Region close to having a commodities exchange

Nakasero Market in Kampala, Uganda. The establishment of the commodities exchange will foster regional integration. PHOTO | FILE 

By JAMES ANYANZWA, The EastAfrican

In Summary

• A commodities exchange is a market where commodities such as agricultural products and derivative products such as futures contracts are traded.
  However, no contract based on commodities will be traded on the EAC’s commodities market in the beginning.
• Rwanda already has a functional commodities exchange that is private sector-driven while Uganda’s Cabinet has approved the regulatory framework for the establishment of the market, which is now awaiting parliamentary approval.
• Rwanda’s Commodity Exchange Bill is before parliament for approval while local shareholders are expected to acquire more shareholding in the exchange.
• Kenya prepared a Cabinet memorandum for the creation of the commodities exchange after completing a feasibility study in June.

East African countries are inching closer to the establishment of a harmonised commodities exchange that will ensure food security and stabilise prices of non-perishable agricultural crops within the region.

The commodities exchange is also expected to foster regional integration and bolster the bloc’s negotiating power with the rest of the world in the pricing of key exports.

Kenya, Uganda and Rwanda, under the Northern Corridor Integration Projects initiative, have agreed on the need to run a joint commodities exchange and warehouse receipting system to ensure transparency in standards and pricing of farm produce.

The three countries agreed on a group of 18 commonly tradable commodities to be traded on the exchange, of which five — wheat, maize, beans, milled rice and dried soya beans — have been earmarked for initial trading.

The prices of the crops will be determined by the forces of supply and demand.

Standards of quality and quantity will be harmonised across the region.

The heads of state of Kenya, Uganda and Rwanda agreed that each country set up its own commodities exchange but harmonise trading regulations with the rest of the member states.

“Each country is going to establish its own exchange but will have to harmonise the standards, legal framework, institutional framework and warehouse receipting system,” said Richard Sindiga, director of economic affairs at Kenya’s Ministry of EAC Affairs, Commerce and Tourism.

Each country is expected to create its own private-sector-driven commodities exchange that will be linked electronically to facilitate interaction between buyers and sellers from all the partner states.

The establishment of a commodities exchange is part of the Northern Corridor Integration Projects of which Tanzania and Burundi are not members. The Northern Corridor is the transport strip linking the landlocked countries of Rwanda, Uganda, Kenya and South Sudan.

Among the projects under the initiative are the standard gauge railway line, development of an oil refinery, a crude oil pipeline, tourism and power generation, transmission and interconnectivity.

A commodities exchange is a market where commodities such as agricultural products and derivative products such as futures contracts are traded.
However, no contract based on commodities will be traded on the EAC’s commodities market in the beginning.

Rwanda already has a functional commodities exchange that is private sector-driven while Uganda’s Cabinet has approved the regulatory framework for the establishment of the market, which is now awaiting parliamentary approval.

Rwanda’s Commodity Exchange Bill is before parliament for approval while local shareholders are expected to acquire more shareholding in the exchange.

Kenya prepared a Cabinet memorandum for the creation of the commodities exchange after completing a feasibility study in June.