Commodities exchange to end marketing woes

Source: Commodities exchange to end marketing woes | Herald (Business)

Prof Mthuli Ncube

Martin Kadzere
Senior Business Reporter
GOVERNMENT is set to launch the agricultural commodities exchange in March next year that is expected to address agriculture marketing problems undermining market access and financial viability of farmers, a senior official has said.

The Zimbabwe Agricultural Commodities Exchange, to be supported by the Warehousing Receipt System, will offer orderly marketing where future delivery contracts for graded commodities such as grains, cotton, sugar and coffee are bought and sold, Finance and Economic Development Minister Professor Mthuli Ncube said.

Addressing delegates during a post budget breakfast meeting in Harare this week, Minister Ncube said Government “cannot continue setting producer process,” adding the exchange will be in place soon.

The exchange was abandoned when the GMB assumed monopoly over maize and wheat. It is a private sector driven initiative in partnership with Government that is injecting an amount equivalent to US$500 000 as Government shareholding capital.

In February 2011, Zimbabwe launched the commodity exchange but never saw the light of the day due to a number of issues including lack of political will and funding challenges.

Analysts say the need to establish a commodity exchange in Zimbabwe is inevitable considering the importance in unlocking agricultural finance and market access.

“A commodity exchange is a good thing,” economist Prof Gift Mugano recently told the local media.

“It creates efficient market systems with proper price discovery for farmers contrary to the current system where the price is determined by the Government.

“Right now, we have had too many instances of farmers complaining about prices offered by the Grain Marketing Board. A good example of a commodity exchange is the tobacco auction floors. It also unlocks financing; you get a warehouse receipt which you can use as a financing instrument. Finally, you can also attract investors from all over to come and invest in grain production,” he added.

Meanwhile the Government is expanding the role of agricultural extension services to include business advisory as it seeks to transform farmer’s mindset into taking farming as a business.

The agricultural extension services, which offer training and advice to farmers have been unreliable and sometimes non-existent.  This partly contributed to poor agricultural practices, which resulted in low yields for small scale farmers.

In Zimbabwe, more than seven million people work as communal or small scale farmers, according to the UN Food and Agriculture Organisation (FAO) and still rely on indigenous weather-predicting systems and occasional visits by extension officers to get crucial information and advice.

While the effects of climate change is regarded as a major contributor to poor farm yields, lack of information on good agricultural practices takes a fair share of the blame.

In the 2021 National Budget, the Government set aside $2 billion to capacitate extension workers who would now work an expanded role of imparting financial literacy skills to small scale farmers.

“In line with the objective of transforming farmer’s mindset into taking farming as a business, extension services are being transformed to include comprehensive business advisory services, inclusive of training and other skills,” said prof Ncube.

“To address this, Government has already started the process of capacitating agriculture specialists who offer advisory farming management, training or farming skills through acquiring necessary transport, communication and other tools for their work making this  an integral requirement for enhancing the sector and in promoting agri-businesses.

Agricultural analysts have hailed the new thrust taken by the Government as being positive.

“The extension services had become non-existent and this was contributing to poor farm output especially from small holder farmers,” said Mr Gerald Musara, a development economist with a local university.

“What makes the new thrust sweeter is the expanded role these agents will have . . . that of providing business advisory services to empower our farmers with basic business skills. This was long overdue.”