Strong rand puts pressure on World Cup travel budget

Exports to that country include sugar and sugar confectionery, coffee, tea, mate and spices, edible vegetables, and certain roots and tubers.

Kenya imported goods worth Sh68 billion from South Africa in the year to November, according to Central Bank of Kenya data, while exporting goods worth Sh3.7 billion, meaning the trade between the two countries is tilted in favour of the rainbow nation.

This comes at a time when Kenya is finding it hard to push its products in Uganda — its single largest market exports market — because of the weakening of the Uganda unit, making Kenyan products more expensive.

Ms Josephine Sagwa, a dealer at Trade Forex Bureau, said they were experiencing a demand for rand from people intending to travel.

But she also cited that the dollar has been strengthening thereby pushing up the value of the rand since South Africa trades in gold, diamonds and other precious metals that are denominated in dollars.

Economic recovery

The dollar has appreciated because of perception as well as reality that the American and the global economy are recovering after experiencing a major jolt from the financial crisis that started in the US.

As the dollar appreciates, the rand has risen even further with the latest forex reports showing that it stood at about 7.4 rands now against 7.8 rands to the dollar on February 25 this year.

In a recent note to investors, Alex Muiruri of Faida Investment Bank said that some movements in the rand/shilling exchange were attributable to speculation as the Cup date approaches.

Ms Sagwa explained that though travellers to SA might find it expensive buying the rand, those returning after the event might earn more for every rand that they will hold if the rates remain the same.

On the other hand, if the Kenya shilling appreciates strongly against the rand, then they will still be at a disadvantage because they will get a lower amount of local currency.

This means that those who will travel and come back carry the currency will be risking.

While the importers might suffer during the duration of the World Cup, their pain might be lessened after.

The only factor that might work against them is an even stronger appreciation of the dollar since this will cause appreciation of the rand.