Weak euro eats into horticulture earnings

Money Markets

Workers harvest roses for export at a Maridadi Flowers Ltd farm in Naivasha. Kenya exports most of its flowers to the EU through the Netherlands. PHOTO | THOMAS MUKOYA 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• Exporters earn Sh1 billion less in the first quarter compared to a similar period in 2014, partly as a result of a weaker euro.

Horticulture exporters earned Sh1 billion less in the first quarter compared to a similar period in 2014, partly as a result of a weaker euro.

Kenya National Bureau of Statistics (KNBS) data shows that earnings from flower, vegetable and fresh fruit exports for quarter one 2015 stood at Sh24.79 billion compared to Sh25.86 billion last year.

Kenya Flower Council chief executive Jane Ngigi said exporters are not only facing reduced earnings due to the weaker euro compared to last year, but also face higher costs due to the stronger dollar which they use to pay for 70 per cent of their costs.

“We get paid for our sales mainly in euros, while we make most purchases in dollars. Over the past one year we have seen the shilling-euro exchange rate come down significantly from about 120 to 100, affecting our earnings negatively while at the same time the strong dollar pushed our production costs through the roof,” said Ms Ngigi.

Flower exports account for the bulk of horticulture earnings and therefore nearly all the decline in earnings, having brought in Sh19.01 billion in the first three months of 2015 compared to Sh20.04 billion over a similar period last year.

The fall in income came even as flower export volumes rose to 34,822 metric tonnes in quarter one compared to a corresponding quarter last year when Kenya exported 31,170 metric tonnes of flowers.

Vegetable exports brought in Sh4.4 billion this year compared to Sh4.6 billion in quarter one 2014 while fruit export earnings rose to Sh1.38 billion from Sh1.22 billion.

The shilling was exchanging at an average of about 119 units to the euro in the first quarter of last year, compared to 104 units for the first three months this year.

Horticulture is a leading source of foreign exchange for Kenya, alongside tea and tourism.

Kenya mainly exports flowers to the European Union through the Netherlands. Vegetable exports have been subject to more stringent checks for pesticide levels ahead of entry into the EU market since late 2012, affecting volumes.

There was a reprieve however in February when beans, which account for about Sh6 billion in earnings per year, were removed from the list.

“Lifting of the checks will minimise delays and ensure that the produce gets to European consumers faster and fresher,” Kenya Plant Health Inspectorate Service (Kephis) acting managing director Esther Kimani told the Business Daily.

Compared to the last quarter of 2014 however, the horticulture market saw a revival having fallen on hard times due to delay in signing of the Economic Partnership Agreement (EPA) with Europe which guaranteed duty free status to Kenyan exports.

The delay saw taxes imposed on exports between October 1 and late December.

Flower exports in quarter four of 2014 stood at Sh15 billion— and total horticulture exports at Sh20.6 billion — with Kenya estimated to have lost nearly Sh100 million a month between October and December due to the impasse.