Kenyan fresh produce exports could fall by half this year on last year’s levels, as senders look at market deflection to help them through a period of unfavourable exchange rates against sterling.
Dr Stephen Mbithi, ceo of the Fresh Produce Exporters’ Association of Kenya, told freshinfo that the situation has improved slightly on the low of December 2008. He said: “The currency situation is having a huge impact on us. Last year, 32.8 per cent of our exports went to the UK. It is the second-largest market after mainland Europe.
“The biggest cost to our business is airfreight, which accounts for 45-55 per cent of our total costs. It is all payable in US dollars. The second greatest cost is labour, which is paid in Kenyan shillings. In December 2008, we held a crisis meeting and several exporters subsequently decided to halt exports to the UK. Exports have picked up again now, but the situation is not completely back to normal yet. Those who do send to the UK are just about breaking even. They are certainly not smiling and they are getting better margins exporting to eurozone countries.”
Kenyan exporters generally hedge shillings to the main currencies, but had been caught out by the weakening of sterling.
Mbithi said: “No one had really predicted this situation with sterling. The only option for exporters now is to hedge against fluctuations in the sterling-dollar exchange rate to cushion themselves. It would help if UK retailers would pay more, but they are looking for price cuts.
“Demand for our beans is up so that is helping a bit, but we are not getting any price adjustment. Kenya has strong historical ties to the UK and we have been exporting our fresh produce to the UK for decades, but exports could go down to half of the levels of 2008 by the end of this year because of the situation.”
Demand is strong for Kenyan produce, however, in mainland Europe. Mbithi said: “There is not a fear that there will be a lack of market.”
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