The establishment of commodity exchange market in Tanzania (TCX) has gathered momentum, since the cabinet paper was presented by the Ministry of Industries and Trade, reported a senior official in the preparation of the exchange.
The official said that they are in the final stages and will be soon forwarding the completed edition to the cabinet.
Godfrey Malekano, a Capital Markets and Securities Authority (CMSA) consultant, said commodity exchange provides three basic functions, price transparency, price discovery and reduced transaction costs.
“Absence of modern commodity exchange limits the reliability and transparency of price formation mechanism for agricultural commodity markets, which makes the sector much more risky from a financier’s perspective and prevents a big number of agricultural producers and agro processing enterprises from efficiently planning their operations…” he explained.
Malekano noted that Tanzania has a suitable legal environment, well functioning banking and financial services system, organised ICT and a national capital market. Also, enough agricultural commodities and market players with the capacity to learn fast how to use the organised market properly.
As such, he urged the government leaders at the different levels not to ban export of select produce since it create unnecessary shortages and price fluctuation.
“We have witnessed in many areas where there is a ban, there is poor availability of the crops and prices are increased drastically…” he explained.
The Deputy Permanent Secretary in the Ministry of Trade and Industry, Dr Shabaan Mwinjaka, was quoted saying there is political will and commitment towards the establishment of the exchange.
It is now being taken as one of the priority areas by the government and is part of the ‘Kilimo Kwanza’ and CAAPD milestones to be achieved overtime and to achieve this objective, the government formed a task force of officials from the respective ministries, government agencies and the private sector.
He noted that one of the assignments of the task force was to prepare the roadmap for the establishment and development of commodity exchange in the country. According to him, the roadmap should address various issues such as legal and regulatory framework, technology, selection of the commodities to be traded at the TCX, banking and insurance support systems.
Other functions will be, funding and international donors’ support, training and education to participants and setting up the physical location of the exchange. Establishment of the market is expected to improve the agricultural marketing system.
Agriculture is still one of the most important economic sectors contributing about 26 percent to the GDP and 75 percent of the rural livelihood’s income. The sector also contributes 30 percent of the total exports and 65 percent of the raw materials requirements.
Government has committed itself to increase investment in the sector as stipulated by the Maputo declaration which requires African governments to commit not less than 10 percent of their respective national budgets for the agricultural sector.