Weak euro spells diminished Kenyan horticulture returns – Business Daily
A worker at a flower firm in Naivasha. FILE PHOTO | NMG
Kenya’s horticulture sector is facing fresh threats as the euro —the currency in which it is paid for exports— has lost ground against the shilling over the past six months.
Commercial banks on Wednesday quoted the local currency at the Sh120.6 mark against the euro, down from an average of Sh128 that it recorded in February. On Friday it had dropped to a low of 119.
The decline implies that flower exporters are taking a cut of at least an average of Sh10 on their earnings compared to the first half of the year.
About 72 per cent of Kenya’s horticulture exports are paid in euros, while 25 per cent are paid in the British Pound, with the uncertainty in the currency expected to hit foreign earnings.
Europe is plagued by a war in Ukraine that has fueled inflation in the business bloc, hurting the EU’s growth outlook.
Richard Fernandez, chairman of the Kenya Flower Council says they a feeling the impact of the falling currency with earnings expected to drop significantly should the situation continue. “The margins are being squeezed because of the falling dollar which has impacted our sales and the cost of production as well,” said Mr Fernandez.
He said the weakening shilling has also had a negative impact on them as they are spending more money on importing farm inputs such as fertiliser and chemicals.
Kenya’s currency has remained weak against the dollar, retailing at Sh118 against the greenback, making it costly for importers.
The euro instability comes at a time when demand for flowers has gone down because of hot weather in Europe that has seen a lot of people spend more time outdoors.
Europe has been hit by one of the worst heatwaves in history with temperatures rising to highs of 40 degrees Celsius. “The demand for flowers has now gone down because of the hot temperatures in Europe,” Mr Fernandez said.