Brexit impact on floriculture in Africa
Kenyan officials were quick to respond to the market turmoil followed by the UK’s vote to leave the EU. Finance Minister Henry Rotich assured investors that Kenya has adequate foreign exchange reserves to absorb any shocks from the crisis. Kenya has $5.6 billion in foreign reserves, which amounts to five months of import cover, which is higher than the four months the country usually holds.
The central bank also said it would be ready to intervene in money and foreign exchange markets if required. Such assurances steadied the impact on the Kenyan shilling, but some banking stocks still suffered losses. Equity Bank and Co-operative Bank were down over two per cent on June 24, while other stocks were unchanged.
However, there is a risk of capital flight from Kenya as risk-aversed investors seek safe havens. This would weaken the shilling and increase import costs. Kenya’s import bill has steadily increased by more than 10 per cent over the past five years. Another key concern would be that ongoing negotiations of a trade agreement between the EU and the East African Community (EAC) would be delayed as the EU copes with the UK’s departure. The Kenya Flowers Association expects any such delays would cost the Kenya flower industry USD38 million per month. Horticulture is a primary export market for Kenya and over one third of the EU’s cut flower imports, mostly to the Netherlands and the UK, are derived from Kenya. However, it is likely that the UK would prioritise trade negotiations with Kenya given the two countries’ long-standing bilateral relations. Such negotiations could even benefit Kenya and other EAC countries, as Kenya gains leverage over setting trade terms.
Read more at The Nation Nigeria