLs,
    correct measurement of chemicals, correct application, both from a
    timing point of view as well as coverage, delay before harvest etc.
    present a real problem to the MRLs issue and also to the over use of
    chemicals. The big producers/exporters handle these issues very
    well, but the small- to medium size exporters, without their own
    production and/or depending on brokers for their supply, may have a
    problem to address these problems properly.

-   The implementation of the CoP will require training of pre-auditing
    personnel, and there is, at present, no organization undertaking
    this cost. Whether the pre-auditing should be carried out by KFC and
    FPEAK or by an independent organization is not quite clear. However,
    in the consultant's opinion, the work should be carried out by the
    two exporter associations and at cost, and which is the opinion of
    the present management of both organizations. USAID should assist in
    financing the training of pre-auditors.

-   There is a need for an organization undertaking the requirements of
    external training of personnel in the private sector on issues
    required by the CoP and/or other label programs. In the consultant's
    opinion, KFC and FPEAK should carry out this training, since they
    would have the manpower and knowledge through their pre-auditing
    functions.

-   In the consultant's opinion, it would be more effective if KFC and
    FPEAK set up this organization as a joint venture and each
    organization could request services for pre-auditing and external
    training from the joint pool.

-   USAID would require an agency to handle the program. The agency
    should evaluate each project and also follow up on the development
    of each project. In matters of investment costs for inputs and
    implements and for marketing assistance, the agency should be
    qualified to judge the viability of the costs and follow up on the
    actual use of the funds. On matters of training and re-organizing of
    out-grower groups, the agency should be able to acquire technical
    assistance from the above resources with KFC and FPEAK. The
    disbursement of the funds could be done directly through the agency
    or via a local bank. The reimbursement of funds could be done
    through the exporter contracted to the out-growers to the agency or
    via a local bank directly from the out-growers. The reimbursement
    should, in any case be connected to the contracted exporter, in
    order to enable the agency to deduct the money from sales proceeds
    should the out-growers fail to repay their loans. Funding for inputs
    should be reimbursed within two years in full and should be
    renewable after that time should the need arise, provided that the
    out-grower has reimbursed the funding properly. Funding for sprayers
    end similar, should be reimbursed with 50% in three years and
    irrigation equipment with 50% in five years. 50% of that funding
    should be grants.

It is recommended that USAID initiate bi-annual meetings with the major
aid organizations working in the horticultural sector in Kenya in order
not to duplicate or compete with one another in the same area and to
make best use of the funds available. Such co-operation may also result
in organizations recommending each other to applicants if their own
resources are momentarily used up or because another organization is
better represented or more specialized in a specific area or field.
Other major organizations working in the horticultural sector in Kenya
are DFID (Development Fund for International Development), IFAD
(International Fund for Agricultural Development) and Care Kenya.

**App.1. Abbreviations used.**

ACP African Caribbean Pacific Countries

CIF Cost/insurance/freight, i.e. landed price inclusive of freight etc.

CoP Code of Practice

DFID Development Fund for Industrial Development

EU European Union

fob Free on Board, i.e. export price at the border of the exporting
country not inclusive of freight etc.

FPEAK Fresh Produce Exporters Association

HCDA Horticultural Crops Development Authority

KARI Kenya Agricultural Institute

KEBS Kenya Bureau of Standards

KEPHIS The Kenya Plant Health Inspectorate Service

KFC Kenya Flower Council

LDC Least Developed Countries

MRLs Maximum Residue Levels

PCPB Pest Control Products Board

WTO World Trade Organization

## App. 2. Companies and offices visited.

+-----------------------+-----------------------+-----------------------+
| Myner Exports Ltd.    | FPEAK, Fresh Produce  | Kenya Flower Council  |
|                       | Exporters Association |                       |
| Langata Shopping      | of Kenya              | P.O. Box 56325        |
| Centre                |                       |                       |
|                       | Kabarnet Road         | Muthangari Gardens in |
| Langata Road          |                       | Lavington             |
|                       | P.O. Box 40312        |                       |
| P.O. Box 11706        |                       | Nairobi, Kenya        |
|                       | Nairobi               |                       |
| Nairobi               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Mr David H Grey       | Everest Enterprises   | Waridi Ltd.           |
|                       | Ltd.                  |                       |
| P.O. Box 63141        |                       | P.O. Box 19294        |
|                       | Everest House         |                       |
| Nairobi               |                       | Nairobi               |
|                       | Outering Road,        |                       |
|                       | Embakasi              |                       |
|                       |                       |                       |
|                       | P:O: Box 52448        |                       |
|                       |                       |                       |
|                       | Nairobi               |                       |
+-----------------------+-----------------------+-----------------------+
| Export Promotion      | SDV TransAmi          | Baobab Farm Ltd.      |
| Council               |                       |                       |
|                       | Off Mombasa-Nairobi   | P.O. Box 81995        |
| Anniversary Tower     | Road                  |                       |
| 1-16                  |                       | Mombasa               |
|                       | P.O. Box 90263        |                       |
| University Way        |                       |                       |
|                       | ##### Mombasa         |                       |
| P.O. Box 40247        |                       |                       |
|                       |                       |                       |
| Nairobi               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| Vegpro (K) Ltd.       | Oserian Development   | Eustoma Kenya Ltd.    |
|                       | Ltd.                  |                       |
| P.O. Box 1442         |                       | P.O.Box 64327         |
|                       | Naivasha              |                       |
| Nairobi               |                       | Nairobi               |
|                       | P.O. Box 43340        |                       |
|                       |                       |                       |
|                       | Nairobi               |                       |
+-----------------------+-----------------------+-----------------------+
| Jakal Services Ltd.   | Siginon Freight Ltd.  | ECI                   |
|                       |                       |                       |
| P.O. Box 86874        | Off Mbaraki Road      | P.O. Box 409          |
|                       |                       |                       |
| Mombasa               | P.O.Box 99646         | Woodmead 2148         |
|                       |                       |                       |
|                       | Mombasa               | South Africa          |
+-----------------------+-----------------------+-----------------------+
| Sunripe (1976) Ltd.   | Sian Roses            | Homegrown             |
|                       |                       |                       |
| Cargo Village,        | P.O. Box 15139        | P.O. Box 10222        |
| J.K.I.A.              |                       |                       |
|                       | Nairobi               | Nairobi               |
| P.O. Box 41852        |                       |                       |
|                       |                       |                       |
| Nairobi               |                       |                       |
+-----------------------+-----------------------+-----------------------+
| East African Growers  | HCDA                  | Kenya Plant Health    |
| Ltd.                  |                       | Inspectorate Service, |
|                       | P.O. Box 42601        | Kephis.               |
| P.O. Box 49125        |                       |                       |
|                       | Nairobi               | P.O. Box 49592        |
| Nairobi               |                       |                       |
|                       |                       | Nairobi               |
+-----------------------+-----------------------+-----------------------+
| KN Airlink            | Tradewinds Express    |                       |
|                       | Ltd.                  |                       |
| P.O. Box 69979        |                       |                       |
|                       | P.O. Box 42474        |                       |
| Nairobi               |                       |                       |
|                       | Nairobi               |                       |
+-----------------------+-----------------------+-----------------------+
| Carzan Ltd.           | DFID                  | Care Kenya            |
|                       |                       |                       |
| P.O. Box 1060         | Upper Hill Road       | Mucai Road Off Ngong  |
|                       |                       | Road                  |
| Limuru                | P.O. Box 30465        |                       |
|                       |                       | P.O. Box 43864        |
| Kenya                 | Nairobi               |                       |
|                       |                       | Nairobi               |
|                       | Kenya                 |                       |
|                       |                       | Kenya                 |
+-----------------------+-----------------------+-----------------------+

## App. 3. EU Standards for Vegetables and Fruits.

Authorities including the OECD, FAO (Codex Alimentarius) and the EC have
issued a number of standards for horticultural produce. The EC standards
are issued as regulations and are enforceable by inspectors. In
practice, however, the importers apply specifications set by their
customers that are significantly more demanding than any of the
regulatory standards: the tolerances are more exacting and the range of
issues more extensive including control of production and post harvest
handling as well. In particular, the protocol for Good Agricultural
Practice (GAP) instigated by the major European retailers under the
EUREP scheme ([www.eurep.org](http://www.eurep.org/)) should be noted.

Nevertheless, the EC standards are detailed documents that are legally
enforceable. The standard for asparagus is given below as an indication
of the subject matter and terminology. Further details of all EC
standards are available on the web site of the European Commission and
can be found in the directory of community legislation in force at
<http://europa.eu.int/eur-lex/en/lif/reg/en_register_036054.html>

**Commission Regulation (EC) No 2377/1999 of 9 November 1999 laying down
the marketing standard for asparagus**

DEFINITION OF PRODUCE

This standard applies to shoots of the varieties (cultivars) grown from
*Asparagus officinalis* L., to be supplied fresh to the consumer,
asparagus for industrial processing being excluded.

Asparagus shoots are classified into four groups according to color:

1\. white asparagus;

> 2\. violet asparagus, having tips of a color between pink and violet
> or purple and a part of the shoot white;

3\. violet/green asparagus, part of which is of violet and green
coloring;

4\. green asparagus having tips and most of the shoot green.

> This standard does not apply to green and violet/green asparagus of
> less than 3-mm diameter and white and violet asparagus of less than
> 8-mm diameter, packed in uniform bundles or unit packages.

II\. PROVISIONS CONCERNING QUALITY

The purpose of this standard is to define the quality requirements for
asparagus after

preparation and packaging.

A. Minimum requirements

In all classes, subject to the special provisions for each class and the
tolerances allowed, the shoots must be:

\- intact,

\- sound; produce affected by rotting or deterioration such as to make
it unfit for

consumption is excluded,

> \- free from damage caused by unsuitable washing (the shoots may have
> been washed but not soaked),

\- clean, practically free of any visible foreign matter,

\- fresh in appearance and fresh-smelling,

\- practically free from pests,

\- practically free from damage caused by pests,

\- practically unbruised,

\- free of abnormal external moisture, i.e. adequately \"dried\" if they
have been

washed or cooled with cold water,

\- free of any foreign smell and/or taste.

The cut at the base of the shoots must be as clean as possible.

> In addition, shoots must be neither hollow, split, peeled or broken.
> Small cracks which have appeared after harvesting are, however,
> allowed, so long as they do not exceed the limits laid down in IV A.
> \"Quality tolerances\"

The condition of the asparagus must be such as to enable them:

\- to withstand transport and handling, and

\- to arrive in satisfactory condition at the place of destination.

B. Classification

Asparagus is graded into three classes defined below:

\(i\) \"Extra\" class

> Shoots in this class must be of superior quality, very well formed and
> practically straight. Having regard to the normal characteristics of
> the group to which they belong, their tips must be very compact.
>
> Only a few very slight traces of rust on the shoot, removable by
> normal peeling by the consumer, are allowed.
>
> For the \"white\" asparagus group, the tips and shoots must be white;
> only a faint pink tint is allowed on the shoots.

Green asparagus must be totally green.

No traces of woodiness are allowed for the shoots in this class.

> The cut at the base of the shoots must be as square as possible.
> However, to improve presentation when the asparagus is packed in
> bundles, those on the outside may be slightly beveled, so long as the
> beveling does not exceed 1 cm.

\(ii\) Class I

> Shoots in this class must be of good quality and well formed. They may
> be slightly curved. Having regard to the normal characteristics of the
> group to which they belong, their tips must be compact.
>
> Slight traces of rust removable by normal peeling by the consumer are
> allowed.
>
> For the \"white\" asparagus group, a faint pink tint may appear on the
> tips and the shoots.

Green asparagus must at least be green for 80 % of the length.

In the \"white\" asparagus group, no woody shoots are allowed. For the
other groups,

a trace of woodiness on the lower part is permissible, provided this
woodiness

disappears by normal peeling by the consumer.

The cut at the base of the shoots must be as square as possible.

\(iii\) Class II

> This class includes shoots that do not qualify for inclusion in the
> higher classes but satisfy the minimum requirements specified above.
>
> Compared with class I, shoots may be less well formed, more curved and
> having regard to the normal characteristics of the group to which they
> belong, their tips may be slightly open.

Traces of rust, removable by normal peeling by the consumer are allowed.

The tips of \"white\" asparagus may have a coloration including a green
tint.

The tips of \"violet\" asparagus may have a slight green tint.

Green asparagus must at least be green for 60 % of the length.

Shoots may be slightly woody.

The cut at the base of the shoots may be slightly oblique.

III\. PROVISIONS CONCERNING SIZING

Size is determined by the length and diameter of the shoot.

A. Sizing by length

The length of the shoots must be:

\- above 17 cm for long asparagus,

\- 12 to 17 cm for short asparagus,

\- above 12 cm for class II asparagus arranged, but not bundled in the
packages,

\- under 12 cm for asparagus tips.

> The maximum length allowed for white and violet asparagus is 22 cm,
> and for green and violet/green asparagus 27 cm.
>
> The maximum difference in length of shoots packed in firmly bound
> bundles must not exceed 5 cm.

B. Sizing by diameter

The diameter of shoots shall be measured at the mid-point of their
length.

IV\. PROVISIONS CONCERNING TOLERANCES

The following tolerances in respect of quality and size are allowed for
produce not

satisfying the requirements of the class indicated in each package.

A. Quality tolerances

\(i\) \"Extra\" class

5 % by number or weight of shoots not satisfying the requirements for
the class, but conforming to those of class I, or exceptionally, coming
within the tolerances for that class, or having slight unscarred cracks
appearing after harvesting.

\(ii\) Class I

10 % by number or weight of shoots not satisfying the requirements for
the class, but conforming to those of class II, or exceptionally, coming
within the tolerances for that class, or having slight unscarred cracks
appearing after harvesting.

\(iii\) Class II

10 % by number or weight of shoots satisfying neither the requirements
for the class, nor the minimum requirements, but excluding shoots
affected by rotting, or any other deterioration rendering them unfit for
consumption. In addition to the above 10 %, an additional tolerance of
10 % by number or weight can be allowed for hollow shoots or shoots
showing very slight cracks due to washing.

In no case can there be more than 15 % hollow shoots in each package or
bundle.

B. Size tolerances

For all classes: 10 % by number or weight of shoots not corresponding to
the size indicated and deviating from the specified limits of length
with a maximum deviation of 1 cm in length and 2 mm in diameter.

V. PROVISIONS CONCERNING PRESENTATION

A. Uniformity

The contents of each package, each unit package or each bundle in the
same package should be uniform, and comprise only asparagus of the same
origin, quality, color group and size (where sizing is compulsory).

Nevertheless, with respect to color, shoots of a different color group
may be allowed within the following limits:

> \- white asparagus: 10 % by number of weight of violet asparagus in
> class \"Extra\" and \"I\" and 15 % in class II,

\- violet, green and violet/green asparagus: 10 % by number or weight of
another

color group.

> In the case of class II, a mixture of white and violet asparagus is
> allowed provided it is appropriately marked.

The visible part of the contents of each package, unit package or bundle
must be

representative of the entire contents.

B. Presentation

The asparagus may be presented in the following ways:

\(i\) in bundles firmly bound

Shoots on the outside of each bundle must correspond in appearance and
diameter with the average of the whole bundle.

In \"Extra\" Class, asparagus shoots packed in bundles must be of the
same length.

Bundles must be arranged evenly in the package; each bundle may be
protected by paper.

In any one package, bundles must be of the same weight and length;

\(ii\) in unit packages, or arranged but not bundled in the package

C. Packaging

The asparagus must be packed in such a way as to ensure adequate
protection for the produce.

The materials used inside the package must be new, clean and of a
quality such as to avoid causing any external or internal damage to the
produce. The use of materials and particularly of paper or stamps
bearing trade specifications is allowed provided that the printing or
labeling has been done with a non-toxic ink or glue.

The package must be free from any foreign matter.

VI\. PROVISIONS CONCERNING MARKING

Each package must bear the following particulars in letters grouped on
the same side, legibly and indelibly marked and visible from the
outside.

A. Identification

Packer and/or dispatcher: Name and address or officially issued or
accepted code mark. However, in the case where a code mark is used, the
reference \"packer and/or dispatcher (or equivalent abbreviations)\" has
to be indicated in close connection with the code mark.

B. Nature of produce

\"Asparagus\" followed by the indication \"white\", \"green\",
\"violet\", or \"violet/green\" if the contents of the package are not
visible from the outside and, where appropriate, the indication
\"short\", \"tips\" or \"mixture white and violet\".

C. Origin of produce

Country of origin and, optionally, district where grown, or national,
regional or local place name.

D. Commercial specifications

\- Class,

\- Size expressed:

\(a\) for asparagus subject to the uniformity rules, as minimum and
maximum

diameters;

\(b\) for asparagus not subject to the uniformity rules, as minimum
diameter followed by maximum diameter or the words \"and over\",

\- For asparagus packed in bundles or unit packages, the number of
bundles or the

number of unit packages.

E. Official control mark (optional)

# PHYTOSANITARY REGULATIONS

**Council Directive 2000/29/EC regulates the phytosanitary control of
the import of fresh fruit and vegetables from outside of the European
Union, aiming to prevent the spread of damaging diseases and pests.**

The phytosanitary regulations of the European Union apply to only a few
products imported from outside the EU. The regulations are pest and
country specific. For the most part the regulations apply to the import
of products that are also cultivated in Europe, although some tropical
fruits are also included as hosts to quarantine pests. In particular,
the import of the following products requires a phytosanitary
certificate and treatment to safeguard against the import of quarantine
pests and pathogens:

  ----------------- ------------------------------------------------------
  **Genus**         **Examples**

  Annona            Cherimoya, custard apple, soursop, sweetsop, atemoya
                    etc

  Citrofortunella   Limequat

  Citrus            Orange, lemon, lime, grapefruit, easy peeler

  Cydonia           Quince

  Diospyros         Persimmon, black sapote

  Fortunella        Kumquat

  Malus             Apple

  Mangifera         Mango

  Passiflora        Passionfruit, granadilla

  Prunus            Plum, greengage, damson, apricot, peach, nectarine,
                    cherry

  Psidium           Guava, guajaba, goyavier

  Pyrus             Pear

  Ribes             Redcurrant, whitecurrant, gooseberry, blackcurrant

  Syzygium          Roseapple, malabar plum, Malay apple

  Vaccinium         Blueberries, cranberries, cowberries etc
  ----------------- ------------------------------------------------------

The text of the Directive can be viewed at

<http://europa.eu.int/eur-lex/en/lif/dat/2000/en_300L0029.html>

**App.4. EU Standards for Floricultural Products.**

**Common Quality Standards for Cut Flowers.**

I. Definition of produce.

These standards shall apply to fresh cut flowers and flower buds of a
kind suitable for bouquets or for ornamental purposes, falling within
subheading No. 06.03 A of the Common Customs Tariff.

II\. Quality Requirements.

A. Minimum Requirements.

Produce must have been carefully cut or picked, according to the
species, and have reached an appropriate stage of growth.

B. Classification.

\(i\) Class 1.

Produce in this category must be of good quality. It must have the
characteristics of the species, and where appropriate, of the variety
(cultivar).

All parts of the cut flower must be:

-   Whole

-   Fresh

-   Free of animal or vegetable parasites and from damage caused by such

-   Free of residues of pesticides and other extraneous matter affecting
    the appearance

-   Unbruised

-   Free of defects of development; for standard carnations a split
    calyx is not considered a defect of development.

However, in respect of Standard (American) carnations flowers with a
split calyx must be ringed, put up separately in uniform lots and the
packaging marked accordingly.

The stems must, according to the species and variety (cultivar), be
rigid and strong enough to support the flower(s).

\(ii\) Class 2

This class should include all produce which do not meet all the
requirements of Class 1.

All parts of the cut flower must be:

-   Whole

-   Fresh

-   Free of animal parasites

The flowers may, however, have the following defects:

-   Slight malformation

-   Slight bruising

-   Slight damage caused by disease or by animal pests

-   Weaker, less rigid stems

-   Small marks caused by treatment with pesticides

The permitted defects must not impair the keeping quality, appearance or
utility of the products.

C. Class Extra

Produce which qualifies for Class 1 without the aid of any quality
tolerance may be marked 'Extra'. However, this classification may not be
used for Standard (American) carnations with split calyxes.

III\. Special Provisions.

The special provisions for certain types of flowers set out in Annex 1A
shall override the provisions of this annex (not reproduced here).

IV\. Sizing.

For cut flowers, sizing must comply at least with the following scale:

Code Length

1.  Less than 5 cm or flowers marketed without stems

2.  5-10 cm

3.  10-15 cm

4.  15-20 cm

5.  20-30 cm

6.  30-40 cm

7.  40-50 cm

8.  50-60 cm

9.  60-80 cm

10. 80-100 cm

11. 100-120 cm

12. More than 120 cm

These lengths include the flower head.

The difference per unit of presentation (bunch, bouquet, box and the
like) between the maximum and minimum lengths of the flowers in the unit
may not exceed:

-   2,5 cm for flowers in codes 15 and below.

-   5,0 cm for flowers in codes 20 (inclusive) and 50 (inclusive).

-   10,0 cm for flowers in codes 60 and above.

This difference may be doubled for flowers presented in a fan shape. For
chrysanthemums with large flowers presented in fan shape, this
difference may go up to 20 cm for flowers in codes 20-50 (inclusive).

The size scales and the uniform lengths are not applicable to mimosa.

The minimum length for branches of mimosa shall be fixed at 20 cm.
However, bundles and bouquets composed exclusively of small sprigs of a
length less than 20 cm may be permitted subject to the words \'short
stem\' or an equivalent being marked on the packages.

V. Quality tolerances.

Quality tolerances should be permitted in each unit of presentation as
follows:

\(i\) Class 1.

Five per cent of the cut flowers may have slight defects, on condition
that the uniformity of the flowers in a unit of presentation is not
affected.

##  {#section-4}

## (ii) Class 2.

##  {#section-5}

## Ten per cent of the cut flowers may vary from the requirements of the class. Half of this percentage may have been attacked by parasites of animal or vegetable origin.

##  {#section-6}

## The defects in question must not impair the utility of the products.

##  {#section-7}

## VI. Packaging and presentation.

##  {#section-8}

A. Presentation (Regulation EEC No 802/71)

##  {#section-9}

## A unit of presentation (bunch, bouquet, box and the like) must consist of 5, 10 or a multiple of 10 pieces.

However, this rule does not apply to:

(a) Flowers normally sold singly

(b) Flowers normally sod by weight

(c) Flowers for which the seller and the buyer agree expressively to
    derogate from the provisions concerning the number of flowers in a
    unit of presentation. This derogation is admissibly solely for
    transactions outside wholesale markets on conditions that

-   The goods are subject of a direct sale, based on a fixed selling
    price per unit of presentation, at wholesale level to a retailer or
    a person acting on behalf of a retailer.

-   The goods are accompanied by a bill, delivery note or similar
    document showing the above-mentioned selling price.

-   The unit of presentation in the packaging required by the buyer for
    the ultimate purchaser. This packaging must be such as to permit
    identification of the goods.

B. Uniformity.

Each unit of presentation (bunch, bouquet, box and the like) must
contain flowers of the same genus, species or variety (cultivar), and of
the same quality class, and must have reached the same stage of
development.

Mixtures of flowers or mixtures of flowers with foliage of different
genus, species or variety (cultivars) are, however, permitted so long as
the products of the same quality calls are used and that they are
appropriately marked.

C. Packaging.

Packaging must protect the produce adequately. Paper or other materials
in direct contact with the cut flowers must be new.

VII\. Marking.

The following particulars must accompany the goods:

A. Identification.

##  {#section-10}

## Dispatcher or Packer; Name and address or code mark.

##  {#section-11}

## B. Nature of produce.

##  {#section-12}

## Genus

-   Species or variety (cultivar) or color of flowers

-   Where appropriate, the word 'mixture' (or equivalent term)

C. Origin of Produce (optional).

## Region of origin, or national, regional or local names.

##  {#section-13}

## D. Commercial specifications.

##  {#section-14}

## Class

-   Size (length code) or minimum and maximum lengths (optional).

-   Number or net weight.

##  {#section-15}

E. Official control mark (optional).

##  {#section-16}

F. Presentation (Regulation EEC No 802/71)

If the number of flowers per unit of presentation does not correspond to
the provisions of section VIA, packages must be marked to show the exact
composition of the units of presentation contained therein.

**App. 5. Vegetable and Fruit Market Situation for Selected Species.**

## FRENCH & CLIMBING BEANS

There is a strong demand in Europe for imported fresh beans of the
species *Phaseolus vulgaris*. While many other species of *Phaseolus*
and *Vigna* are grown around the World for consumption both fresh and
dried, varieties of *P.vulgaris* have become the major airfreighted
fresh vegetable into the EU.

A number of varieties of *P.vulgaris* are grown and many different names
are applied, but the most important to East Africa are the French beans
(also referred to as string, green, filet, needle, haricot, Kenya, snap)
and the climbing beans (also called Helda). They are widely grown and
can be cultivated in temperate, sub-tropical and tropical climates over
a range of territory.

The trade distinguishes three types of French bean:

-   Bobby beans are typically 8-12mm in diameter, 12-116cm long

-   Fine beans are 6.5-9mm diameter, 10-13cm long

-   Extra fine beans are 6-7.5mm diameter, 8-12cm long

European production is limited by the cost of harvesting. Climbing beans
are produced in Europe, and southern Europe, notably Italy and Spain,
also produces some of the large grades of French beans, i.e. the bobby
beans, during the summer months.

Trade statistics do not distinguish the different types of beans. In
fact, all the fresh imported beans of species of *Phaseolus* and *Vigna*
are grouped together under one code. Over 96% of imports arrive from
Africa and most of these are either French or climbing beans.

Figure 1 shows the imports of fresh beans in the EU from non-EU sources.
It does not include trade within the EU or re-exports since it is not
possible to separate out locally produced beans from imported ones.

Figure 1 Bean Imports to the EU

![](media/image1.wmf){width="4.4in"
height="2.9972222222222222in"}Source: EUROSTAT

-   Figure 1 shows the rapid development of the EU market since the
    early 1990s. Total EU imports of beans (all fresh beans from all
    origins) reached 76,000 tons by 1999.

-   France is the largest importer with over 23,000 tons entering France
    during 1999. A large proportion of these imports derives from
    Morocco and may have been re-exported subsequently, but there is a
    strong demanding France particularly for the extra-fine grades.

-   The UK is the second largest importer, with arrivals of 21,000 tons
    in 1999. The bobby beans and fine grades are more important in this
    market.

-   Imports to the Netherlands have not grown as much as those to France
    or the UK. Imports to the Netherlands exceeded 17,000 tons in 1999.
    Much of this is redistributed in northern Europe.

![](media/image2.wmf){width="4.45in" height="2.917361111111111in"}Figure
2 Origin of EU Imports

Source: EUROSTAT

-   Three suppliers, Kenya, Egypt and Morocco, now provide 73% of the EU
    imports of beans.

-   Kenyan supplies have grown by 50% since 1990 to over 21,000 tons
    in 1999. Kenya is the leading supplier to the EU.

-   The EU imports of fresh beans was worth some US \$133mn (CIF) in
    1999 of which imports from Kenya were valued at over US \$57mn
    (CIF).

Figure 3 Seasonality of EU Bean Imports

![](media/image3.wmf){width="4.5in"
height="3.1493055555555554in"}Source: EUROSTAT

-   Kenya supplies beans to Europe throughout the year. Quarterly
    exports are relatively even but there is a marked dip in quarter 3
    (Jul-Sep). At this time Europe has plentiful supplies of its own
    vegetables and total imports from outside the EU fall dramatically.

-   Quarters 1 and 2 are the most important time for imports.

Figure 4 destination of Bean Imports from Kenya

![](media/image4.wmf){width="4.5in" height="3.2041666666666666in"}

Source: EUROSTAT

-   The UK has become the major market for Kenyan bean exports. In the
    early 1990s France led the imports from Kenya, but in 1999 almost
    60% of Kenya beans were dispatched to the UK.

-   24% of bean shipments from Kenya are sent to France. Exports to
    France showed a steady decline during the 1990s from 6,760 tons in
    1992 to 3,613 in 1997 while total French imports remained broadly
    static. Subsequently, a growth in French imports during 1998 and
    1999 has been reflected in increased imports from Kenya.

![](media/image5.wmf){width="4.25in" height="3.009027777777778in"}Figure
5 Unit Import Value of Beans

Source: EUROSTAT

-   The values in Fig 5 are calculated from the import statistics. They
    are not real prices and are subject to a number of potential errors,
    but they do show the trends and there is a reasonable accord with
    reported market prices.

-   The highest unit values are achieved by Kenyan produce. Values from
    Senegal and Morocco fell significantly during the late 1990s. Kenyan
    produce maintains value by the strength of its marketing and the
    quality of its produce.

-   Values for Egyptian exports are low, as these are mostly the lower
    priced climbing beans.

## MANGETOUT

Mangetout here refers to all the edible-podded peas, including the snow
peas and the sugar snaps. Snowpeas are harvested before the peas begin
to swell, while the pods are still flat. In sugar snaps the pods are
full but the peas are still tender.

Although mangetout are quite popular garden crops in Europe, the
commercial production is limited by cost since the pods must be
harvested by hand.

The trade statistics of Europe do not distinguish the mangetout from
other, shelling, peas but it can be assumed that all long distance
imports to the EU are the high value mangetout.

Fig 1 shows the imports to the EU from non-EU sources. It does not
include trade within the EU or re-exports since it is not possible to
separate out the shelling peas from the mangetout.

![](media/image6.wmf){width="5.260416666666667in"
height="3.5833333333333335in"}Fig 1 Mangetout Imports to the EU

Source: EUROSTAT

-   Figure 1 shows the rapid development of EU imports of mangetout in
    the late 1990s. Total EU imports of peas reached 17,000 tons
    by 1999. This figure includes a small quantity of shelling peas from
    other European sources.

-   The UK is by far the largest importer of mangetout, importing in
    excess of 11,000 tons in 1999.

-   The Netherlands is the next largest importer taking 3,000 tons
    in 1999. Mostly these imports are distributed to other EU member
    states.

![](media/image7.wmf){width="4.1in" height="2.6881944444444446in"}Figure
2 Origin of EU Imports

Source: EUROSTAT

-   Four suppliers, Kenya, Zimbabwe, Guatemala and Zambia, now provide
    over 86% of the peas imported to the EU.

-   Kenyan exports have grown rapidly from 1992 to dominate the supplies
    to Europe. Imports from Kenya reached almost 8,000 tons in 1999.

-   The EU imports of peas were worth US \$52mn (CIF) in 1999. Of this,
    the imports from Kenya were valued at over US \$24mn (CIF).

Figure 3 Seasonality of EU Pea Imports.

![](media/image8.wmf){width="5.34375in" height="3.7395833333333335in"}
Source: EUROSTAT

-   Kenya supplies the EU market throughout the year. It is the only
    major supplier to do so.

-   Zambia and Zimbabwe do not supply during Quarter 1.

-   Guatemala does not supply during Quarter 3.

![](media/image9.wmf){width="4.5in" height="3.2041666666666666in"}Figure
4 Destination of Mangetout Imports from Kenya

Source: EUROSTAT

-   The UK is the principal destination for Kenyan exports of mangetout.
    There appears to have been little marketing outside of the UK.

![](media/image10.wmf){width="4.4in"
height="3.1152777777777776in"}Figure 5 Unit Import Value of Mangetout

Source: EUROSTAT

-   The values in Fig % are calculated from the import statistics. They
    are not real prices and are subject to a number of potential errors,
    but they do show the trends and there is a reasonable accord with
    reported market prices.

-   The highest unit values are achieved by Zimbabwean produce.

-   Kenyan mangetout values have increased steadily since 1993.

-   Zimbabwean and Zambian values have declined since 1996 while Kenyan
    and Guatemalan values have risen.

## ASIAN VEGETABLES

A large number of products, typically ingredients in Asian cuisine, are
grouped together here.

The major products are:

#### Gourds and cucurbits

Karela

Dudhi

Tinda

Tindori

Turia

#### Aubergines

#### Okra

#### Legumes

Chora

Gwar

Valore

Yardlong

#### Roots

Sweet Potatoes

Taro

Cassava

Yam

There are also a number of leaf vegetables, which would be included
here, but they are mostly temperate or Mediterranean crops and there are
no opportunities for long distance supply.

The trade statistics do not disaggregate these products and they are
included either as 'Other Legumes' or as 'Other Vegetables'.

The demand for these products has been created in Europe by the
immigrant populations and is therefore focussed on markets, such as the
UK, where they are most numerous. There has been some crossover into
mainstream purchasing through the interest in novel flavors and ethnic
cooking. Mostly however this is restricted to the catering trade and the
supermarkets carry only limited supplies.

These will remain specialist products, focussed on the UK. Their value
puts them just in the range of the lower cost airfreight opportunities,
and West African suppliers provide most of the EU imports. Kenya has
some share of this market. The roots and tubers are sea-freight items
supplied either from West Africa or the Caribbean.

## CAPSICUMS

A wide variety of capsicum types are grown around the world. Generally,
they can be classified by end use into a) sweet peppers for flavor,
salad use and decoration b) paprika for coloring and c) chilies for
heat. However, the distinction gets somewhat blurred by the types which
fulfill more than one function. The capsicum trade described here refers
mostly to the trade in fresh chilies, but specifically in the product
for fresh consumption rather than in the product destined for processing
and oil extraction. It does not include the sweet peppers that are a
major salad crop in Europe nor the paprika used as a colorant. In terms
of trade classification for customs purposes these are "other
capsicums".

Among the fresh chilies there are many different types and cultivars:
Anaheim, Jalapeno, Fresno, Habanero, Serrano, Bird's Eye, Scotch Bonnet
and Cayenne show a range of heat ratings, color and pod shape and size.
The demand for each is quite specific and often associated with the
traditional cooking of a particular region of the World. The import
requirement in the EU is therefore quite particular about the cultivar
required.

Capsicum imports to Europe grew strongly during the 1990s to exceed
21,000 tons by 1999. Figure 1 shows the progress of imports to the EU
from non-EU sources. It does not include the trade within the EU or
re-exports.

Figure 1 Capsicum Imports to the EU

![](media/image11.wmf){width="5.260416666666667in"
height="3.5833333333333335in"}Source: EUROSTAT

-   Germany is the largest importer of capsicums.

-   The total EU importers were raised significantly by the accession of
    Austria to the EU in 1996. Austria is a major importer.

-   The UK has a significant demand, which fell to 4,200 tons in 1999
    from 5,400 tons in 1998.

Figure 2 Origin of EU Imports

![](media/image12.wmf){width="4.55in" height="2.982638888888889in"}

Source: EUROSTAT

-   The principal supplier to Europe of 'other capsicums' is Turkey.
    These are Mediterranean style long peppers with some heat. They are
    particularly popular in Austria and Germany.

-   Kenya supplied almost 1,300 tons of capsicums in 1999. The exports
    have not grown significantly since the mid 1990s.

-   ![](media/image13.wmf){width="4.55in"
    height="3.1840277777777777in"}The total EU import trade of capsicums
    was valued at US \$27.6mn (CIF ) in 1999 of which Kenya's exports
    contributed US \$3.2mn (CIF).

Figure 3 Seasonality of EU Capsicum Imports

Source: EUROSTAT

-   Turkey and Kenya supply the EU throughout the year.

Figure 4 Destination of Imports from Kenya

![](media/image14.wmf){width="4.6in" height="3.2756944444444445in"}

Source: EUROSTAT

-   Almost all exports of capsicums from Kenya to the EU are sent to the
    UK.

![](media/image15.wmf){width="4.45in"
height="3.1506944444444445in"}Figure 5 Unit Import Value of Capsicums

Source: EUROSTAT

-   The values in Figure 6 are calculated from import statistics. They
    are not real prices and are subject to a number of potential errors,
    but they do show the trends and there is a reasonable accord with
    reported market prices.

-   The fall in prices during the 1990s is clear. Kenya achieves a
    relatively high value.

## AVOCADOS

Imports of avocados into the EU in 1999 amounted to some 89,000 tons,
which was not significantly different from 10 years previously. In the
mid 1990s imports rose to 110,000 tons but have since fallen back again.
The downward trend will probably continue as European production from
southern member states gradually expands. While the import of avocados
into Europe has declined trade within the EU has increased from 45,000
tons in 1990 to 96,000 tons in 1999.

The principal varieties of interest to the European markets are Hass,
Fuerte and Ettinger. Hass is particularly favored in the UK. France
accepts both Hass and Fuerte, while the green varieties, Ettinger and
Fuerte, are preferred in Germany.

Figure 1 shows the imports to the EU from non-EU sources. It does not
include the trade within the EU or re-exports.

![](media/image16.wmf){width="4.65in"
height="3.167361111111111in"}Figure 1 Avocado Imports to the EU

Source: EUROSTAT

-   Figure 1 shows the recent decline of the imports of avocados into
    Europe.

-   France is by the far the largest importer and consumer of avocados.
    The next largest importers are the Benelux countries collectively.
    Imports here are distributed across northern Europe.

-   The UK imports around 11,000 tons of avocados from outside the EU.
    Overall the UK market is growing slowly with total imports in 1999
    of some 18,000 tons.

![](media/image17.wmf){width="4.55in"
height="2.982638888888889in"}Figure 2 Origin of EU Imports

Source: EUROSTAT

-   The principal suppliers of avocados to Europe are South Africa,
    Israel and Mexico. South African exports have shown the best growth
    with exports increasing by 50% over the 1990s. Although Israeli
    exports grew during the 1990s they have since fallen back.

-   Kenya expanded exports with the development of sea freighting and a
    consequent reduction in costs.

-   The EU imports of avocados were worth US \$138mn (CIF) in 1999. Of
    this, imports from Kenya were valued at US \$13.7mn (CIF).

Figure 3 Seasonality of EU Avocado Imports

![](media/image18.wmf){width="4.35in" height="3.04375in"}Source:
EUROSTAT

-   Kenya supplies mainly into quarter 2 while South Africa has a strong
    market share in quarters 2 and 3. Mexico and Israel supply quarters
    1 and 4.

-   Production in Spain has increased during the 1990s and expanding
    availability in quarters 4 and 1. This has impacted directly on the
    imports from outside the EU as shown in figure 4.

![](media/image19.wmf){width="4.35in"
height="3.046527777777778in"}Figure 4 Quarterly Imports from non-EU
origins.

Source: EUROSTAT

-   The falling imports in quarter 1 are shown here as EU output
    increases. Quarter 4 also shows a downward trend, although this
    reversed in 1999.

-   The overall decline in avocado imports is largely due to the falls
    in quarters 1 and 4. Quarters 2 and 3 imports have been more stable.

-   The implications for Mexico and Israel, exporting at the same time
    as the southern European harvest is serious. In the future, the
    import requirement will become more focussed on quarters 2 and 3.
    Mexico is developing a year round supply pattern.

![](media/image20.wmf){width="4.75in"
height="3.3819444444444446in"}Figure 5 Destination of Avocado Imports
from Kenya

Source: EUROSTAT

-   Most avocado exports from Kenya are shipped to France or the
    Netherlands.

![](media/image21.wmf){width="4.6in"
height="3.2569444444444446in"}Figure 6 Unit Import Value of Avocados

Source: EUROSTAT

-   The values in Figure 6 are calculated from import statistics. They
    are not real prices and are subject to a number of potential errors,
    but they do show the trends and there is a reasonable accord with
    reported market prices.

-   The erosion of prices in the 1990s is clear. All four major origins
    suffered a decline in import values.