Egyptian turmoil hits Kenyan exports

By Macharia Kamau

While long-term effects of the Egyptian political crisis on the Kenyan economy are not yet clear, the situation is expected to impact certain key sectors in the short term.

Already there is reported decline in the amount of tea and cut flowers exported to the North African country while operations of airlines plying the Nairobi-Cairo route have been affected, with Egypt Air suspending all flights between the two countries.

But despite the gloom, Robert Bunyi managing director Mavuno Capital says the misfortune of Egypt might benefit Kenya’s tourism. This, however, depends on how the country positions itself from the massive cancellations suffered by the Egyptian tourism sector.

As a result of the protests, there is reported decline in the amount of tea and cut flowers exported to Egypt while operations of airlines plying the Nairobi-Cairo route have been affected. Photos: File/Standard

Central Bank of Kenya (CBK) last week, however, expressed concern over the situation in Egypt, especially its impact on local production and fuel prices.

"Although we are still uncertain about what impact this Arab crisis could have on the economy, there could be supply side shocks in the short run," said CBK Governor Prof Njuguna Ndung’u.

Bunyi said other than a short-lived decline in trade between the two countries, the Egyptian political situation was not a major risk to the Kenyan economy.

"I do not see much negative effects for Kenya… this is the kind of protest where people are agitating for increased freedom and space and unlikely bilateral trade with other countries in the long term," he said.

"The other risk would be if they blocked the Suez Canal, which would affect the entire world as ships going to and from Europe and Asia would have to go round Africa but it is unlikely to happen with this sort of protests."

Nullifies progress

He noted that the probable long term risk that the crisis posed to Kenya would be a new government that nullifies progress made by the current regime when it comes to sharing resources of the River Nile.

"For Kenya, the only risk is regressing on the milestones that have been reached in use of Nile resources… if subsequent Egyptian regimes stick to the issues on the Nile and build on the progress made, then I do not foresee long term problems arising," he said.

Bunyi added that Kenya’s tourism might benefit from the misfortune of Egyptians in the short term.

"If their tourism is not attended, then there is a likelihood that Kenya might benefit but only in the short term," he said.

Among the local industries that have suffered the wrath of the crisis is aviation. Airlines flying Nairobi-Cairo have reported a decline in the number of people flying to Egypt.

Kenya Airways said while it had not scaled down the number of flights to Egypt since the crisis began close to two weeks ago, it had witnessed huge decline in the number of passengers flying to Cairo from Nairobi.

The national carrier however said there was a reverse situation in Cairo, with departures having risen significantly since the protests began.

The airline has also shifted its crew base from Cairo to Khartoum following the overnight curfew in Cairo. KQ airline operates daily flights to Cairo with a stop over in Khartoum.

Egypt Air has been the most affected and has indefinitely suspended flights on Nairobi-Cairo route.

Egypt has in the recent past emerged as among the alternative destinations for Kenyan cut flowers. The political turmoil has however seen the exports to the country go down.

Ms Jane Ngigi chief executive Kenya Flower Council said most floricultural exporters were unable to take their products to the Egyptian market in the last two weeks.

She added that the situation had disrupted demand, which would take time before recovery.

"We have not been able to export much to Egypt since the turmoil started… it is unfortunate as it is the high season for flowers with the Valentine holiday – which is big for the flower industry across the world - being just a week away," she said.

"Though the crisis, which is unfortunate for the Egyptian people, may not persist for long, it might take sometime before the market normalises.’’

Tea is another commodity whose sales to the country have been affected. The Middle East is an important market for Kenyan tea with Egypt being the largest export market.

According to data by the Tea Board of Kenya, Egypt bought 93 million kilogrammes of tea from Kenya last year.

While some players in the industry say the crisis might not affect tea exports, there has already been reported a decline in the volumes of tea moved during last week’s tea auction in Mombasa. Egyptian traders were noted as among those least active during last week’s auction.

Subdued activities

‘There was less interest from Egyptian Packers, Pakistan Packers, Afghanistan and UK while Bazaar was subdued. Somalia was less active at the lower end of the market," said East African Tea Brokers in its weekly report compiled after the auction.

There were 7.4 million kilogrammes of tea on offer at the Mombasa Tea Auction last week but buyers took up 4.8 million or about 60 per cent of the commodity on offer. East Africa Tea Brokers said this was the lowest in the recent past.

"There was much easier demand for the 7.44 million kilos on offer with the highest ever number of unsold teas (38.28 per cent) in recent times," said EATB in the weekly report.