A presentation by
Trade Policy Team EAGC/EQUITY BANK/COMPETE 29th September 2009
Lusaka, Zambia
The Case & Action for Regional
Structured Trading Systems
About EAGC
• Established (2006) as an USAID-funded RATES program
initiative – with the active encouragement and participation of key stakeholders, including service providers, in the grain
value chain.
• Promotes free trade in grain within a harmonized regional
trade regime - providing small farmers with improved market access.
• Membership has grown to 55 organizations from across Eastern Africa.
Donors and Partnerships
• USAID- COMPETE program support enables EAGC to facilitate smallholder farmers:
– access support services to enable upgrading
– develop & maintain direct linkages with buyers
– increase access to market intelligence.
• USAID – RATES programme was instrumental in establishment and development.
Donors and Partnerships cont...
• USAID-funded Kenya Maize Development Programme (KMDP) serves as an operational link between the Council and small scale maize producers, directly and through their associations.
• The Warehouse Receipt System (WRS) program is supported by the DFID-led Financial Sector Deepening (FSD) program based in Kenya.
• MoU signed with DANIDA (ASPS) Uganda in September 2008, who will be a key partner in furthering the Council’s activities in Uganda.
• MoU’s signed with EAC and COMESA
Mission Statement
•
Our mission is to bring order to the regional
grain trade, practicing and promoting
approaches to trade that help farmers,
suppliers , processors, traders and consumers
transform their businesses and lives
EAGC Membership
•
Eligible Membership
–
All stakeholders along the grain value chain
• Producers, Processors, Traders --ACTIVE
• Service Providers (Warehouse Keepers, inspection, input suppliers)-AFFILIATE
• Financial sector (Banks, Insurance) ASSOCIATE
• Current Members are from UG, KE, TZ, Zambia, RSA & USA
Causes of reduced STS growth in the region;
•Lack of adequate Storage facilitates
• Uneconomical volume from small holder farmers
• Lack of awareness of required standards and grading • Lack of contract enforcement system
Lack of Financial institutions willing to finance small scale farmers
Effects;
•Post harvest losses
• Reduced income
• Reduced selling prices (low quality) • Reduced productivity
EAGC Activities;
•Training on post-harvest handling
• Warehouse receipting system
• Training on grades and standards – quality specifications • Provide and create awareness on the rules of grain trade
– use of contract
– dispute settlement system
• Link traders to potential buyers
Link Financial institutions to farmer groups
Results;
•Post Harvest losses reduced
•Small scale farmers income increased
• Quality product produced and sold • Small scale farmers linked to market
• Financial institutions provide loans to farmers
Enforce Rules of Trade and coordinate arbitration
Provide Warehouse Receipts Protocols • Commodity Care rules
• Appoint Inspectors
• Issue Warehouse Certificate
Print Warehouse Receipt
Register Warehouse Receipt
Benefits of using WRS
Farmer:
• Access to cash while waiting for price increases
• Better sale margins
• Access to a larger more formal market
• Better storage conditions
Government
• Alternative way of managing / financing Strategic Grain Reserves
Trader/Miller
• Access to wider sources of commodity
Warehouse Receipt financing process
Warehouse Keeper
Deposits Produce at the Warehouse Issues Warehouse Receipt
Warehouse Keeper Applies
for Inspection EAGC Appoints Inspector
EAGC Issues Certificate
Farmer/Trader presents WR to his Bank Banks contact EAGC to verify the WR B an k Iss u es lo an BANK
Structured trade financing: Experience in Kenya
(Equity)
Motivation
• Responding to client commodity financing needs
• Recognition of agribusiness sector requirements
• Focus on the value chain
– Farmer, trader, processor, retailer and consumer
• Regional aspect of trade financing
• Support to clients in the region through appropriate financing instruments
• Policy issues that banks are concerned with in effective commodity financing
Training of farmers and small scale
traders
•
Awareness creation
on use of trade
contracts.
•
Use of Warehouse
Receipts.
•
Training on grades
and standards.
Market Information Services
¾ Prices (maize, rice and beans):
o Nairobi, Kampala, Dar es Salaam, Mombasa among others
• To get daily prices on your cell phone send a text message by typing; maize, beans, or rice and send to 8000.
Crop production update (KE,UG,TZ)
¾ Trade projections
• Supply and demand analysis
EAGC Trade Link
Trade linkage between
small grain traders and
large enterprises, such as
processors, government
institutions and food aid
agencies can be a channel
of enhancing
competitiveness while
enabling small-scale
traders access markets and
increase trade.
Towards a Regional Trade Policy Platform
In support of Structured Trading System
The Grain dream of COMESA, EAC and SADC Region
• Free Trade in grain - partially realized through elimination of import duties on intra-regional trade
• Regional policy space for production and intra-regional trade of grain – Realized through definition of Common External Tariff (COMESA, EAC and SACU Customs Unions )
• Regional policies supportive of free market of grain – still a dream because of:
9 Partial liberalization in pricing and marketing of grain not sufficient to support thriving of free commodity markets 9 Export/Import restrictions
9 Lack of enabling legal & regulatory framework
9 Lack of regional quality standards and SPS regulatory framework
Requirements for Regional Trade Policy Platform in
support of Structured Trading System
• Full market liberalization
9 pricing 9 marketing
• Regional grain quality standards
• Regional Sanitary and Phytosanitary framework
• A region devoid of Export/Import restrictions (regional mechanism for management of food security concerns needed).
• Effective regulatory framework that supports functioning of the market
9 Legal framework supportive of WH (functioning law of contract or WR Act) and Commodities Exchanges and appropriate institutional structures.
9 Agricultural Information Act to facilitate collection of market information
• Effective private sector self regulatory framework that resonates government regulatory framework
Time for Action is now!
• Baselines VCA to establish where each of the countries are in respect of the policy platform underway through
COMPETE/EAGC/COMESA (ACTESA) and EAC/
• VCAs covering grain and other staple foods (maize, wheat, rice, beans and pulses and root tubers) and covering key producing and consuming
• Regional policy reform program targeting moving each
country’s policy regime to the optimal regional trade policy platform that is supportive of structured trading system
Action Plan Towards Establishment of Regional Food Balance Sheet
• Regional Task MIS Force – Was set up at the Regional MIS Workshop held between 9th and 10th Sept. in Nairobi.
• National Grain Consultative Forums/Committees – Each country in COMESA and EAC to establish/revamp such committees in order to respond to the regional grain trade and food security agenda
¾ Baseline on survey – institutional framework and current practice in assembling food balance sheet (Sept/Oct 2009)
¾ Establish, through a stakeholder process National Grain Consultative Forum (Nov/Dec 2009)
¾ National Stakeholder Grain consultative forum to prepare 1st All
Stakeholder owned food balance sheet (Nov/Dec)
¾ Consolidation of National Food Balance Sheets (NFBS) into Regional Food Balance Sheet (RFBS) using data/information submitted by NGCFs and posting the RFBS in RATIN – Monthly starting December 2009
¾ Regional Grain Consultative Forum to Consider RFBS(February 2010) – Action EAGC and Partners
