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Mthuli Ncube to launch commodities exchange by end November

by Staff reporter
27 Oct 2020 at 17:44hrs | Views
Finance Minister Mthuli Ncube says that Government will launch a commodities exchange by end of November as part of efforts to improve the way commodities are marketed in the country.

Ncube told FinX that the commodities exchange would address the agriculture marketing problems that have been a feature in the country since the 1930s when direct intervention in marketing of agricultural commodities was initiated in 1931 in response to the world depression which seriously undermined the financial viability of the maize industry.

A commodities exchange is an organised market where future delivery contracts for graded commodities such as grains, cotton, sugar and coffee are bought and sold. For Zimbabwe, the need to establish a commodity exchange is inevitable considering the importance in unlocking agricultural finance and market access.

 The idea of a commodities exchange was first mooted in the early 1990s when the Government committed itself to liberalise agricultural marketing. Ncube said just as they had shown determination in launching the Victoria Falls Stock Exchange at the shortest possible time, they were equally determined to set up a commodities exchange before the end of the year. "This will introduce a new way of marketing our produce."

 A commodity stock exchange - the Zimbabwe Agricultural Commodities Exchange (ZIMACE) was born in 1994, a brainchild of the Commercial Farmers Union and then Edwards & Company, a stockbroking firm. The project was abandoned seven years later when GMB was given monopoly over wheat and maize.

Economist Gift Mugano said a commodity exchange would be a panacea for farmers.  

"A commodity exchange is a good thing. 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".

John Robertson, another analyst said a new exchange could only succeed if the government keeps its hands-off grain marketing and stops giving unhealthy subsidies.

"The previous attempts were good but failed because of government interference. If we have a new marketing authority and the government continues to subsidise prices it will break down. At the moment we have a maize and wheat price which is higher than world prices, which is ridiculous".

Source - finx