Companies importing goods from the UK might enjoy lower prices following the decline of the pound against other currencies.
The Shilling has in the recent months gained significantly against the Pound, trading at Sh123.9 Friday compared to Sh150 levels at the beginning of the year.
This has meant that Kenyans buying goods and services from the UK currently need less currency to buy the same quantity of UK goods. Thus, a stronger shilling means that that Kenyans importing from the UK can get goods at cheaper rates and make a decent margins when they resell them back home.
“Foreign buyers need less currency to buy the same quantity of UK goods. Therefore, a weak pound means UK exporters can sell their goods cheaper and increase their profit margins. A weak Pound should help British manufacturers and exporters,” notes an analysis on economicshelp.org.
The benefits of a stronger shilling against the Pound might be short lived and they might not even be obvious to Kenyans buying UK products especially at the retail level.
For starters, most of imports to Kenya are from the Asian countries of China and India, which is unlikely to shift especially in the short term. This is considering that Kenya is to a large extent a price sensitive market, an area where Chinese goods and services have been able to beat other markets to emerge the largest exporters to Kenya and indeed many African countries.
“In recent years, British exports have proved to be quite inelastic. They tend to be higher value goods and services – less sensitive to price change,” notes economicshelp.org.
Among the major imports are chemicals, manufactured goods, machinery and transport equipment.
Data from the Kenya National Bureau of Statistics shows that the country imported goods worth Sh42 billion in 2015 from the UK. The imports from the European country have been on a slow but steady decline since 2011, only rising momentarily in 2013.
The decline over time is attributed to Chinese influence, which has become a preferred market for goods retailing in Kenya.
UK is the second largest source of imports in Europe after Germany. In 2015, Kenyans imported goods worth Sh47 billion from Germany. Other major source of imports to Kenya include China (the largest with imports from the country totalling Sh320 billion), India (Sh252 billion), US (Sh126 billion), United Arab Emirates (Sh90 billion), South Africa (Sh61 billion) and Saudi Arabia (Sh55 billion)
According to UK’s Department of International Trade, dozens of UK companies operate in Kenya and include Barclays bank, British Airways, BAT, Standard Chartered bank, Diageo, GlaxoSmithKline, Unilever, De La Rue, Finlays, G4S, Tullow Oil and BG Group.
Despite decline in trade with UK and growth in ties with countries like China, UK still sees potential for further trade and business with Kenya. The British Chamber of Commerce notes that Kenya has a central role in East Africa as the largest economy and a gateway into the region.
“The economy is diversified and the financial sector strong, with deep and developed domestic debt markets. Opportunities for UK businesses exist largely in the services sector (tourism, banking, telecommunications, wholesale and retail trade, and business process outsourcing),” said the British Chamber of Commerce in a recent brief.
“Kenya envisages a massive upgrading and extension of the country’s infrastructure. In this regard, the country has highlighted a number of infrastructure projects that present significant opportunities for UK businesses in the coming years.”
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