By Kingsley Jassi:
The government, through the Reserve Bank of Malawi (RBM), has moved to establish a national commodities exchange to streamline agricultural exports and enhance market transparency.
The facility is expected to provide predictable markets to farmers, agro-dealers, off-takers and exporters while addressing revenue leakages through smuggling and export proceeds externalisation.
The commodities exchange is also anticipated to contribute to the country’s productivity and increase exports with traceable proceeds.
Finance, Economic Planning and Decentralisation Minister Joseph Mwanamvekha told development partners at a recent meeting in Lilongwe that Malawi was losing substantial revenue through unscrupulous traders who smuggle commodities and externalise export proceeds.
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“With the exchange, all agricultural exports will be passing through the facility,” Mwanamvekha said. Agriculture policy expert Candida Nakhumwa welcomed the initiative, describing it as a bold step that would help the government maximise revenue collection and address forex challenges that are being experienced.
However, she cautioned that the facility must draw lessons from past mistakes when a similar exchange by State-owned Auction Holdings Limited failed to sustain operations and eventually closed.
Furthermore, Nakhumwa emphasised the need for a strong legal framework that protects and supports the exchange while ensuring an inclusive governance structure to accommodate diverse interests.
“The government will be able to track exports and this has been a problem in the past. This will help address under-declarations of export earnings.
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“There is a need to ensure availability of an enforceable regulatory framework, proper governance structures are in place and proper capacity building for players that want to participate [in activities] on the platform,” Nakhumwa said.
She added that adherence to standards on commodities would be crucial for the exchange’s success.
Another agriculture policy analyst Tamani Nkhono Mvula said the exchange would change the agricultural market landscape by providing predictable markets and eliminating manipulations faced by smallholder farmers.
He said most smallholder farmers lacked bargaining power to negotiate with traders but a structured system such as the exchange would ensure farmers sell produce at preferable prices.
“Commodity exchanges are one very good way of structuring markets. This will rule out most of the manipulations that smallholder farmers face when selling their produce.
“When you have a structured system like the exchange, most of these challenges are taken away because it is the system that makes sure that farmers sell at preferable prices,” Mvula said.
However, Mvula urged the authorities to ensure that a legal framework, regulations and guidelines that are responsive to the needs of farmers were put in place.
He said a feasibility study would help stakeholders identify gaps, risks and challenges that the exchange would need to address before becoming operational.
