Europe’s inflation cuts Sh12bn horticulture income
Tuesday March 14 2023
Kenya’s earnings from horticultural exports reduced by 9.7 percent in 2022 on the back of elevated inflation in main markets amid weaker currencies, data shows.
Revenue from horticultural sales abroad amounted to Sh120.26 billion last year from Sh133.23 billion in the prior year, provisional export statistics indicate.
The decline came in a year when the average price growth in the Eurozone — a group of 19 countries which use the euro as a common currency — climbed to 8.35 percent compared with 2.4 percent a year earlier.
Kenyan exporters had complained that the runaway inflation was eroding consumer purchasing power in the Euro area and the UK, the main destinations for cut flowers, fruits and vegetables.
Read: Horticulture earnings fall Sh20 billion in first quarter
Earnings from the sale of vegetables fell by nearly a quarter to Sh27.34 billion, while the value of cut flowers reduced by 10.21 percent to Sh54.25 billion, according to provisional data collated by the Central Bank of Kenya.
The data, however, shows exports of fruits— which were bolstered by the opening up of China for fresh avocadoes — earned Kenya a modest 4.19 percent more last year to Sh38.67 billion.
The Kenya Flower Council, a lobby, had described 2022 as a “horrible” year which had “worked against growers”, citing persistent inflationary pressures on households in Europe following the Russia-Ukraine war.
Europe is the largest market for Kenya’s fresh farm produce, buying nearly three-quarters of the country’s horticultural exports.
“With [inflationary] pressure that people in Europe have, especially on energy costs, they are cutting expenditure on things like ornaments where cut flowers fall,” KFC chief executive Clement Tulezi had told the Business Daily last October when Eurozone inflation peaked at 10.6 percent.
“We are also incurring a lot of production costs on the shilling which we cannot recover on the euro and pound when you are selling.”
A unit of the euro on average exchanged for Sh124. 17 last year, a depreciation of 4.3 percent compared with Sh129.76 the year before, an analysis of official foreign exchange rates shows.
The Sterling pound, on the other hand, weakened a marginal 1.3 percent against the Kenyan currency, with a unit priced at Sh145.80 on average compared with Sh150.85 in the prior year.
Kenya sells more than it buys from most of its major trade partners in Europe, meaning local exporters were net losers as inflation in the Eurozone and the UK soared to decades-high, with respective currencies weakening.
About 72 percent of Kenya’s horticulture exports are paid in euros, while about a fifth are paid in the British pound.
Last year’s runaway inflation in Europe was largely driven by soaring energy and food costs on the back of Russia’s brutal war in Ukraine which further disrupted supply chains that were yet to recover from the pandemic shocks.
“When the Russian war came in, we were subjected to high prices of fuel and other inputs [like fertiliser] coupled with inflation in Europe,” Mr Tulezi had said.
Read: Horticulture earnings drop Sh7bn in Jan
“A lot of [flower] farms are struggling with liquidity challenges because money is not coming in as they had expected.”
The CBK data shows the volume of vegetables sold abroad fell the deepest at 30.11 percent to 194,627 tonnes, while cut flowers dropped 6.35 percent to 127,406 tonnes.