Businesses in the floriculture industry thought they had seen the worst when the COVID-19 pandemic hit two years ago. In the months following the outbreak, they took a hit as lockdowns and travel restrictions put a chokehold on demand in their largest market – Europe. The Netherlands bought 294 million dollars worth of flowers last year, claiming a little over 60pc of flowers Ethiopia sold to the world in the same year.

Though the virus left hardly any industry unaffected, floriculture felt the sting the hardest as flower producers source inputs abroad. There is almost no option to substitute chemicals, fertilisers, and seeds from the domestic market. This is not for lack of attempt. Floriculturists had tried their hand at sourcing from local suppliers as these, together with royalty payments, account for 90pc of spending in foreign currency to run a flower farm.

Afri Flower, in Holeta town in Oromia Regional State, 40Km west of Addis Abeba, saw firsthand the futility of turning to local suppliers. The company grows roses, spray roses, and gypsophila on its farm in a region favoured by floriculturists for its conducive climate. It had tried to buy packaging materials here, but the gap in quality remains a barrier. Afri Flower executives had to scramble to import it instead.

As the pandemic progressed and restrictions began to ease, the industry breathed a collective sigh of relief. Not for long, though.

In the year since, the industry has been plagued by a series of hiccups, each seemingly tougher than the last.

In January, the central bank decided to alter foreign currency retention and distribution rules for the third time in a year. Commercial banks have to surrender 70pc of export revenues and remittances to the National Bank of Ethiopia (NBE). What is left is to be shared between exporters and banks. There is also a percentage to go to cover freight costs. Exporters' share in forex retention dropped by half to 20pc.

For exporters, this meant profoundly altering the business calculus. Many entered the export sector, hardly making money from what they sold. Previously, they had been allowed to retain 30pc of export earnings unbounded by time, and 10pc to be used in 28 days of receipt, after which it had to be surrendered to the central bank. The catch was to import merchandise the local market is desperate to find. The margins from imports can even cover the losses from export transactions.

Exporters received the news of the dropping share in forex retention coldly. Little did many suspect they were in for some more disappointments.

Federal government officials and regulators at the central bank were desperate to beef up the country's foreign currency reserves, which may pay for a little over one month of imports. To cover the ballooning import bills, feared to reach 18 billion dollars this year, and external debt payments, bordering 1.6 billion dollars, they have also tried to discourage the use of foreign currency for the imports of what they categorise as "non-essential goods."

Over the first half of the year, the government spent 2.1 billion dollars on the import of basic goods and a further one billion dollars on external debt servicing. In the face of dwindling loans and grants from development partners; surges in the prices of essential commodities such as wheat, fertiliser, and petroleum; and a global shipping crisis, the government's attempt to hold on to as much forex as possible remains a source of frustration for the officials watching on the balance of payments.

In attempting to patch an economic wound in the absence of an adequate fallback, their policy response ensued a ripple effect that whacks a segment or two of the economy. Exporters find themselves at the receiving end of the series of policies meant to increase the foreign exchange reserves.

Sentayehu Kebede, general manager of Afri Flower, is one of those who find the current rules on forex retention hard to swallow. It has made it more difficult for him to run a business that employs 500 people. Afri Flower has paused monthly royalty payments to the patent owners of the high-quality flower seeds it uses. Suppliers are showing reluctance to continue with the credit-based payment system they had had with the company for years. Some are refusing to accept new orders, Sentayehu said, with a tone of vexation in his voice.

"They're asking us to switch to a cash-against-document scheme," said the General Manager.

The timing of the central bank's decision could not have been more off for Afri Flower and several in the floriculture industry. This was a season of peak sales in the year. Valentine's and Mother's day merrymakings bring with them a swell in demand, sometimes as much as 40pc. The over 100 floriculture companies, which grow flowers on 1,600ht of land, rush to leverage the moment.

The industry could also be a victim of its own success. Despite the forex policy its leaders view as detrimental, and in apprehension, it has done well. It brought in 471 million dollars last year, covering 13pc of revenues from export Ethiopia generated. Export revenues from flowers exceeded traditional sources such as khat (11pc), oilseeds (nine percent) and pulses (seven percent).

Over 2,700tn flowers were exported over the first two weeks of February, a report from the Ethiopian Horticulture Producer Exporters Association (EHPEA) reveals. Data from the Customs Commission shows flower export revenues hit 55 million dollars over the past two months alone, recording a 10pc increase on last year's same period figure.

Another input-intensive industry impacted by the new rules is the textile industry. Industry insiders ring the alarm bell that productivity has been declining in recent months, perhaps due to the retention policy changes.

Elias Tesfaye Garment & Textile Factory runs two plants in the Akaki-Qality District and Bishoftu town. Operating with 1,400 employees, the company generates around three million dollars a year, shipping its products to North America, Europe and the Middle East. Its productivity has fallen by a fifth since the retention rates were changed, according to Elias Tesfaye, a major shareholder.

"We're working with what we had in stock before the regulation changed," he told Fortune.

Elias says that accessing letters of credit (LCs) from commercial banks has become more difficult. Queues for LCs are long, and the fast-moving manufacturing sector is ill-suited for extended waits.

Like many other manufacturers, Elias hopes to see his industry receive a preferential surrender rate. After all, it generated 147 million dollars in earnings mainly exported to the United States, claiming 4.7pc of total exports. Nonetheless, the industry had seen revenues dropping by 13pc from the previous year when it had generated 169 million dollars. But the outlook for the first half of the current year gives those in the industry like Elias a cause for sanguinity. The industry brought in 75 million dollars, an increase of 15pc from the same period last year. So has the share of textile export revenues jumped by one percentage point.

Experts like Ermias Wodajo, a private consultant having experience with industrial parks companies, say bargaining on retention share will do little for manufacturers.

"It wouldn't be enough even if it had been 50pc," he said.

Ermias advises exporters and the government to find alternatives to source raw materials.