The Zimbabwe National Chamber of Commerce (ZNCC), a lobby group representing businesses from across the economy, says the Government should expedite setting up of an agricultural commodity exchange to help in market price discovery.
A commodities exchange is a transparent, efficient and organised market for selling agricultural commodities like the tobacco auction floors. Farmers sell at a market determined price depending on demand and supply, which reduces arbitrage opportunities or artificial shortages.
ZNCC made the proposal as part of a wide range of proposals for the 2020 National Budget, which is due in the next few weeks. ZNCC said such an exchange was key for rewarding producers of soya, wheat, and maize imported due to constrained production.
“There is need to implement an agricultural commodities exchange that enables market determination of prices across the board,” ZNCC said. The idea of a commodities exchange has been lingering for more than two decades with little progress in this regard.
The business lobby group said that the setting up of producer prices especially; in a market where prices for inputs and other costs are sky-rocketing was not the best approach to ensure right prices for such commodities.
The exchange would address pricing distortions, such as one instance this year when farmers were paid $12 330 (about US$100 using the market rate from March to May 2020) per tonne when the world price was US$150 before shipping and transportation costs.
Due to inflation, ZNCC said, some farmers ended up making losses for maize delivered to the country’s national grain buyer, which would mean that some of these farmers may not be able to plant again the next season. The business grouping said there is a need to channel more funding to small scale irrigation equipment to mitigate the impact of droughts. The Government can guarantee commercial banks facilities to assessed A1 and A2 farmers.
ZNCC also said the Government should give leeway for the private sector to support agriculture and that the Government cannot continue to be the main player in agriculture funding given the US$3,5 billion obligation to pay former commercial white farmers.
It also said that the Ministry of Finance and Economic Development and Bankers Association of Zimbabwe should put in place a sustainable funding model contrary to grants of yesteryear and that farm land should have value and be transferable.
Studies have shown that Africa’s smallholder farmers, including Zimbabwe, have long been victims of fragmented, disorganised markets where they have had to sell their products at lower than the market price.
As such, commodity exchanges can offer more stable, more ethical trading platforms whereby farmers can benefit from fairer transactions and learn how to make wiser marketing and investment decisions. Experts say there has never been a better time to increase the number of commodity exchanges in Africa and ensure fledgling farmers have better prices. They remain poor because they have no money to buy good quality seeds and fertiliser and no money to invest in machines or techniques that can optimise their farming.