BY GIRMACHEW GASHAW
Today’s guest Mr. Bas Terlouw is a Dutch citizen and currently working as a country coordinator for Abyssinia flowers-a company exporting flowers from Ethiopia to the rest of the world. Bas had served a range of institutions before joining Abyssinia. He previously worked as a manager in different organizations such as Royal Van Zanten, Dümmen Orange, Red Fox Ethiopia Plc and Xclusive Cuttings (U) Ltd.
BY GIRMACHEW GASHAW
Today’s guest Mr. Bas Terlouw is a Dutch citizen and currently working as a country coordinator for Abyssinia flowers-a company exporting flowers from Ethiopia to the rest of the world. Bas had served a range of institutions before joining Abyssinia. He previously worked as a manager in different organizations such as Royal Van Zanten, Dümmen Orange, Red Fox Ethiopia Plc and Xclusive Cuttings (U) Ltd.
He received first degree in economics in 1997. He then earned a second degree from Netherland Business School in economics and another MA in good governance. The Ethiopian Herald recently had a short stay with Bas to know more about flower export business in Ethiopia in general and the challenge that flower producers have been facing so far in particular.
Would you tell us when you started the flower producing and exporting business in Ethiopia? What inspired you to invest here?
Abyssinia flowers started investment in Ethiopia some 17 years ago, it is the first to engage in the flower business. During that time, the Ethiopian government invited foreign investors to invest and grow rich. The business climate and the benefits they proposed to give us enthused shareholders to invest here. At that moment, we already had three flower farms in Kenya. However, the incentive that was arranged here was good in relation to climate, tax relief, enough cargo freight available to transport our flowers and other related products to different destinations.
The company, which established its first farm just 17 years ago, has now multiplied its farms to four as the demand for flowers increased. We are constructing the fourth farm in Amhara state at a special place called Qonzila. Even though five foreign investors have received the license to invest in the flower productions, we are the first to engage in the construction phase. Hopefully, the fourth farm will start production by the end of this year just after the rainy season.
How do you evaluate the overall performance of the organization in terms of producing and supplying flowers to the international market?
Though we started from zero, our company has exported nearly 50 million stems a year. We have planned to increase the number of stems to 60 million next year. We have gained 700 thousand dollars profit before interest and tax in the first quarter of 2022.
We are expanding flower production every year as per the demand of the market. It provides premium Hypericum Coco and Veronica Smart to numerous countries that quite literally span the globe: Russia to Australia and USA to Japan. Known for their colorful berries and ravishing look, both our Hypericum Coco Series and Veronica Smart Series bring an amazing aura to any bouquet.
It’s perfectly green leaves and marvelous robust stems complete a nice and beautiful flower arrangement. If you want to know a little bit about our flowers, you put them in more exclusive bouquets.
We export the whole bunch of flowers. The material and the bouquet makers make a nice bouquet for export. We have a final product but never sell it only in the flower shops. We sell it in combination with other flowers to make it more nicely and attractive. Our finished products are exported to Europe, Japan, and China, and even to Australia. They buy flowers to make a nice bouquet. Our product also incited on the Hypericum part as we are the biggest in the world.
We harvest flowers every 20 weeks. Then, we do a kind of grading to see high quality products in every variety of flowers. So, we have strong standards.
Investing in Ethiopia, How do you explain it?
We bring a lot of money outside from the shareholders to use it here partly as a seed capital. For example, this year, the company invested one million and five hundred thousand USD to make the new farm in Qonzila area operational. Every farm costs us millions of dollars to appear with quality products. While we’re running the business, due to depreciation and other factors, the farm land required us to reinvest in it so as to maintain the standard of the farm. For this to happen, the company buys new tractors, generators and other equipment for irrigation purposes. For a farm to be productive, it requires three or four million dollars each. In short, floriculture needs continuous investment.
Apart from replacing the old irrigation system, the reinvestment tasks that carry out every year in the new farm costs 600,000 USD. Substitute old plastic nets, ground covers, drip lines with new ones are part and parcel of reinvestment tasks.
Could you tell us the total capital that the company invested here in Ethiopia?
Every farm costs us three million dollars to start up the business. Accordingly, the company has invested 12 million dollars in four farms. In addition, every year the company spends an extensive amount of money to run the business and this includes capital expenses. So, roughly, the company spends one and half million USD to run the business every year. So far, the company has invested more than 25 million dollars in Ethiopia.
He received first degree in economics in 1997. He then earned a second degree from Netherland Business School in economics and another MA in good governance. The Ethiopian Herald recently had a short stay with Bas to know more about flower export business in Ethiopia in general and the challenge that flower producers have been facing so far in particular.
Would you tell us when you started the flower producing and exporting business in Ethiopia? What inspired you to invest here?
Abyssinia flowers started investment in Ethiopia some 17 years ago, it is the first to engage in the flower business. During that time, the Ethiopian government invited foreign investors to invest and grow rich. The business climate and the benefits they proposed to give us enthused shareholders to invest here. At that moment, we already had three flower farms in Kenya. However, the incentive that was arranged here was good in relation to climate, tax relief, enough cargo freight available to transport our flowers and other related products to different destinations.
The company, which established its first farm just 17 years ago, has now multiplied its farms to four as the demand for flowers increased. We are constructing the fourth farm in Amhara state at a special place called Qonzila. Even though five foreign investors have received the license to invest in the flower productions, we are the first to engage in the construction phase. Hopefully, the fourth farm will start production by the end of this year just after the rainy season.
How do you evaluate the overall performance of the organization in terms of producing and supplying flowers to the international market?
Though we started from zero, our company has exported nearly 50 million stems a year. We have planned to increase the number of stems to 60 million next year. We have gained 700 thousand dollars profit before interest and tax in the first quarter of 2022.
We are expanding flower production every year as per the demand of the market. It provides premium Hypericum Coco and Veronica Smart to numerous countries that quite literally span the globe: Russia to Australia and USA to Japan. Known for their colorful berries and ravishing look, both our Hypericum Coco Series and Veronica Smart Series bring an amazing aura to any bouquet.
It’s perfectly green leaves and marvelous robust stems complete a nice and beautiful flower arrangement. If you want to know a little bit about our flowers, you put them in more exclusive bouquets.
We export the whole bunch of flowers. The material and the bouquet makers make a nice bouquet for export. We have a final product but never sell it only in the flower shops. We sell it in combination with other flowers to make it more nicely and attractive. Our finished products are exported to Europe, Japan, and China, and even to Australia. They buy flowers to make a nice bouquet. Our product also incited on the Hypericum part as we are the biggest in the world.
We harvest flowers every 20 weeks. Then, we do a kind of grading to see high quality products in every variety of flowers. So, we have strong standards.
Investing in Ethiopia, How do you explain it?
We bring a lot of money outside from the shareholders to use it here partly as a seed capital. For example, this year, the company invested one million and five hundred thousand USD to make the new farm in Qonzila area operational. Every farm costs us millions of dollars to appear with quality products. While we’re running the business, due to depreciation and other factors, the farm land required us to reinvest in it so as to maintain the standard of the farm. For this to happen, the company buys new tractors, generators and other equipment for irrigation purposes. For a farm to be productive, it requires three or four million dollars each. In short, floriculture needs continuous investment.
Apart from replacing the old irrigation system, the reinvestment tasks that carry out every year in the new farm costs 600,000 USD. Substitute old plastic nets, ground covers, drip lines with new ones are part and parcel of reinvestment tasks.
Could you tell us the total capital that the company invested here in Ethiopia?
Every farm costs us three million dollars to start up the business. Accordingly, the company has invested 12 million dollars in four farms. In addition, every year the company spends an extensive amount of money to run the business and this includes capital expenses. So, roughly, the company spends one and half million USD to run the business every year. So far, the company has invested more than 25 million dollars in Ethiopia.
Could you tell us the challenge that the company has been facing so far? How could you deal with challenges and be able to sustain the business?
Yes, there is a challenge in connection with the directive for amendment of retention and utilization and export earnings; and inward remittance (directive No. FXD/79/2022) is discouraging us to sustain in the business. The directive says; “Exporters of goods and services and recipients of inward remittance shall have the right to retain 20 % of their export earnings in foreign currency indeterminately in a retention account after deduction of 70% surrender requirement from the total earning. Whereas the remaining 10 % shall be surrendered to the respective banks at the prevailing buying exchange rate immediately on the day of the receipt and the bank effect the payment of the equivalent birr to an eligible customer.”
Previously, when we imported 100 USD in this country, the government took 60 percent of dollars and changed it to birr. As of January, the government revised the directive and took 80 percent of the company’s dollars and changed it to birr. It leaves only 20 percent of dollars to the company to buy fertilizers, chemicals and additional investment. The dollars left to us is too less to manage other tasks. Exporters associations and other stockholders are struggling to put pressure on the government and the National Bank to bring them back.
Receiving 20 percent of dollars is too little to survive in the business. If things continue as it is, we cannot buy enough fertilizer or chemicals which will be impacted to produce quality export products. To this end, our income will reduce. So, we’re struggling for the revision of the directive.
What will be the plan of the company in terms of expanding the supply of flowers for the international market and increasing foreign currency income?
We want to increase investments but the new directive is a headache to survive in the sector. We will increase our production in Ethiopia rather than in Kenya due to nice logistics service which enables us to directly export our flowers directly to all countries in the world. In this regard, Ethiopian Airlines has an irreplaceable role. This is an important step that eases our business to transport logistics using the direct flights to US, Europe, China, and Japan, even to Melbourne- Australia.
This is the pushing factor that triggers us to further expand our investment here in Ethiopia. What is more, the amount of plant disease caused by insects on plants here in Ethiopia is better than in Kenya. As there are a number of flower producing companies in Kenya, there are many plant diseases there. Separately, our investment in Ethiopia enables us to get nice benefits from the sector through exploiting the incentives. The cheap labor, supply of low-priced electricity, tax relief and other incentives encouraged flower exporting companies to expand their investment in Ethiopia. If we take the price of electricity, for instance, the price in Ethiopia is 10 times lower than that of Kenya. Had it not been political instability, the country would have had the capacity to attract foreign direct investment which would have had a greater impact on the economy. Even if we have a flower farm in Colombia, invested in eight farms worldwide, our farms in Ethiopia have given us a lot of benefits. These enable us to help the country through bringing foreign currency income and create a lot of jobs.
How many jobs have the companies created for Ethiopian citizens?
Our company has already created 1800 jobs on a permanent basis. The figure does not include the temporary jobs which were created directly or indirectly related to the flower farms as a lot of businesses are now supplying food and other services.
Could you tell us the mechanisms that the company has applied to produce quality flowers that meet international standards?
The research and development section, located in the Netherlands where our shareholders are found, figured out the climate and soil type to breed the right variety of flower at the right place. They bring and apply that knowledge here. I am working together with local people to properly apply the knowledge and expertise in order to produce quality flowers. In addition, there are some international experts who manage the farms intermediary with the shareholders from Kenya and the Netherlands. However, as they are real growers, knowledge is coming from the Netherlands, investors in Kenya. We measure the quality of flowers every week as per the techniques drawn from the Netherlands. I can say we are still going on the right track. We have the knowledge and expertise on how to increase our quality and quantity of flowers. These quality measures have helped us to be competitive worldwide.
How do we evaluate a company’s performance in terms of exporting quality products to the international market?
The goal of our company is to produce quality flowers not for the lowest price; rather, we go for the high quality market. We aim to stay on that level as the people; the buyers worldwide know the company’s reputation and its standard. That is why we are working for quality. So, we keep internally very strict to stay on that level of quality and we do not want to fail. For that reason, we always select quality flowers and reject those with the lowest quality.
We want to stay in the high quality market worldwide, especially meeting the high level standard of Japan and the US. Japan wants to import good quality flowers and pay nice for that. If you want to stay in the market, you have to invest in quality. Every week, I receive a quality report from each farm in order to know insect pressure, flower size and lifetime of flowers.
When you buy flowers, the banquet must stay for 14 days without any quality loss. In short, one stem must stay in your home for14 days keeping its original quality. Otherwise, it is not good. Thus, we grow flowers utilizing the right amount of fertilizer and applying every care for it. This way, you can extend that life and real premium quality.
Could you list some of the countries that receive your export products?
Europe, Australia, Japan, China are continents and countries who look for our quality products. The Netherlands is a central place to distribute our products for the rest of European countries. We have a big market in the US. One third of what we produce is exported to the US, another one third to the European market and we do not want to rely on it and export the remaining one third flowers to the Asian market.
The horticulture sector has a great contribution to the economy. So what do you recommend to further develop the flower sector?
We do it in a proper way, we’ve taken care of the environment, we use our land for seven years, then we uproot and then we start to rehabilitate our land. So we have, for example, 90 hectares, we only use 40 hectares. We use the remaining 50 hectares to rehabilitate the land in a natural way. Accordingly, we plant grass on the farm that is served for years and plow it after two years to rehabilitate it. We are very keen on what type of chemicals to use in the farm as it is not allowed to poison the whole area. If that is so, the flowers, vegetables, and fruit can grow out nicely in the place where our farms are found.
Thank you.
It is my pleasure.
