In a noteworthy development, Kenya’s exports to Uganda have exceeded Sh100 billion, marking a significant milestone attributed to the weakened state of the Kenyan shilling against its Ugandan counterpart. Official data for November 2023 reveals that Kenya exported goods valued at Sh105 billion to Uganda during that month alone.
The Kenyan shilling experienced a considerable 17.45 percent depreciation against the Ugandan shilling in the year leading up to November 2023. This depreciation has notably favored Kenyan producers in the iron, steel, and cement sectors, the primary commodities exported to Uganda.
By the end of 2022, a Ugandan trader required 30.18 units of their currency to obtain one Kenyan shilling. However, by November 2023, the same trader needed only 24.9 units of the Ugandan shilling, indicating an advantageous shift for purchasing Kenyan products.
According to the Kenya National Bureau of Statistics (KNBS), the value of goods exported to Uganda during the first 11 months of the year exceeded Sh80 billion, surpassing the total exports of Sh73 billion for the entire year of 2022. This surge in exports is not solely attributed to increased production but is significantly influenced by the weakening Kenyan currency.
Antony Mwangi, Managing Director of the Kenya Association of Manufacturers (KAM), emphasized that the depreciation of the Kenyan shilling played a pivotal role in making Kenyan goods more competitive in the Ugandan market. Mwangi noted, “So it may not be because of the increase of products that we are exporting, it may be because our currency now is weaker.”
In border towns like Busia, reports have surfaced of Ugandans crossing into Kenya to take advantage of the affordability of Kenyan products such as cooking oil, wheat flour, and other household items.
Despite longstanding competition from China and India, Kenyan exports, particularly cement, iron, and steel, have gained an edge in the Ugandan market. This is a significant development considering these are Kenya’s major export commodities to Uganda.
Kennedy Manyala, an economist, highlighted that the cost of production in Uganda is comparatively high, making it more cost-effective for Uganda to import goods and services from Kenya. This trend has reversed the historical pattern where Kenyans crossed into Uganda to access cheaper products.
While both countries are founding members of the East African Community (EAC), the exports and imports between Kenya and Uganda enjoy tariff-free status. This factor, combined with the competitiveness of the Kenyan shilling against the US dollar in the EAC, further enhances the appeal of Kenyan products in the region.
Experts note that the strength of the US dollar continues to influence exchange rates among EAC currencies. James Njoroge, Chairman of China-Dubai Traders Group and a regional trader, emphasized that the dollar acts as a “super currency” determining the value of all other currencies and their exchange rates.
Amid this export surge, Kenya and Uganda find themselves entangled in a trade dispute over Kenya’s fuel import scheme. Kampala alleges unfair treatment, leading to a legal battle at the East African Court of Justice, underscoring the complexities within the regional economic dynamics.
By: Montel Kamau
Serrari Financial Analyst
25th January, 2024
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