Maravi

ZAMACE records over $8.1m in transactions

ZAMACE records over $8.1m in transactions
By Chiwoyu Sinyangwe
Tuesday June 10, 2008 [04:00]

ZAMBIA Agricultural Commodity Exchange (ZAMACE) has recorded transactions of over US$ 8.1 million involving over 21,620 tonnes of commodities since inception last October, executive director Brian Tembo has said. In an interview, Tembo explained that the creation of ZAMACE would contribute towards sanitisation of the way agricultural related commodities were traded as well as ensuring that there was efficiency in the agriculture marketing system in the country.

He said ZAMACE also guarantees security of transactions and has an arbitration system in place, should grey areas emerge. It also has the country's first market driven laboratory for independent standards testing of ZAMACE standards.

“ZAMACE is a market place where you, through a ZAMACE authorised broker, let others know what you have for sale or what you intend to purchase, in what quantity, quality, conditions and delivery,” Tembo said. “The ZAMACE commission is only 0.15 per cent on the value of the transaction on both the side of the buyer or seller. “You benefit from a transparent price, traceable transaction, independent quality testing and arbitration system for dispute resolution.

Banks and other financial institutions are also able to monitor prices and transactions of those producers they have supported and have firmer indications for future support. ZAMACE does not determine the prices at which commodities are bought or sold at. The willing buyer and willing seller (through their brokers) compare and agree the price based on their clients instructions.”

He also said there was need for all stakeholders in the country’s agriculture sector to support the growth of ZAMACE as it would benefit both the small and commercial farmers in their transactions both at home and abroad.

“Every one thinks the floor price of maize set by the Food Reserve Agency is the optimum price of the commodity in the country. This is not correct and to some extent that distorts the market,” he said. “What ZAMACE want to achieve is to change this perception…FRA is just a player in the market like the millers. In fact, we would desire that stakeholders like millers, both the small-scale and commercial farmers, other organisations like World Food Programme…even FRA to be using ZAMACE in their transactions, after all, all we want to achieve is a sanitised way of trading in agricultural related commodities.”

Tembo also explained that transactions at ZAMACE were done through appointed commodity brokers who are instructed to buy or sell your commodity on behalf of ZAMACE.

He said although ZAMACE did not have a set minimum amount of any commodity that can be traded, in effect, a figure of 30 tonnes is about the minimum to trade to enable transactions become cost effective due to high transport costs.

He also said traders did not need to bring the commodities to ZAMACE but just to make offers or bids and that Lusaka was just being used as a default locations and that adjustments were made as such to factor in the freight costs.

On storage, Tembo said a successful warehouse certification process would reduce risk by providing collateral in a system backed by credible operators.

“When you receive the summary, you will see the bid/offer reflected. If the bid/offer is matched and a trade is closed, you will see the transaction in the closed trade table,” he added. “Clients instruct the brokers how long their orders (bids/offers) should be reflected on the market and can revise the orders depending on market conditions. Client deals take preference to professional (own) deals and brokers are bound by ZAMACE rules and regulations.”

Tembo also said that ZAMACE was working on plans to ensure its presence was wide spread and that information was made readily available to stakeholders, especially farmers in the outposts.

“That's what we want to achieve because we realise that critical many small farmers, the lack of information on alternative offers certainly prevents them from realising tradeable opportunities because everyone FRA is sole authorised buyer. In fact, this year, National Milling is going to buy more maize than FRA. So why not bring all those transactions to ZAMACE,” Tembo said.

On the involvement of international buyers and sellers, Tembo said ZAMACE was open to trading and that the price at ZAMACE for international trade excluded any duty or taxes while transport estimate was about US$ 160 million per metric tonne.

He also said ZAMACE was currently working with other international commodity exchanges like South African Futures Exchange (Safex) of South Africa and the Chicago Board of Trade in the United States.

He however said ZAMACE still faced the challenge of getting smallholder farmers to accept a new way of trading their goods and to accept transparency in pricing.

“The situation where small farmers sell without really knowing if they are getting fair prices for their goods beyond their immediate locale has been the norm in the country until now. For all the upsides of transparency and price discovery, it may take time to change this,” said Tembo.

ZAMACE was funded through the support of among other organisations, the USAid through the Profit programme, as part of its programme to establish an effective warehouse receipt system to make food supply more financially viable. The receipt system allows farmers to store grain against receipts for their goods, against which they can raise finance for replanting. It also allows them to keep their products to ensure better prices outside peak seasons.

It is linked to the regional Agricultural Commodities Exchange (ACE), established in October 2006 and based in Malawi, which gives local participants a linkage into regional markets but it is still relatively inactive.

Labels: ZAMACE

posted by MrK @ 4:40 AM