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January 24, 2011

Zimbabwe launches commodities exchange

by Tom Minney

The new Commodities Exchange of Zimbabwe (COMEZ) is open, but no date is yet set for the start of trading. At the launch on 14 January, Industry and Commerce Minister Welshman Ncube said the exchange would be managed by the State, banks and farmers’ unions, according to a report in Bloomberg’s Business Week.

Zimbabwe previously had a thriving Commodity Exchange, which was closed in 2001 when the Government gave the monopoly on corn and wheat trading to the Grain Marketing Board. COMEZ will end the GMB monopoly, although the State will continue to play a strong role.

Bloomberg quotes Ncube saying: “We should create a transparent, open and accessible commodities market where both buyers and sellers can participate knowing the prevailing prices.”

To start with the new commodities exchange will trade only grains, cereals and oil seeds. The chairman of Comez, Wilson Nyabonda (the previous president of the Zimbabwe Commercial Farmers Union) said that private investors would be able to acquire shares in COMEZ.

Zimbabwe needs 2.09 million metric tons of corn (maize) the staple food according to the UN World Food Programme and the Food and Agriculture Organization, but the last harvest was 1.35 million metric tonne (mt) and 1.68 million Zimbabweans depend on food aid. The winter wheat requirement is stated at 410,000-450,000 according to some sources, and the harvest was reported at 10,000 mt.

According to a recent report in the businessdigest of the Zimbabwe Independent, agriculture in Zimbabwe is recovering well, particularly tobacco, partly aided by subsidized fertilizer. However, there is a huge need for financing to rehabilitate irrigation schemes and improving farms, as well as supporting the recently settled “A2 farmers”.

There is a trend to set up commodity exchanges, with strong backing from donors. The leader in Africa is SAFEX, the commodities and futures arm of South Africa’s JSE Ltd. Next is the new and fast-growing Ethiopia Commodity Exchange. There is an Agricultural Commodity Exchange for Africa (based in Malawi but serving smaller farmers in 5 countries) and Nigeria has Abuja Securities and Commodities Exchange. ZamACE in Zambia is active , followed by Uganda Commodity Exchange. Malawi and Kenya ACEs for the domestic market appear to have run out of donor funding, according to web reports and the Kenyan Government and the East Africa Grain Council are considering a replacement in Kenya. Projects and studies are underway in Ghana and Tanzania and Sudan is watching developments with interest.

Commodity exchanges are part of a move to try to revitalize agricultural productivity in Africa and should be seen as part of a holistic solution, including agricultural extension, support infrastructure for small farmers including quality warehousing, and finance as well as market price information.

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