Kenya postpones launch of commodity exchange

In Summary

• The exchange will allow farmers to sell their produce at real-time market prices and in the process eliminate the role of the middlemen.

Industrialisation CS Peter Munya
Industrialisation CS Peter Munya

Kenya has postponed the pushed the launch of the national commodity exchange to March, despite allocating Sh2 billion as initial capital for the exchange in April.

 The Trade and Industry ministry had initially intended to kick off the commodity bourse last October  before pushing it to February.

It will grant farmers an opportunity to sell their produce at real-time market prices and cut out middlemen.

"The Commodity Exchange will be up and running in next nine months after President Uhuru Kenyatta signed the Warehouse Receipt Bill 2018 into law,’’ said Trade Cabinet secretary Peter Munya said.

Last year, parliament finally passed the Bill  that is expected to realise the full potential of the agriculture sector after being put in abeyance for three years.

Member states of the Northern Corridor Integration Projects including Kenya, Uganda and Rwanda have been toying around with the idea of a regional commodity exchange since 2015.

Rwanda already has a commodities exchange which is private sector-driven.

The postponement is likely to upset Uganda and Rwanda that have been waiting on Kenya to establish legal and regulatory framework for the operationalisation of the market since 2015.

The exchange is expected to address constraints faced by both smallholder farmers and consumers by providing an organised market through a single platform where buyers and sellers meet.

It will further ensure better farm gate prices for farmers. Other benefits include providing access to proper storage and warehousing especially for primary producers, miners, and farmers during bumper harvests.

The exchange will also facilitate local, regional and international trade, enable price discovery, and offer risk management system.

Further, it will provide stability in product quality, guaranteeing better profit margins and reduce risks associated with lending to the agricultural sector.

Some of the government and private-owned entities likely to be turned to warehouses include Kenya National Trading Corporation, the National Cereals and Produce Board, Kenya Farmers Association and Kenya Planters Cooperative Union.

In April, the ministry announced that Investors seeking to trade in commodities at the Nairobi Securities Exchange (NSE) will have to part with Sh5 million for the establishment of the Kenya National Multi Commodity Exchange (KOMEX).

The exchange will have an inclusive equity shareholding comprising farmers, farm co-operatives, individual investors, institutional investors, financial institutions and foreign investors.