Freshly harvested roses. April to August traditionally represents the low flower export season. REUTERS
Foreign currency earnings from the sale of flowers dropped by 95 per cent in May. Exporters attributed the move to subdued demand from European countries.
Cut flower sales are Kenya’s second biggest foreign exchange earner after tea, providing an important buffer for the shilling whose exchange rate against major international currencies is determined by forex inflows from exports.
The shilling has depreciated by about 10 per cent, touching record low levels against the dollar in the past five months, on what dealers have attributed to sluggish forex inflows at a time when the import bill has risen sharply due to increased crude oil prices.
“This explains the weakening of the shilling,” said Jeremiah Kendagol, the acting head of treasury at KCB.
On Wednesday, the shilling traded at 90.51 units to the dollar. Kenya earned more than Sh72 billion from horticultural exports last year, about one-third of which comprised revenues from sale of cut flowers, with the rest being income from vegetable and fruit exports.
Export earnings
Flower export earnings topped Sh13.5 billion between January and April, 28.6 per cent higher than the Sh10.5 billion reported last year. However, it is the slowing demand beginning April that is presenting fresh worries.
The exports slid by more than 95 per cent in May to Sh111 million compared to the same month a year ago. Industry players attribute the trend to waning consumer demand in the main European markets. The weakening shilling has stoked inflation as prices of imported goods have shot up, while local manufacturers have borne higher input and energy costs.
April to August traditionally represents the low flower export season as a majority of potential buyers in the West spend time outdoors, according to the Kenya Flower Council (KFC).
But this year’s drop is steeper than in any other period in the recent past.
“Europe and the US have been hot with most people spending time on beaches so the consumption of flowers has been low,” said KFC chief executive Jane Ngige. “Demand is not there, so prices have been significantly depressed in the past two months,” she added.
Data compiled by the Horticultural Crops Development Authority shows that trade in cut flowers has experienced major swings this year, with March revenues hitting a record Sh7.8 billion.
Monthly volumes of cut flower exports increased steadily to 9,448 metric tonnes in May, a three-year high as more farmers upped their output with the anticipation of netting bigger returns. Ms Ngige said earnings were helped by high demand and weakening of the shilling against the Euro and the Sterling Pound — the two major foreign currencies that flower exports are billed in.
Despite a further weakening of the local currency that would otherwise mean exporters earn higher revenues from the same quantity of flowers, individuals and households seem to have revised their shopping lists leaving florists with huge stocks that have ended up in dumps.
Huge stocks
Fresh Produce Exporters’ Association chief executive Stephen Mbithi said huge stocks of cut flowers that had reached the market had to be dumped because they did not find buyers.
“The prices have not been holding their ground and around May especially, we had to dump some flowers as demand has been low,” said Dr Mbithi.
He attributed the sluggish demand to waning consumer confidence as buyers slashed their budgets with luxurious spending on items like flowers affected the most.
“There has been fluctuating demand due to the European consumer’s confidence going down as a result of the financial crisis experienced in Greece and other countries,” he added.
Trade in food items destined for the same market such as fruits and vegetables picked up in the period.
“Demand for non-essential products will likely remain suppressed, but we are receiving bigger orders on fruits and vegetables with both fetching higher prices,” said Dr Mbithi.
