Exporters win big from battered shilling

Exporters are smiling all the way to the bank following the sustained weakening of the shilling against major world currencies. The local unit has been steadily losing ground against the dollar, the euro and the sterling pound since January this last year.

This has handed exporters foreign exchange gains of up to 15 per cent. The biggest beneficiaries include horticulture, tea and coffee farmers whose exports are paid in dollars, euros and sterling pounds. A strong euro, dollar or sterling pound means more shillings for local exporters given that they would receive dues in foreign currencies for the same value of goods in the Kenyan shilling exchanged.

Exports to Europe comprise mostly agricultural products including tea, coffee, fresh fruits and vegetables as well as cut flowers. The euro and the sterling pounds have also been going in the same direction as the dollar.

Data from the Central Bank of Kenya (CBK) shows that the shilling has lost ground by about 15 per cent since January. This has seen exporters earn Sh160 for every sterling pound worth of exports sold up from the Sh138 for they earned in January. Most of the flowers from Kenya end up in the United Kingdom.

The US dollar has also strengthened against the local unit, gaining over 13 per cent in value in the same period. This has seen tea and coffee exporters earn Sh102 for every dollar of exports, up from the Sh90 they were receiving at the beginning of the year. Exporters are now receiving Sh110 for every euro earned, up from the Sh108 in January.

Other beneficiaries in the poor performance of the shilling are companies in the tourism industry such as airlines, hotels and tourist attraction cites who are paid in foreign currency. Other winners are firms in the export processing zones who produce goods mainly for exports to other countries abroad.

Companies with dollar loans are also enjoying lower interest repayments as the home unit continues to be battered.

Clothing accessories

Data from the Economic Survey 2015 shows that Kenya earned Sh97 billion from horticultural crops while earnings from the export of apparel and clothing accessories stood at Sh28 billion - mainly due to the increased production within the Export Processing Zones under the African Growth Opportunity Act.

Earnings from exports of unroasted coffee grew by 22.0 per cent to Sh19 billion. The figures could be higher this year due to foreign exchange gains. Importers will however continue to bear the brunt of the weak shilling. Dealers in used vehicles have already started passing the extra costs from forex losses to consumers.

Borrowers have also started feeling the pinch of a weak shilling after the Central Bank raised the indicative lending rate. This has seen banks slap consumers with expensive loans.

CBK attributes the volatility and the weakening of the shilling to the strengthening of the US dollar against major global currencies.