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

Contents....

• Introduction to EAGC• Key EAGC Initiatives• EAGC WRS programme• Achievements• Challenges • Lessons Learnt

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

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

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

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

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

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

EAGC WRS PROCESS.......

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

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

FARMERS TRAINING.....

SUPPORT TO FARMERS....

GRAIN HANDLING EQUIPMEMENT..

WAREHOUSE OPS TRAINING

GRAIN BULKING & TPT.....

GRAIN WAREHOUSING....

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

EAGC WRS CERTIFIED

WAREHOUSES

WRS Cost Analysis.....

0%

20%

40%

60%

80%

100%

Gogar Farm J.K Koech Minua C. A

STG

TPT

FINANCE

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

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

• 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

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.

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

• 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…….

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”