Crop exchange model impresses Kikwete

ECX Commodity Brokers
The establishment of Tanzania Commodities Exchange (TCX) is a timely idea to check against unregulated actors, uncoordinated markets and poor information amid high risks and costs.

Subsequently, TCX would be modelled in a way that served best the interests of smallholder farmers and not middlemen, exporters or politicians.

And the best model for Tanzania was the Ethiopian Commodities Exchange (ECX) that impressed President Jakaya Kikwete and his delegation that toured the centre early this month in Addis Ababa, Ethiopia.  The President, during the tour, directed the capital markets authority to borrow a leaf  from the book of the ECX in the establishment of TCX as it was pro-farmers and not traders.

“There is no need to shop around for the best commodity exchange modalities, you (CMSA) should emulate the Ethiopian model,” Mr Kikwete said.   

In the tour,  the President, who was accompanied by the Bank of Tanzania Governor, Prof Benno Ndulu and Capital Markets and Securities, CEO Ms Nasama Massinda, was briefed on what the best commodity market on the continent has achieved in its four years of existence.

The President, who is an economist, said: “This is the best model which resembles our needs due to the nature and type of commodities traded here.”     

ECX CEO Dr Gabre-Madhin
The President said the war to liberate peasants from the shackles of the buyers who want to profit immensely by exploiting farmers were numbered. 

“The warehouse receipt is here to stay; no one can stop it as our farmers are getting little due to price mismatch. We want to ensure farmers with stable market…the commodity exchange is the right strategy,” he said.

Warehouse receipt models are the cornerstone of commodity exchanges globally.   The President also asked the ECX CEO, Dr Eleni Gabre-Madhin, to generously extend their expertise to Tanzania in its effort to establish TCX,  the wheels of which have been set in the motion. 

Dr Gabre-Madhin told the President they would be more than happy to provide the needed assistance to fellow country within the broader Eastern Africa region.  “I agree. The key message is Africans should control their own commodity prices,” the ECX chief said and added: “Our exchange from the beginning was designed to serve the interests of smallholder farmers and not the elite class.” 

Before the establishment of the ECX, coffee farmers used to receive 38 per cent of the final price but today they get 70 per cent upon selling and full payment the next day.  

Last year, ECX, which is a spot market, traded 504,000 tonnes of various commodities ranging from coffee, sesame, maize, peas and beans and generated 1.2 billion US dollars. 

The exchange has 17 delivery sites that reach about 4.7 million farmers across the country. The farmers are updated by 82 sites that post the exchange prices as they happen during trading in two seconds. The warehouse has capacity for storing 300,000 tonnes. 

EXC has 450 members and 11,000 clients who trade throughout the weekdays. The trading is divided into a span of 20 minutes depending on commodity, quality and grade. 

“Buyers cannot cheat farmers as they know the prices in every second and can also call the exchange to ask for the day’s prices,” Dr Gabre-Madhin said. She said the exchange received 61,600 calls a day that are automatically answered by machines hooked to the commodity trading platform.  

The CMSA CEO Ms Massinda said the government task force has also recommended the ECX model and the formulation of TCX are at drafting laws and regulations stage and will go concurrently with the commodity design levels.   

 “TCX will start with cashew nuts, rice, maize and sesame…other commodities will be included later,” the CEO said, “We have advantages as the base work, that are supported by warehouse receipt model, financial settlement infrastructure, ICT and telecommunications.”

Currently, the ECX carters for coffee, sesame, haricot beans, wheat and maize. The exchange made it possible for all major players in the commodities selling cycle to get a fair and by far,  better deal with the help of commodity brokers.   Everyone from the farmer through the commodity brokers and on to the final consumer of these commodities get their deserved share of the final selling price. 

“This,” Dr Gabre-Madhin said, “is in contrast to the time when brokers were able to cheat the poor farmers by telling them that the price of their produce had dropped drastically in cities and they had to sell at a very cheap price”.
Source: The Daily News,dailynews.co.tz, reported by Abduel Elinaza


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