Commodities stock exchange to help farmers

Tanzania will be the latest African country to develop a national commodities exchange. It will be a public-private partnership (PPP) between the government and private sector.

“The CSE is a market platform for trading local commodities in a transparent and uniform manner with the view of improving efficiency and profitability of the most dominant sector in Tanzania’s economy,” said Dr Sinare Yusuf Sinare (pictured), Agricultural Council of Tanzania (ACT) Chair Board.

According to him, the CSE will start with spot trading and other derivatives contracts such as trading agriculture outputs, including maize, rice, groundnuts, cassava and cashew nuts.

For the producer, a commodity exchange brings transparency in prices, ability to plan, capacity to borrow more easily from financial institutions and ability to provide farming production estimates.

Maize farmers, for example, continue to be subjected to inconsistent producer prices below their expectations without any formula as to how such prices are arrived at. Therefore, small producers can meet with bigger institutional investors via this platform.

ACT said that the initiative is a positive step towards realising the government’s vision of a revitalised agriculture sector that will support efforts to boost and diversify Tanzania’s export trade as well as maximise the huge potential of the agriculture sector as a key economic trigger.

Agriculture is a dominant sector of the economy that offers informal employment to the vast majority of the country’s population, and that is why there is need for a platform that is backed by a warehouse receipt system as a springboard for national economic growth and prosperity.

This project will move the economy to being export-driven from import-driven, formalise agriculture trading activities and sanitise commercial activities in the sector to attract investments and boost productivity.

The CSE will address challenges facing smallholder growers and associated value chain participants. It will curb the perennial issues of post-harvest losses and access to capital.

“The government recognises the agriculture sector’s viability to push socio-economic growth, and we anticipate that this project will transform the lives of farmers, stakeholders along the value chain, and the Tanzanian economy as a whole through sector productivity and profitability,” said Dr Sinare.

The CSE, which is expected to be fully operational this year, has the potential to transform Tanzania’s agriculture landscape.

The exchange strengthens the position of smallholder farmers who contribute significantly to Tanzania’s economy.

William Ole Nasha, Deputy Minister for Agriculture, Livestock and Fisheries told The Banker that the initiative is what the sector requires to fully explore and transform Tanzania’s agriculture sector.

“The main factor limiting the economic potential of the agriculture sector is lack of a common market that will boost the trust and confidence of farmers, as well as financial institutions to invest extensively in the sector toward economic growth,” he said.

Through this project, agro-processors and sector actors along the value chain will have a reliable supply of quality commodities to push the quest for value addition to local raw materials, ole Nasha noted.

According to him, CSE will address the significant losses in farm produce that constantly happened to the detriment of farmers and society at large.

Felix Mosha, a stakeholder in the agriculture sector, said any commodity exchange that is set up should be run by the private sector and monitored by the government department responsible for agriculture.

However, in today’s environment this is unlikely to work or be as effective as it should be due to a number of factors, he pointed out.

“This will negate farmers’ need for a commodity exchange as prices are set and to some extent negotiated between the contract company and the farmer,” Mosha stressed.

The traditional small scale producers also have their own logistical issues such as transport, access to market trends and price, quality of product, small parcels or quantities of produce and market access among others.

There are small traders or buyers of produce who travel to distant areas to purchase farmers’ produce at farm gates. Prices that are paid to the farmer by these traders for their produce on the whole are way below market related prices of the day.

For a commodity exchange to work one requires large volumes of various agricultural commodities. Large scale and medium scale farmers need to access these funds through banks, small scale farmers need to access finance through micro financiers, he said.

The exchange could also boost commodity financing.