Egypt violence likely to have a significant impact on Kenyan tea exports

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Tea is the highest foreign exchange earner for Kenya and Egypt is Kenya’s second highest buyer.

“It’s going to mean we’re going to see some softness in tea prices, probably some continued softness in the shilling, which has been hit by these Egyptian concerns, tea, reduced tourism, the airport fire, and a couple of other things. So it’s going to keep the shilling on the back foot and keep the tea sellers on the back foot as well,” Kenya-based Rich Management CEO Aly-Khan Satchu told CNBC Africa.

In 2010, Egypt attracted roughly 14 million tourists before the Arab Spring. Since the recent spate of violence, the European Union has issued travel advisories for Europeans travelling to Egypt.

The travel advisory, however, might benefit Kenya and increase tourism numbers. Kenya’s recent Jomo Kenyatta International Airport fire however, which cost national carrier Kenya Airways 300 million shillings in damages, will likely give the country’s tourism a knock.

“Previously when we’ve had these sorts of crises, Kenya tends to win a little bit of business. I don’t think it’s going to be dramatic, but I think it should be helpful, especially given the fact that we had a weak first half in the tourism side,” Satchu explained.

Despite the political instability, the Egyptian pound has managed to stabilise. The stock market however dramatically fell 3.27 per cent on Monday. Historically, gateways to Africa have been through Egypt and South Africa but investors have now ventured deeper into sub-Saharan Africa, resulting in strong economic performance from Kenya, Nigeria and Ghana.

“It’s quite an interesting re-direction of capital flows that we’re seeing and I think this is going to continue, because the risks in Egypt and in part in South Africa will remain elevated for the foreseeable future,” he added.

According to the Tea Board of Kenya, the country exported 421 million kilograms in 2011 and 429.6 million kilograms of tea in 2012. So far, they have exported 204.3 million kilograms of tea this year.  

Kenya’s president Uhuru Kenyatta arrived in Kenya on Monday, where economic and political ties are expected to be discussed between President Kenyatta and China’s President Xi Jinping.

“China was the first to congratulate the government of Uhuru Kenyatta weeks ahead of everybody, that was the signal of how close that relationship is. I think the president himself is seeking to reduce Western influence, increase China’s influence, so he’s embarking on this rebalancing idea,” said Satchu.