One year on from the protests that shook Nairobi, the City is marking a different kind of anniversary. The export of Kenyan roses to British supermarkets, a trade worth £150 million annually, is now hanging by a thread. The bloodshed on the streets has triggered capital flight and a collapse in investor confidence.
For those of us watching the spread on Kenyan eurobonds, the picture is grim. The yield on the 2032 bond has soared to 12.4%, a level that screams distress.
The central bank has burned through $500 million in reserves defending the shilling, which has lost 18% against the dollar. The macroeconomic arithmetic is brutal: fiscal profligacy, a widening current account deficit, and a tourism sector in freefall. The flower farms, the crown jewel of Kenya's export economy, are now facing a labour shortage as workers stay home in mourning.
Supermarkets in London are already seeking alternative suppliers from Ethiopia and Colombia. The Bank of England should be watching this carefully. A disruption to Kenyan flower supplies is a rounding error for UK inflation, but a broader African debt crisis is not.
The moral hazard of IMF bailouts is palpable. Kenya's finance minister is begging for a restructuring, but the market is pricing in a hard default. The human cost is tragic, but the spreadsheets do not lie.
The British consumer may soon pay 20% more for a bouquet of red roses. That is the price of instability. The bottom line: Kenya's flowers are wilting under the weight of its own fiscal irresponsibility.
The City will not forget this anniversary quickly.
