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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
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Contents....
• Introduction to EAGC• Key EAGC Initiatives• EAGC WRS programme• Achievements• Challenges • Lessons Learnt
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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
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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
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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
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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
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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
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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
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EAGC WRS PROCESS.......
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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
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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
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FARMERS TRAINING.....
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SUPPORT TO FARMERS....
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GRAIN HANDLING EQUIPMEMENT..
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WAREHOUSE OPS TRAINING
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GRAIN BULKING & TPT.....
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GRAIN WAREHOUSING....
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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
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EAGC WRS CERTIFIED
WAREHOUSES
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WRS Cost Analysis.....
0%
20%
40%
60%
80%
100%
Gogar Farm J.K Koech Minua C. A
STG
TPT
FINANCE
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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
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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
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• 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
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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.
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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
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• 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…….
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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”