Lusaka, May 04, 2018
‘We need to start talking more about ZAMACE’
On 3 May 2018 CUTS submit a report entitled ‘Promoting Agricultural Commodity Management in Zambia’ to the Ministry of Agriculture.The objective of the report was to provide specific, practicable recommendations that can aid in addressing some of the existing issues in the Zambian Commodity Exchange (ZAMACE).
The report revealed that ZAMACE plays a crucial role in the agriculture sector and so it is important to start making more use of the (ZAMACE).ZAMACE provides benefits for all: If more small-scale farmers were to store their maize and other commodities in ZAMACE-certified warehouses it would greatly reduce their level of exploitation by middle men, give them the best possible price for their hard earned produce and provide them with access to the formal financial sector.Similarly, if more millers were to buy their agricultural commodities from ZAMACE they would have access to the most competitive prices for their inputs – which ultimately benefits consumers.
According to the report, there are three main issues that are still hindering ZAMACE from achieving its full potential. These are: limited volumes; Government intervention and limited participation of the financial sector. Drawing on interviews with key stakeholders in Zambia and best practices from other commodity exchanges in sub-Saharan Africa, CUTS recommended a series of policy recommendations which are focused on addressing these three barriers.
1. Limited volumes has continued to severely limit the effectiveness of ZAMACE therefore:
- More concerted awareness raising efforts to sensitise farmers about the exchange need to be undertaken. One of the major reasons for this is that Zambia’s agricultural sector is dominated by small scale farmers and ZAMACE has yet managed to leverage their potential and boost their participation on the platform
- Mechanisms that allow farmers to recieve some of their cash as soon as they deposit their commodities would improve the participation of farmers, particularly those who know about ZAMACE but do not participate due to the need to pay for some of their more immediate needs.
- The Food Reserve Agency should seek to purchase at least 50 percent of its reserves through the platform. This would be the quickest way to address the lack of liquidity and low volumes on the platform. Such a move combined with measures to bring in small scale farmers would contribute to the issue of ZAMACE’s market thinness.
2. The second issue that has continued to affect ZAMACE has been the inconsistency and unpredictability of Government policy, therefore we recommend that:
- A legally binding document that establishes the principles for Government intervention in agriculture needs to be established. The Agricultural Marketing Bill would be a first step to achieving this role as it establishes an Agricultural Marketing Council, however, some stakeholders are of the view that such a council would be limited in scope. Rather, the proposed recommendation is that the sector requires a council that has a purview much wider than marketing and instead supports the Government on all aspects of the agricultural value chain – not just marketing.
- There needs to be a substantive institution akin to South African Grain Information Service (SAGIS) or the Crop Estimates Committee (CEC) to provide the necessary information to feed into evidence-based agricultural policy decisions. Such a move would be the first step to building confidence for all actors and would contribute significantly to the success of ZAMACE.
3. The third issue that continues to affect ZAMACE’s performance has been the participation of the financial sector. To this end we recommend that:
- There needs to be a strong reporting and information exchange system between the exchange and the partner banks. Such a reporting system in Zambia could serve to promote transparency and free flow of information between ZAMACE and the banks, and ideally contribute to confidence building with the financial sector.
- Banks should also be shareholders. This has allowed the financial sector in other countries to have an interest in the success of the commodity exchange. Bank participation at this level could potentially also attract other financial institutions. This could play an important role as many banks are waiting to see increased participation by their counterparts in ZAMACE before they too can follow suit.
For further information please contact:
Chenai Mukumba, Country Coordinator at email@example.com. firstname.lastname@example.org or 097 8055 293.