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International flower companies are fleeing Ethiopia because of a worsening conflict in the northwestern Amhara region, a key flower-growing hub, dealing a blow to one of the country’s major exports.
Germany’s Selecta One this month said it would move production from its Kunzila site in Amhara to neighboring Kenya and Uganda, saying “the unstable political situation and the uncertain military environment were the main reasons for this decision.” The company, which began operations in Ethiopia in 2021, is also laying off more than 1,000 local employees due to the two-year war between the Ethiopian government and Fano, a loose collection of militias.
The fighting comes amid fears of a wider regional war as tensions rise in the nearby northern region of Tigray: Fano earlier fought alongside the Ethiopian army and Eritrean forces, against the Tigray People’s Liberation Front, during Tigray’s 2020-2022 civil war.
The firm is following in the footsteps of other horticultural companies including two Dutch-owned firms, Tal Flower Farms and Tana Flora, that left Amhara last year following incidents of looting and arson. “There are many companies that have suspended their operation in Amhara,” Tewodros Zewdie, executive director of the Ethiopian Horticulture Producer Exporters Association (EHPEA), told Semafor, pointing to three other Dutch-owned firms — Abyssinia Flowers, Dutch Flower Group, and Alpha Flora — that suspended production in 2024.
Ethiopia’s cut-flower industry, which generated more than $500 million in revenues last year, is the country’s second-biggest export after the top-earning $900 million coffee sector, according to central bank figures. It has made strong inroads into the global flower trade in recent years, securing a 5.5% stake of market share, while still behind Kenya’s roughly 16% stake.
The Ethiopian Investment Commission, which oversees foreign investment, did not immediately respond to a request for comment.
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Zewdie said the EHPEA has called for the Ethiopian government to pay out compensation to the companies suffering losses due to the conflict, trying to incentivize them to stay. But with few improvements in the security situation, he fears more will leave. Many companies have reported hijackings of staff truck drivers for ransom. “We are in discussion with them on their options,” Zewdie told Semafor.
This is not the first time conflict has hit flower growers in the volatile Amhara region. In 2016, several flower farms belonging to multinational companies were razed to the ground by armed militias. Many also saw attacks on their employees.
Writing on LinkedIn earlier this month, Selecta One’s CEO Per Ansgar Klemm, described the decision to leave Ethiopia as “a bitter pill to swallow,” saying the company was “forced to leave” despite its “best efforts” after enduring various difficulties in the last two years.”
Step Back
The horticultural industry exodus comes as other international investors are suspending their operations in Ethiopia. In June, French fund manager Meridiam’s $2 billion geothermal project in the neighboring Oromia region, hit by a separate conflict, was suspended due to security threats a year before completion. Concerns over kidnapping have also deterred tourists, another important source of revenue for the government.
Samuel’s view
The damage to Ethiopia’s horticultural industry comes at a time when the country is struggling with sluggish economic growth. Flower exports provide an important source of foreign currency that Ethiopia relies on to import essential goods, including fuel.
The government has also been unable to attract foreign investors in its telecommunication, construction, and real-estate sectors despite changing laws allowing foreign players to operate within the country. Other spiralling conflicts and potential conflagrations — including growing fears of renewed fighting in Tigray — also threaten the country’s economy.
Selecta One’s Klemm told me that he thinks other investors will likely leave Ethiopia too, hurting an economy that has earned more foreign currency from horticulture than any other commodity except coffee. “I would assume that our action and reasoning — [the] safety of our employees — will increase pressure for others,” Klemm said.
Room for Disagreement
Samson Berhane, an economic analyst based in Addis Ababa, said that Ethiopia still has unique qualities that will make it a viable destination for foreign investors. “The recent foreign exchange liberalization that has made profit repatriation easier will enhance Ethiopia’s appeal to foreign investors,” he told Semafor, as well as its “low production costs driven by affordable electricity and cheap labor costs.” Berhane pointed to the recent decision by Nigerian industrialist Aliko Dangote, Africa’s richest man, to double the capacity of his cement operations in Ethiopia.
Notable
- Chinese investors are leaving Ethiopia in search of more stable conditions in neighboring countries, Capital Newspaper reported.