Ethiopia is being hit hard by a dramatic slump in demand for flowers as the global economic crisis forces consumers to curb spending on perceived luxuries.By Aida
n Jones | Contributor to The Christian Science Monitor
from the May 10, 2009 edition
Sabeta, Ethiopia - A local pop song trills out from the radio, filling the cavernous packing hall at the Ethio Highland Flora farm in Sabeta, a 45-minute drive from Ethiopia's capital, Addis Ababa.
Dozens of workers tackle a seemingly endless stack of exotically named roses, separating the short stems and rotten petals from the bright Valentino, Duo Unique, Wild Calypso, and Alyssa blooms destined for Europe.
Most of the farm's 400 employees earn less than a dollar a day, but it is a steady wage in one of the world's poorest nations where 80 percent of the population lives off the land.
This year the 20-hectare farm, a sprawl of irrigated and temperature-controlled greenhouses, is set to beat its target for growing, cutting, and exporting 21 million stems.
That is a 15 percent rise on its contribution to the 1.5 billion stems exported by Ethiopia in 2008, earning an estimated $175 million for the industry.
But the positive figures belie a dramatic slump in demand for flowers as the global economic crisis forces European consumers, Ethiopia's main market, to curb spending on perceived luxuries. It's a tough blow for Ethiopia, where flower power was touted to supplant coffee as Ethiopia's main export and highest earner of foreign exchange.
Many analysts now fear that, without swift assistance, Ethiopia's nascent flower industry will wilt in the heat of global recession.
"We're not talking about falling profit this year, just survival," says farm manager Emebet Tesfaye. "Even Valentine's Day was down from last year. The problem is Europeans don't want flowers right now. The buyers in Amsterdam control the market, and they are setting prices very low – there is no minimum price for our stems. Every loss is on the growers' side: transport, water, electricity, wages, and even fees to the rose breeders."
Sales down on Valentine's Day and 'Mothering Sunday'
Sales forecasts are traditionally pegged to an expected bonanza at Valentine's Day and Mothering Sunday (Europe's version of Mother's Day on March 22). This year Ethio Highland Flora Farm sold 20 to 30 percent fewer flowers, punching a hole in expected revenues and compounding the pain caused by low stem prices.
Prices per stem are now 10 cents (euro) or less, down 15-20 percent from last year.
On bad days, the flower auction houses of Amsterdam – where the majority of stems from Kenya, Ethiopia, Namibia, and Tanzania vie for buyers – have reported dips of up to 40 percent.
Four farms have already filed for bankruptcy – out of 85 – while at least half of the remainder are operating at a loss.
Oh, what a difference half a year makes
Just six months ago, things looked very different.
Foreign and local investors piled into the sector lured by predictions of revenues of $1 billion within five years, tax incentives, and a surfeit of cheap labor.
One thousand hectares of land went under cultivation, more than 50,000 people were directly employed on the farms, with tens of thousands earning a crust along the supply chain, as Ethiopia threatened the regional primacy of Kenya's longer-established floriculture.
Keen to banish Ethiopia's famine-ridden reputation, Prime Minister Meles Zenawi played his part, hailing flowers as the flagship of an increasingly buoyant economy – the government says that in 2008 gross domestic product grew at just under 10 percent.
And it is to him that the flower farmers are now turning, calling for a reprieve from the banks which are nervously eyeing their loans, and the freight firms and airlines, who currently charge $1.85 per kilo of cargo to fly the flowers to Europe.
"This is a problem caused by the developed world, but we are paying for it in Africa," says Tsegaye Abebe, president of the Ethiopian Horticulture Producers and Exporters Association (EHPEA). "We can tolerate low market prices for a time, but if prices continue like this for many more months our industry will be under serious threat. It is time for all the businesses with a stake in the sector to help each other out."
Despite a recent pledge to support the industry "through thick and thin," Meles – as he is widely known – can not hold back the confluence of global and local forces sweeping across the Ethiopian flower business.
Too much power in hands of European middlemen?
It is a tough trade; cheap and high quality stems pour into the market from across Africa and Latin America, putting European buyers in the driving seat.
Prices are set low in the knowledge there is a surplus of supply from desperate growers, and farm owners have yet to build the capacity to trade directly with supermarkets – the major sale point for flowers.
As a newcomer to the market, Ethiopia does not benefit from the same economies of scale as neighboring Kenya, raising fears it is particularly vulnerable to the price shock.
Mr. Tsegaye believes survival can be secured through a diversification of products to include herbs, fruits, and vegetables, and markets to reach Japan, Middle East, Russia, and the United States. "But that depends on the short and medium term being kind to us," he says.
The social impact of decline will also be keenly felt in Sabeta – where small holding farmers were convinced to sell their land to flower farms by the promise of big rewards to come.
The majority of flower workers are women, and the recession threatens to stymie plans to empower them with minimum labor standards and unions.
It has deflated Emebet Tesfaye's hopes. She may soon be left with the awkward choice of dumping some of the 70,000 flowers a day produced at Ethio Highland or flooding the market with roses no one is buying.
A recent visit to a Dutch auction house intensified her gloom as she witnessed the pecking order of a market which roots flower-producing nations to the bottom.
"Each morning the buyers look at their computer screens and click one button that determines the life of all these people," she explains gesturing to the female packers. "We have no power."
The Christian Science Monitor