Trend of the Shilling exchange rates against the Euro and USD affecting businesses

In the recent past there has been a change of trend of the Shilling exchange rates against the Euro and USD with the shilling losing value against the dollar and gaining against the Euro, at trend that experts say may continue in the near future.  The impact on flower producers and exporters is quite big and this can be explained in 2 ways; our major costs, apart from payroll costs, which include imported inputs and freight cost are in dollars. On the other hand, our main market is in the EU and our sales are in Euros. Therefore while our Ksh value of revenue is falling, our costs are going up. Obviously this will further erode an already suppressed bottom line, coming hot on the heels of challenges related to GSP duty paid as a result of a delayed conclusion of the EPAs.

The flower industry is currently exploring ways of cushioning the sector against the negative impact of this trend. The immediate option is by lobbying the government – the National Treasury and Kenya Revenue Authority, to fast track the outstanding VAT refunds. This will help alleviate cash flow constraints.  Other options include engagement with airlines and shippers to seek possibilities of reviewing freight charges and related costs, also in light of the falling global oil prices. Also, to focus on reducing wastage of products due to rejections at JKIA and interceptions at the market place.

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