A government policy that favours struggling national carrier Kenya Airways (KQ) against its cheaper competitors to transport fresh produce to other countries continues to hurt other exporters.
They have complained about the lack of capacity on KQ to ferry their produce and the airline’s expensive airfreight charges. They now fear they could be forced in the coming days to throw away half of their produce due to the logistical challenges.
Farmers lament that about a quarter of their produce is rotting on farms because of KQ’s inability to ferry goods per local demand, with the flower industry saying it is losing Sh4 billion monthly, losses farmers fear could double in the coming days if there is no intervention.
“We are falling short of 1,500 tonnes weekly due to lack of cargo space, since flower growers are harvesting 5,000 tonnes weekly and only 3,500 tonnes is being exported. The tonnage being exported weekly is a detriment to the vibrant sector,” said Kenya Flower Council CEO Clement Tulezi.
KQ yesterday told the Nation it had ferried about 25,000 tonnes of fresh produce (flowers, fruits and vegetables combined) this year, indicating that its capacity over the 11 months falls short by more than half of the current 5,000-tonne weekly demand.
The 25,000 tonnes also represents an average of 2,272 tonnes every month and 568 tonnes weekly over the 11 months, a figure almost nine times lower compared with current demand.
While exporters also complain that KQ has increased airfreight charges to transport produce from Nairobi to Europe by 73 per cent from $1.5 to $2.6 per kilo (Sh168 to Sh291), raising their costs and reducing their profit margins, the airline said it had only increased freight rates by 15 per cent.
“However it is important to highlight that whereas fuel prices have nearly doubled versus baseline October 2020, freight rates have only increased by a 15 per cent average. KQ holds that the freight rates offered in the market are competitive,” Mr Peter Musola, KQ cargo commercial manager, told the Nation yesterday.
Fresh produce and flower exporters are facing the logistical problems at the worst of times - peak season for the sector, with huge demand in Europe and other overseas markets.
The horticulture sector is one of Kenya’s biggest foreign exchange earners, bringing in over Sh600 billion over the past five years.
Last year, Kenya exported 592,068 tonnes of horticulture products, earning Sh135.9 billion - the highest returns on exports – becoming one of the main sectors that offered a lifeline to the economy as others bled due to the impact of the Covid-19 pandemic.
Players in the sector, however, fear that logistical issues are already limiting the sector from operating to its full potential and farmers and exporters are already hurting.
“We have been engaging with multiple stakeholders on the current issues but we are still stuck with no respite in sight. The sector is highly dependent on freight, with cargo capacity having greatly reduced,” Mr Tulezi said.
KQ, which has struggled with inadequate cargo capacity, is unable to satisfy demand from the local fresh produce sector, but the government is reluctant to allow other carriers - some of which the players say are cheaper than the national carrier- to enter the fray.
“Yes, we are in the process of increasing our capacity and we are in the process of getting a freighter to enter into service in early 2022, testament to growing cargo capacity towards the derisking goal,” Mr Musola said.
And as the airline crawls to “progressively” grow its cargo operations to 20 percent of all the operations, it is farmers and exporters who are suffering.
In desperation, exporters have in recent weeks been seeking ways to ferry produce to outside markets by sea.
“The port of Mombasa is a crucial landing point for goods in Kenya, but while controlled atmosphere containers have made it possible to export fruit and flowers to new markets, the use of sea freight is underdeveloped,” the Kenya Flower Council (KFC) said as it championed the use of sea freight.
KQ has not responded officially to a request from exporters to be allocated four wide-body cargo planes that could ensure efficiency.
“Besides the passenger flights, if you could give us four cargo flights we can sign an MoU on how much we should be supplying to you. We have safe produce that is available and we are willing and ready to pay the levies,” said Mr Okisegere Ojepat, CEO of the Fresh Produce Consortium of Kenya.
The airline yesterday told the Nation that the repurposing of two Dreamliner aircraft was part of those plans, even as it indicated that it would take time to acquire the aircraft.
“This process takes time. To address the increased capacity, we repurposed two Dreamliners and we are adding a third freighter coming into operation in early 2022,” the airline said.
The repurposed Dreamliners are lifting an average of 3,000 tonnes of cargo monthly, a third of which consists of horticultural products bound for the UK market.
On October 27, KFC leadership met Transport CS James Macharia seeking his intervention on capacity and cost challenges to lift their produce, but the association says nothing positive had materialised.
“KFC stressed that the challenge has persisted with shortfalls in capacity of 1,500 tonnes per week leading to 25 percent of produce being discarded. This has a huge impact on Kenya's competitiveness in international trade which (contributes) to the country's economy,” the association said at the time.
Since then, exporters say, at least 6,000 tonnes of produce has gone to waste.
On Thursday, Mr Macharia told Business Daily that the government this week approved two airlines to ferry fresh produce from Nairobi. But he indicated that Ethiopian Airlines would not get any more capacity, a retaliatory move against Ethiopia, which refused to allow KQ to operate direct flights to Europe from Addis Ababa.
“We met with the flower lobby and KQ and agreed that the national carrier will commit to increase capacity, which they have confirmed in writing,” Mr Macharia said.
The CS instead asked exporters to recommend other carriers to boost airfreight capacity.
The sector is calling for an instant solution, as KFC says flower producers are already panicking, fearing that losses will increase to 50 per cent of produce in the coming days.
“Concerned growers have been calling my office seeking solutions but I have none. I have been engaged in high-level consultation, without a breakthrough,” Mr Tulezi said.
The situation has hit small-scale exporters hardest, because with high freight charges, exporters will need to transport in high volumes to make good profits.