Exporters reap record pay from weakening shilling

Exporters who earn revenues in hard currencies have started to report big gains from a mix of a weak shilling and high global commodity prices that prevailed for most of last year.

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Just days after the tea industry reported a record Sh109 billion in annual earnings, key foreign exchange earners are gearing up for big leaps in revenues from their 2011 operations.

“A weak shilling and high commodity prices gave the textile industry its best earnings ever from the US market,” Kenya Association of Manufacturers chairman Jes Bedi said on Friday. The sector earned a record Sh25 billion ($292 million) under the preferential African Growth and Opportunity Act (Agoa) in 2011.

Break 2010 record

Horticulture — the country’s number two foreign exchange earner — also looks set to break its 2010 record of Sh78 billion, having bagged Sh73.1 billion in the first ten months of last year.

High prices also helped the coffee industry to shrug off a threatening encroachment by real estate, netting Sh18.7 billion in the first 10 months of last year, already above the Sh16.3 billion it earned in the whole of 2010.

The tea industry had by October earned Sh83.72 billion against the 2010 total revenues of Sh97 billion. Industry insiders said the industry would have performed better had it not been for intense competition from rival beverages and lower output.

“Potential consumers are turning to alternatives, especially juices in place for tea,” the Tea Board of Kenya CEO, Sicily Kariuki, said when Ministry of Agriculture officials released their 2011 report.

The shilling depreciated rapidly last year from 80 units against the dollar in January to a low of Sh 107 in October with attendant inflationary pressure on domestic consumers.

The National Economic and Social Council (NESC) is concerned that the high earnings of last year may not be repeated this year because of a possible drop in agricultural production from a forecast dry spell as well as low demand in the international markets, the product of a slowdown in global economic growth.

Negative trends

While opening the council’s full meeting about a week ago, Prime Minister Raila Odinga challenged technocrats to help Kenya “defy these negative global trends.”

The council recommended additional incentives to encourage diversification of exports, improve efficiency in energy use and strengthen economic and diplomatic relationships with emerging economies to counter the slowdown.

Uncertainty persists as the economic crisis in the eurozone — Kenya’s main market outside East Africa — signals reduced margins in 2012.