Tea, coffee and horticulture, Kenya’s major foreign exchange earners have performed dismally this year largely because of erratic weather patterns and suppressed external demand which has led to reduced export.
According to the Kenya National Bureau of Statistics, tea, the country’s biggest cash crop by volume, decreased by a marginal 0.9 per cent to 193,241 tonnes in the first five months of the year from 195,091 last year.
“I think probably the biggest challenge right now is the commodity prices and sales in the international market. If you look at last year we had coffee prices perform quite badly but the tea prices were quite strong and we are looking at a trend this year where the tea prices are quite low due to oversupply and the coffee prices are not doing quite well due to the adverse effects from Brazil and other coffee producers,” Moses Kiplagat, managing director of Sasini Tea told CNBC Africa.
Meanwhile, the Horticulture sector has faced problems with firms such as Karuturi going into receivership. This has had a ripple effect on the economy around Naivasha with a private hospital closing down and traders indicating that their sales have reduced. Moreover, unless the Economic Partnership Agreement (EPA) between the East African Community and the European Union is agreed on soon, Kenyan flower exports will from October 1 face a duty of between 5% to 8.5% depending on the season. This is likely to reduce demands and therefore foreign exchange earnings for Kenya.
Recent travel advisories against Kenya have resulted in hotels in Mombasa operating at 30% occupancy levels compared to 60-70% occupancy levels as at the same time last year. This is according to Mombasa and Coast Tourist Association (MCTA) chairman Mohamed Hersi. This points to a reduction in tourist numbers, a situation that presents a challenge to firms in the industry like TPS Serena. The NSE listed hotelier recorded a 71.6 per cent drop in earnings before tax for the year ended June 2014. It will face challenges in getting back to profitability.