CBK data reveals exports have hit a three-year low

Kenyan exports dropped to a three-year low on lower tea and coffee earnings, reflecting the pain of reduced cash flow in the country’s farming community.

Total exports fell to Sh595.28 billion in the year to December from a record Sh612.88 billion a year earlier, Central Bank of Kenya (CBK) data has revealed. The dip pushed Kenya’s trade deficit – the gap between imports and exports – to a record Sh1.16 trillion from Sh1.145 trillion in 2018 despite a flat growth in imports.

A persistently higher trade deficit, economists say, slows down the creation of new job opportunities among the growing skilled youth as most revenue earned within Kenya is spent on buying goods from foreign factories.

Total imports dropped by 0.09 percent, or Sh1.54 billion, to Sh1.756 trillion.

The depressed income from exports reflects a difficult operating environment for farmers and manufacturers, the largest drivers of job creation in the country. Kenya has struggled to diversify her exports away from traditional tea, horticulture and coffee which are largely sold raw, exposing farmers to price shocks in international markets.

CBK data indicates income from tea shipped abroad last year stood at Sh113.67 billion, a significant Sh25.16 billion dip compared with nearly Sh138.84 billion a year earlier.

The earnings from Kenyan tea – used to blend other varieties globally due its superior quality but fetches relatively low value because it is exported raw – were the lowest since 2014 when they stood at nearly Sh94.0 billion.

“Kenya has to overcome some of the structural changes that are happening in its exports markets,” London-based Citi Bank chief economist for Africa David Cowan said.

“For example, Kenya exports a lot of tea to the UK, but tea consumers in the UK are increasingly drinking less of black tea and more of herbal tea. So, Kenya has to re-adjust its market to either meet that herbal tea demand or grow exports in countries like Egypt, India and Pakistan where people drink traditional tea or create new products.”

President Uhuru Kenyatta had on January 14 directed the Competition Authority of Kenya (CAK) to investigate conflict of interest among Kenya Tea Development Agency (KTDA) directors, arguing that the low earnings for farmers could partly have been driven by domestic shortcomings such as poor governance.

KTDA manages tea produced by smallholder farmers, estimated at more than 60 percent of the total produce, and whose earnings fell to a six-year low of Sh69.7 billion in the year through June 2019 from Sh85.7 billion a year earlier.

“There are some of the operational and governance challenges that have emerged in the last few years. Key among these are conflict of interest by (KTDA) directors,” the President said.

CBK data shows that coffee exports fell Sh2.58 billion to Sh20.91 billion in 2019 compared with the year before, while horticulture’s rose Sh5.04 billion to Sh110.70 billion.

Kenya made expanding penetration of value-added farm produce such as tea, coffee and fruits to China and India a priority under the ambitious Integrated National Exports Development and Promotion Strategy that was launched in July 2018.

The ambitious exports growth strategy targets an average annual growth of 25 percent between 2018 and 2022, culminating in an elusive trade surplus.

Little has been achieved in growing shipments to the two populous Far East markets.