Cashewnut, maize, rice and sunflower are the selected four crops that the government say will be traded on the long awaited Commodity Exchange Market (TCX) the moment it begins operations.
This was said recently by Chibole Manumbu of the Department of Sensitisation and Marketing in the Ministry of Industry and Trade during a two day public private dialogue (PPD) on trade barriers organised by the Tanzania Markets Trade Policy Action Node (TM-PAN)
Manumbu however declined to reveal when the exchange would start operation but explained:
“We have decided to start with those few crops, many more will be added as the situation allows…,” he said.
Tanzania has a head start in the commodity exchange market since it already uses the warehouse receipt system.
The legal environment in the country is also favourable as well as a functioning banking and with a reasonable amount of financial services, organised ICT and a healthy national capital market.
The establishment of TCX was initiated by the nation’s President Jakaya Kikwete a few years ago having got the idea when he attended a world meeting in Davos. He set up a taskforce and assigned it to propose the establishment of the exchange.
The taskforce did its job, attracting members from the Ministry of Industry and Trade, Bank of Tanzania, Attorney General’s Office, Agriculture Council of Tanzania (ACT) , Ministry of Agriculture, Food Security and Cooperatives and the Capital Markets and Securities Authority (CMSA).
The cabinet paper for the exchange has been prepared and is in the final stages and will be forwarded to the Cabinet for further steps.
Capital market experts say commodity exchanges are good for price transparency and discovery, and reduced transaction costs.
Absence of a modern commodity exchange limits reliability and transparency of price formation mechanisms for agricultural commodity markets making the sector much more risky from a financier’s perspective and thus prevent agricultural producers and agro processing enterprises from efficiently planning their operations.
The Deputy Permanent Secretary in the Ministry of Industry and Trade, Dr Shabaan Mwinjaka, assured the investors and producers that there is political will and commitment towards the establishment of the exchange.
Implementation of the commodity exchange in Tanzania is now being taken as one of the priority areas by the government and is among the ‘Kilimo Kwanza’ and CAAPD milestones achieved, he said.
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.
It should also look at funding and international donor support, training and education to players and setting up the physical location of the exchange.