· Africa’s exports to European countries are being hit badly due to the crashing value of the euro and the British pound (£). High prices of fuel and other inputs sparked by the Russian war, coupled with inflation in Europe and weakening of the currency have eroded the profit margin of the African exporters.
Africa’s exports to European countries are being hit badly due to the crashing value of the euro and the British pound (£). High prices of fuel and other inputs sparked by the Russian war, coupled with inflation in Europe and the weakening of the currency have eroded the profit margin of the African exporters. The steep fall in the value of the UK pound and euro against the dollar and local currency has heavily impacted the contracts previously established by exporters. The crisis is compounded by issues like high freight charges and fuel costs that have led to higher costs of operations.
For instance, in Rwanda due to the high volatility of the Pound, many exporters face losses. It was estimated that airfreight became 21% more expensive because of the Pound value drop. Last week, the value of the pound was Rwf1,204 against Rwf1,065 the previous week. As a result, traders have to spend more pounds or euros in order to get US dollars to pay airlines for the shipment of products, packaging materials, etc. UK, France, Germany, and Switzerland are the major export destinations for Rwanda. Rwandan exporters who get paid in euro or pound by buyers in Europe have to exchange those currencies for Rwandan franc (Rwf) to buy from the local producers
Meanwhile, Inflation in the Eurozone rose to a record of 10 percent in September against 9.2 percent in August. The rising cost of living in Europe and the consequent cut in consumer spending is also affecting the demand from Europe. European consumers have cut spending on Kenyan flowers amid a steep rise in cost-of-living. Kenya’s exports of flowers to Europe experienced the sharpest fall in a decade dashing the hopes of the growers of recovery of the sector from the effects of Covid-19 restrictions. According to the latest data by the Central Bank of Kenya, earnings from horticultural exports fell 11.94 percent in eight months through August to $1.003 billion (Sh120.36 billion) from $1.139 billion (Sh136.68 billion) in the same period last year.
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