The Role and Importance of Developing Vibrant Commodity ...€¦ · •EAGC WRS programme ......

AFRICA FEEDING AFRICAThe Role and Importance of Developing Vibrant Commodity Exchange Systemsi

Warehouse Receipts SystemsExperiences from Eastern Africa.

Gerald Makau MASILA, Executive Director, EAGC

Presented to the ReNAPRI WORKSHOP4th- 5th Nov 2014, Lusaka, ZAMBIA

Contents....

• Introduction to EAGC• Key EAGC Initiatives• EAGC WRS programme• Achievements• Challenges • Lessons Learnt

EAGC Mandate……

Main Grains/Cereals

•Maize

•Wheat

•Rice

•Sorghum

•Millet

•Beans

•Green grams

•Pigeon peas

•Soya beans

•Teff..Etc... Inclusive…◦ Farmers/Producers – small holder and large◦ Traders, Handlers, Warehouses◦ Processors/Milling/Manufacture

As Members of EAGC…Active, Affiliate, Associate

EAGC Object……• To develop and promote regional

structured grain TRADE • Advocate for an enabling

environment, • Reduce transaction costs, trade

barriers, • Increase incomes/reduce poverty,

improve food security

GRAIN VALUE CHAIN.....

•PRODUCTION ( SMALLHOLDERS 70-80%)

•INPUTS(SEEDS, AGRO-INPUTS, FERTS

•FINANCE ACCESS

•MARKET ACCESS,

•MKT INFORMATION

•RISK MANAGEMENT

•PRICE VOLATILITY

•COMPETITION (INTERNATIONAL/REGIONAL

•POLICY – MACROECON

•FISCAL

•MONETARY

•NATIONAL POLICIES

•IMPORT/EXPORT

•REGIONAL POLICIES(RECS)

•AFRICAN UNION(AUC)

•IGAD,COMESA,EAC

•SADC, ECOWAS etc

Key EAGC InitiativesStructured Trading Systems (STS)

Grades and Standards

Storage and Warehousing, Post Harvest

• Warehouse Receipt System,• Trade Contracts, ADR• Financing Systems –Inventory Credits

-Collateral Management •Grain Trade Platform/Commodity Exchange

Market Information Systems (MIS)

Capacity Building

Trade Policy •Policy Dialogue•Regional harmonization of Trade Policies•Regional Food Balance Sheet•Removal of Trade barriers

Structured TRADING System

SILOSSTORES

WRS

FARMERS/ TRADERS

PROCESS/MILLING

STANDARDS & GRADING

RULES OF TRADE/CONTRACTS/ARBITRATION

TRADING PLATFORM/COMMODITY EXCHANGE

BANKS

ENABLING POLICY ENVIRONMENT/LEGAL & REGULATORY FOR STS

EAGC WRS Programme.....

• WRS Kenya Pilot ...2007

• Development of WRS process & Protocols

• Certification criteria for Warehouses

• Awareness creation to Stakeholders

• Participation of Financial Institutions/Banks

• Farmer/ Trader mobilization to utilize WRS.

• Market linkage – Sale of commodities in WRS

• Market Information Services to support WRS

EAGC WRS PROCESS.......

EAGC WRS PROTOCOLS...• WAREHOUSE CERTIFICATION

– INSPECTION CRITERIA –, INSURANCE, SERVICES

– FACILITY – SILO OR FLAT BED WAREHOUSE

– APPOINTMENT OF INSPECTORS

– ISSUE OF WAREHOUSE CERTIFICATE & WHSE RCPTS

• COMMODITY CARE RULES

• WAREHOUSE RECEIPT REGISTRY

• TRIPATITE CONTRACT – EAGC/WHOUSE/BANK

• RULES OF TRADE & ARBITRATION - ADR

• MARKET LINKAGE/TRADE PLATFORM

WRS ACTIVITIES.......• Warehouse Identification & Certification

• WRS concept awareness creation/sensitization

• Farmer Groups formation & Training

• Grain Aggregation/bulking centres

• Issue of PHH equipment for Quality Control

• Warehouse Operators Training

• Monitoring/Facilitating Grain deposits to Certified Warehouses

• Surveillance, Impromtu Inspections

FARMERS TRAINING.....

SUPPORT TO FARMERS....

GRAIN HANDLING EQUIPMEMENT..

WAREHOUSE OPS TRAINING

GRAIN BULKING & TPT.....

GRAIN WAREHOUSING....

Achievements....• Certified Warehouses – 10 (Ten)

• Certified Warehouse Capacity – 33,705MT

• Commodities Deposited in WRS – 21,000MT

– MAIZE, WHEAT & PULSES

• Total farmers reached – 13,233

• LOANS advanced to date – Kshs.108 Million

• Depositors to date – 1,100

• Financial Inst/Banks - 4

Equity Bank, Krep FSA, Unaitas Sacco, Chase Bank

EAGC WRS CERTIFIED

WAREHOUSES

WRS Cost Analysis.....

0%

20%

40%

60%

80%

100%

Gogar Farm J.K Koech Minua C. A

STG

TPT

FINANCE

WRS benefits• Warehouse Receipt System – is a market instrument that

enables aggregation & safe storage of produce at harvest for eventual release to the market and thereby enable;

– Aggregation of produce from smallholder farmers at village bulking centres to access certified warehouses

– Transaction costs reduced – for farmers, traders, millers etc which allows for increased earnings for all.

– Market Access – Buyers can purchase directly from the warehouses where quality and quantity is guaranteed.

– Finance Access – Warehouse receipts used as collateral for borrowing

– Stabilizing prices – by eliminating excess supply at harvest

EAGC Experience....&..................Lessons Learnt• Warehouse Receipt System(WRS) WORKS!

• It’s a Win- Win for all Stakeholders

– Depositors i.e. Farmers/Traders, Warehouse Operators, Financial Institutions, Commodity BUYERS/Processors/ Consumers

• Risk Management is key –Professionalism & Insurance

• Governance - Roles & Responsibilities clear

• Commodity Trade is key and critical to spatial redistribution of food from surplus production areas to deficit demand areas.

• Region as a unit for production and consumption. Cross border trade in Eastern Africa is the avenue to achieve this.

• However, XBT faces many challenges and barriers, tariff and non-tariff all which increase transaction costs.

EAGC Experience....&..................Lessons Learnt

Lessons....cont....

• TRADE POLICY and predictability of policy is either a support or a disincentive especially to private sector investment in the grain trade value chain.

• MARKET INFORMATION – about available stock levels and to inform POLICY decision as well as supporting buy/sell decision by the value chain actors is necessary.

Challenges.....• Low Awareness & Participation in structure

trade by FARMERS, TRADERS etc

• WAREHOUSE FACILITIES – Under utilized / Few

• MARKET/BUYERS – Low Awareness, Commodity Standards &Grading, Delivery, Procurement Procedure/Tendering

• POLICY – Legislative, Trade/Market limitations

• SIDA - Sweden

• USAID– USAID/Compete

– USAID/MLI

– USAID/Lead

• FSD

• AGRA

• CTA

FAOWFP

CGA/UCEUNCTAD

IFCRESAKSSASARECAICRISAT

ACDI/VOCA/KMPDNile Basin Initiative

EACCOMESA

African UnionAFRACA

aBi Trust -UG

Donor Support Partners

APPRECIATIONS…….

EAGC - Vision

“To be the leading voice for the grain industry in Africa”

Mission.....“To advocate for an enabling environment and promote structured grain trade for optimum stakeholder benefits”