Fresh produce exporters are owed more than Sh15 billion in arrears and tax refunds by the government, according to the Kenya Flower Council (KFC).
This, it says has is hurting growth prospects in the sector that suffered during the Covid-19 pandemic.
KFC Chief Executive Clement Tulezi, says that the last time the government granted any substantial tax refund was in 2021.
“It’s been coming in but very small, like for a grower whom you owe Sh2 billion if you give him ten million then it’s nothing [because] it will take you 10 years to offset the balance and as you are doing that more is accumulating,” said Tulezi.
The council also decried the recent move by the Water Resources Authority (WASREB) to implemented new water levies, which they claim will increase the cost of water for commercial use by 400 percent.
“Water charges have risen from the previous 50 cents to between Sh2 and 6 for irrigation and commercial use. And, as you are aware, floriculture is heavy user of water. This increase therefore compounds the existing situation in the sub-sector,” Tulezi added.
He said lack of incentives in horticulture sector and the trickle approach in tax refunds has led to stagnation in the sector.
With some of these refunds dating back seven years ago, the council says the government needs to make substantial payments to clear the arrears.
Despite high taxation, and the volatility of the sector, horticulture was among the fastest growing sub-sectors in Kenya. In 2021, the sector earned Kenya Sh154billion.
The value of floriculture specifically was Sh110Billion, equivalent to 71 per cent of all earnings from horticulture.
The council says that despite the relative growth, the flower industry requires a predictable and stable business environment.
Tulezi pointed out that, the industry is struggling, the margins shrinking by the day and growers struggling to supply the market and maintain Kenya’s position as a key producer of cut flowers and ornamentals.
"It is difficult to increase the sector's performance this year because of the new taxes that the government is increasing which directly affect the sector," added Tulezi.
KFC says the numerous hurdles could see exports of flowers and ornamentals shrink by between 10,000 to 15,000 tons this year from 21,000 tons exported last year.
Rising inflation globally last year saw flower prices drop in the international market despite the rise in volumes exported where Kenya lost Sh20 billion between 2021 and 2022.
The Council said taxation coupled with high freight rates has seen a decline in the volume of flower exports.
On average, growers are paying up to 45 levies between the national and county governments which they say impact negatively on the sector threatening jobs and livelihoods.
“The sector is willing to pay taxes, but too many levies that also have no public/users participation are posing a big challenge to the sector. Liquidity is a major issue for growers at the moment yet, the government is not adequately refunding VAT to help cushion growers,”
