Agro commodity trading in East Africa is associated with risks due to inefficiency, which puts millions at risk of food insecurity. In the last decade, national commodity exchanges were established across East Africa. To promote efficient trading of regional commodities going forward, the East African national commodities exchanges can be harmonized. How? This is what SITA’s manual on Integrating East Africa’s Trade Platforms addresses.
Agro commodity trading in East Africa is associated with risks due to inefficiency. Price fluctuations, limited access to finance and lack of storage infrastructure discourage farmers from holding the stock for better price realization. These inefficiencies can lead to food insecurity, which pushes vulnerable people into abject poverty.
As a solution, most African countries in the last two decades adopted the marketing board system to provide secure and predictable markets for local farmers. Most state-run marketing boards handled entire nations’ output of several commodities, with the objective of bringing economies of scale through aggregation and uniform quality with transparent pricing and delivery mechanisms. Unfortunately, most state marketing boards collapsed under the burden of mismanagement, leaving farmers to suffer.
In the last decade, many countries moved away from a marketing board system model and instead established national commodity exchanges. Modern national commodities exchanges create transparent, efficient and structured national trading systems, giving farmers and producers better prices for their commodities and enabling processors to reduce price and quality fluctuations.
Even more recently, global grade is becoming more dynamic African countries are coming together as one marketplace through the African Continental Free Trade Area (AfCFTA). Regional interconnectivity is necessary to promote trade and facilitate improved export competitiveness for farmers throughout East Africa. To promote efficient trading of regional commodities going forward, the East African national commodities exchanges can be harmonized, by synchronizing legal and regulatory frameworks as well as basic infrastructure (including commodities warehousing standards). In addition, integrating East African commodity exchanges with international exchanges in India can bring more trade opportunities and promote South-South trade.
Read the manual here.