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Business Reporter
The Zimbabwe Mercantile Exchange (ZMX) says it has opened up the agricultural financing space to the private sector, which should utilise the exchange to address perennial funding issues in agriculture that include post-harvest harvest losses and poor commodity prices.
ZMX is a licenced commodity exchange operating a warehouse system, spot trading platform and recently derivatives market.
It is a private sector enterprise borne out of public-private partnership (PPP) initiative that leverages technology.
ZMX chief executive officer Mr Collen Tapfumaneyi, in a presentation at the Zimbabwe Association of Pension Funds (ZAPF)’s 5th edition of the Principal Officers and Chairman’s Convention in Bulawayo, said in terms of the context of the commodity exchange, there have been quite a number of reforms taking place in the agricultural financing and marketing structure of the country.
“This has opened up the agricultural financing space to private sector participation, and the private sector participation should look at utilising the commodity exchange to address perennial issues in agriculture that include post-harvest losses, mispricing of commodities, where price controls were always the order of the day, and limited access to finance,” he said.
Mr Tapfumaneyi said the establishment of the commodity exchange was provided for in the Government’s strategy papers, especially the National Development Strategy (NDS1).
As such, there have been serious interventions like breaking the Grain Marketing Board (GMB) monopoly in the trading of strategic commodities.
The Government has since opened up the trading of almost all commodities, including maize, wheat and soybeans, that were previously restricted.
“Generally, a commodity exchange is there to provide market access, meaning that you now have an open and transparent market that brings together all the supply and demand sides as well as the financing.
“A commodity exchange also brings in a transparent price discovery of commodities, so that the pricing is not set in boardrooms, but it is a function of demand and supply,” he said.
Mr Tapfumaneyi said ZMX looked at the full cycle of commodities because for as long as people live, they will consume commodities.
“Therefore, we need to grow them. So, the first part is on production financing, which the commodity exchange is bringing in a new perspective in production financing.
“There are various contract funding schemes in the country, such as command agriculture; however, ZMX comes in to provide a structured way in which we can securitise production financing through a variety of instruments that are palatable to the capital markets and financial markets,” he said.
He added that in terms of tenures, ZMX is looking at production financing instruments that are between six and nine months.
“After production, we look at a post-harvest; once the commodity has been harvested, the suppliers of the commodities may be in need of bridging finance before they are ready to market the commodities.
“We then bring in the warehouse seed financing opportunity that now finances not just a small-scale producer but also contractors and corporate farmers who would have a number of commodities that are waiting for the market for the foreseeable future,” said Mr Tapfumaneyi.
On the demand side, he said these commodities have to be processed by other processors, such as agro-millers, and generally they also need some liquidity interventions.
“It’s not possible for any miller to actually have sufficient liquidity to acquire all the commodities that they are going to need for the next 12 months, and they likely rely on bank finance, which is very expensive, given the liquidity situation.
“This is where the coming in of the commodity exchange can come in now for us to introduce instruments that are palatable to both the financiers as well as the millers for them to be able to conduct their business,” he said.
The ZMX also has a sports market that enables those who are in need of the commodity and those who have supplied to then trade through ZMX continuous auctions.
Mr Tapfumaneyi said through the support market, ZMX is also facilitating imports and exports of commodities.
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