Ethiopian Plans to Undercut Go-Betweens in Flower Export

March 6th, 2012 | by addis portal |

A decision by the management of the Ethiopian Airlines’ Cargo Division to launch a service to take horticulture products from farm gates all the way to auctions in Europe, thereby cutting out companies in the middle, has brought fierce resistance from industry operators.

The Airline management has announced its plan of leasing space in cargo planes direct to farmers, instead of one of the three companies that go between, at a briefing session held at Radisson Blu Hotel, on Marshal Tito Road, on Thursday, March 1, 2012.

For long, Ethiopia’s nascent cut flower industry has been too small and fragmented to fill a chartered cargo on the capacity of an individual farm. Close to eight growers formed Ethio-Horti S.C., a company created to collectively export their produces, leasing a chartered plane from the national carrier. Two more such companies – Ethio-Horticulture Cooperative and Trade Path International Plc – have emerged, although Trade Path came to be the largest player in the industry. Sher Ethiopia, the biggest flower farm in the country, uses Trade Path to export its flowers from its farm near Ziway town to a market in The Netherlands.

Jointly chaired by Hailesellasie Tekie, director general of the Ethiopian Horticultural Development Agency (EHDA), and Tewolde Woldemariam, CEO of Ethiopian, the announcement made last week by Ethiopian cargo management team to launch the new system to transport horticultural products from the country was stormy. Seen by industry leaders as an attempt that threatens the existence of the three forwarding companies serving flower growers to date, they attack the management for being secretive of its plans to launch the system.

The management set up a new department to undertake the operations originally scheduled to start next week. However, bombarded with series of questions from skeptical growers, who challenged the readiness of the company to take over the job, the Airline management has finally reversed their decision and postponed the date the new system will be launched.

Growers were surprised to learn that they were not consulted while the government was planning such a dramatic and far fetching changes in the industry.

The management envisions the creation of supervisory board to oversee and regulate how the new system functions, comprising eight members from growers, their association, the federal agency regulating the industry and the Airline. Neither were management members ready to disclose the price regime when they laid out their plans last week, a move that infuriated growers, some of whom threatened not to leave the room before told what price the company charges them.

“It’s not appropriate not to disclose price for a grower while telling us that the system will start after three days,” a disappointed flower grower, who attended the meeting, told Fortune. “They were going around the bush instead of addressing our legitimate questions.”

There are currently 91 flower growers comprised under the association with a total land size of 1,310hct. Exporting 41.6 billion stems cut flower last year, they helped the country earn 178.3 million dollars. Nonetheless, this revenues was much lower than the 288 million dollars anticipated from exporting a planned three billion stems, leading officials to question whether there are proceedings that fail to have their way home.      

It was after a lot of going around the bush senior managers of the Airline told growers the price would be determined by the supervisory board. Ironically, the managers asked growers to select members of the board at the same meeting that again surprised industry operators. It was after uptight debate that the board was formed, for those attending the meeting demanded time while the managers were seen strongly insisting it should take no time.

“Although Ethiopian never generated much profit from this cargo operation, the management has decided to support the sector at any cost,” Tewolde said during the session.

He promised daily accesses to international market irrespective of the volume to be exported.

“Although we are challenged by high fuel cost, the management decides to absorb all the risks,” Tewolde said. “This is not a temporary business that we are interested at when the business is doing well. Ethiopian is there for a long haul.”

Growers can book their shipment through email and internet, through first come and first served basis.

Ethiopian has also plans to give tracking service to transport the flowers from the farms to the airport, for most of the farmers are within 160Km radius. But this has perplexed forwarders, who question the wisdom of an airline turn out to be a forwarder.

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