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December 09, 2008

Commodities exchange to be introduced in Uganda

by Aggrey Nsekanabo

The Uganda Commodities Exchange (UCE) is soon to be introduced. Its mandate will be to facilitate the procurement and marketing of agricultural produce, mainly maize, un-milled rice and beans to begin with.

According to Alex Rwego, the manager of the European Union and Government of Uganda- funded UCE, it will help link farmers and buyers trading in these commodities and introduce the Warehouse Receipts System.

"Our main goal is to link farmers to markets and formally commercialise agriculture. We are partnering with operators of warehouses and we are funding the renovation of the existing warehouses in Kasese, Masindi and Kapchorwa," Rwego explained.

The Warehouse Receipt System (WRS) is a mechanism whereby warehouse managers keep produce in the warehouses for up to six months until the right buyers with the best prices are found by commodity brokers. Rwego explained that when a farmer deposits produce at a warehouse, they are issued a warehouse receipt as proof of ownership with details regarding the type of produce, weight and grade of the produce and date of deposit with a licensed warehouse authorised by UCE.

The UCE with its commodity brokers then takes on the responsibility of searching for the buyers with the most competitive prices. Farmers may be able to use those warehouse receipts as security to obtain loans in banks to pay for school fees and meet other needs like acquiring property while one's produce acts as collateral security. The banks can always cross-check with the licensed warehouse or UCE to confirm if stock exists for a particular farmer.

To the buyers, the opportunity lies in obtaining produce from one point of sale other than roaming villages. It also helps the buyers to get the right quantities and of the right quality.

There is also a massive opportunity for banks to cash into commodity trading. All payments are done electronically into the bank accounts of the respective farmers whose produce was bought off. This will also encourage farmers who have been ignored by most banks, thereby boosting banking trade and possibly a banking culture and increased savings.

Already UCE has advertised job opportunities for commodity brokers. This is a new opportunity for young men and women to act as commodity brokers on the Uganda Commodities Exchange in the same way it is done on the Stock Exchange Markets. Since the WRS is electronically managed and internet based, there will be increased ICT access in the rural areas like Kasese, Kapchorwa and Masindi where UCE is in final stages of refurbishing existing warehouses and setting up internet connected computers as part of the deal.

The UCE has already funded refurbishment of the western Uganda based Nyakatonzi Co-operative Union warehouse in Kasese district at a cost of UShs 45million to cater for maize and rice storage. The Masindi one in the mid west of Uganda is in the final stages of construction while UCE has rented a big warehouse in Jinja district to cater for maize and beans for the mid eastern districts of Bugiri, Iganga, Kamuli, Jinja and Mayuge.

Analysts said this will be one of the ways that would help concretize government's efforts to modernise and commercialise agriculture; making it more profitable, competitive and sustainable and lead to increased incomes for the condemned Ugandan farmer.The operationalisation of the UCE is in fulfillment of Uganda's Plan for Modernisation of Agriculture (PMA) whose comprehensive seven-tier strategy that included market linkage, has been silent.
East African Business Week

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