HomeBusinessCommodities Exchange to boost small-scale agriculture

Commodities Exchange to boost small-scale agriculture

 

The development is anticipated to benefit small-scale farmers in the country.

Comez is an organised market place where trade, with or without the physical commodities, is funnelled through a single mechanism thereby allowing effective competition among buyers and sellers.

Speaking at the launch of the commodities exchange on Friday, Commercial Bank of Zimbabwe economist, Ngonidzaishe Murota said the exchange would provide a measure of confidence within the country’s banking sector for more funds to be loaned to farmers.

“The use of inventory as collateral should lead to ease of access to finance and this also lowers financing costs,” Murota said.

Murota said the banking sector had in the past been reluctant to provide long- term loans to farmers not only because of their lack of collateral security but also due to the country’s liquidity crunch.

“A well functioning financial sector will remain an integral component in the operations of the commodity exchange,” he said adding that banks will most likely be inclined to accept warehouse receipts as collateral because they were negotiable and transferable.

In the case of agricultural commodities, trading will be on the basis of warehouse receipts issued by the exchange operated or approved warehouses which guarantee quality and quantity of products.

The use of the warehouse receipt system as the physical storage and delivery mechanism is in line with global trends, also involving the use of an electronic trading system.

Murota said that besides financing the exchange system, banks would play the roles of executing inter-broker settlements, ensuring that strict settlement time-lines are adhered to as well as marketing and information dissemination.

National chairman of the Grain Millers Association of Zimbabwe, Tafadzwa Musarara welcomed the introduction of Comez but urged authorities to address the debilitation of the industry’s operating environment.

“Imports have severely affected the milling industry. From 310 players we now have only 25 who are still functional plus they are operating at 5% capacity utilisation,” Musarara said.

He said the influx of South African imported maize meal was choking local players out of the market as the imports can be sold at cost-recovery prices owing to South Africa’s recurrent surpluses.

A Zimbabwe Farmers Union representative, Prince Kuipa reiterated the need for policy consistency in terms of market liberalisation adding that controls would ‘kill’ the system.

“There is also a need for the adoption of a legal and institutional environment that is supportive of such a market,” Kuipa said.

The commodities market has come at a time when Zimbabwe expects to gain economic leverage through the sale of tobacco this coming season.
Comez enables depositors to sell their grain when market conditions and prices are favourable while eliminating the large number of intermediaries between the farmer and the market, which had become common practice in Zimbabwe.

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