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Kenya ripe for commodity exchange market, experts say

By Patrick Alushula | June 14th 2016

Kenya’s huge agricultural base places it at a prime position to launch run a successful commodities exchange market, experts have said.

Speaking ahead of a Commodity Trading and Risk Management Seminar that gets underway today, Kenya National Chamber of Commerce and Industry CEO Matanda Wabuyele said  such a market would save farmers from low prices offered by speculative middlemen.

“It will be a platform where buyers and sellers meet with certain rules and conditions to ensure that people are able to sell their commodities in a transparent way and hedging against price volatility,” said Wabuyele.

A commodity market trades in primary economic sectors such as agricultural products and minerals as opposed to manufactured products. In the region, Ethiopia and Rwanda have such markets.

Currently, Kenya only exhibits aspects of commodity market. Agricultural products are traded through means such the warehousing and receipting system of National Cereals Board (NCB), the Nairobi Coffee Exchange and Tea Exchange in Mombasa. NCB relies on marketing teams from across the counties who announce prices for farmers to know where prices are better.

However, these are infiltrated by middlemen. According to Wabuyele, Kenya deserves a full-fledged commodities market, with clear rules, trading floor and clearing distinct from Nairobi Securities Exchange (NSE).

Ahead of the United Nations Conference on Trade and Development (UNCTAD) meeting that will also discuss commodity market, the forum will set the scene to take the discussion further. According to John Mwaniki, a senior officer in Agricultural Ministry in charge of Agri-business, the seminar at Windsor Golf Hotel will give the government a chance to learn the skills of running such market. “The issue of price volatility discourages farmers in Kenya. We need organised trade and marketing so that the prices are stable and predictable,” said Mwaniki.

Speaking in the same media briefing, NSE Director of Derivative Markets Terry Adembesa backed the idea, saying NSE is keen on embracing new products. “Agriculture is key driver of economy in addition to recent discoveries in oil and mining sector. There is therefore need to formalise trading infrastructure around these aspects,” he reckoned.

The organisers of the two day event, INTL FCStone, a US-based firm that deals in commodity market are upbeat that Kenya will join 28 other African countries that are also working towards establishing a structured commodity market.

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