Govt allocates $500 000 for commodities exchange

HARARE - Government has allocated $500 000 towards establishment of the Commodity Exchange of Zimbabwe (Comez).

Finance minister Tendai Biti said he expected the exchange to commence operations soon, ahead of the 2013/14 agricultural season.

Comez — which has been on the cards for the past four years — is targeted at playing a key role in unlocking agriculture sector funding.

“The exchange should bring about market discipline, eliminate delayed payments to farmers, as well as ensure a competitive price regime for agricultural produce,” Biti said on Tuesday.

He said the commodity exchange, which will offer spot markets where payment is immediate, is anticipated to ensure efficiency in the marketing of the country’s agricultural products.

A commodity exchange is a market where various goods and derivatives are traded.

Most commodity markets across the world trade in agricultural products and other raw materials including wheat, barley, sugar, maize, cotton, coffee, oil and metals among others.

Other sophisticated products may include interest rates, environmental instruments, swaps, or ocean freight contracts.

Previously, Zimbabwe had a thriving commodity exchange that was closed in 2001 when government granted the Grain Marketing Board (GMB) the exclusive licence to buy maize and wheat.

However, in 2009, government liberalised the market following GMB’s failure to pay farmers timeously.

“We welcome a situation where GMB is the buyer of last resort as opposed to the current system where GMB is the buyer of first resort,” Biti said.

Market observers say the setting up of a commodity exchange will assist in mobilising financial resources, which are fundamental in funding agricultural products and eliminate monopolies enjoyed by various entities in marketing and purchase of agricultural products.

Exchange will provide information and hints on which crops have a deeper market and greater profit margin before investment is made by the farmer or market participants.

With the advantage of more market players and reduced monopoly power, it is also anticipated that liquidity will increase through clearing house.

Zimbabwe recently engaged Malawi’s commodity exchange seeking advice on how to re-establish a similar trade platform.

Commodity exchanges are part of a move to try to revitalise agricultural productivity in Africa and should be seen as part of a holistic solution, including agricultural extension, support infrastructure for small farmers including quality warehousing, and finance as well as market price information. - John Kachembere

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