In December 2020, the Zimbabwean government launched an agricultural commodities exchange called the Zimbabwe Agricultural Commodities Exchange. The government hopes it will increase market access and farmers' financial viability.

The key players in this exchange are:

Private companies like Financial Securities Exchange Limited (FINSEC), TSL Limited, and CBZ Holdings Limited. They have established the Zimbabwe Mercantile Exchange (ZMX) to enter the Public-Private Partnership (PPP) with the government to launch the exchange.
Finsec will provide the warehouse receipt system (WRS), while the Grain Marketing Board and TSL will provide transport, logistical, and storage facilities for farmers.
Regulatory oversight will be conducted by the Securities and Exchange Commission of Zimbabwe, the Reserve Bank of Zimbabwe, and the Agricultural Marketing Authority.

The History Behind Zimbabwe Agricultural Commodities Exchange

Initially, Zimbabwe had a commodity exchange until it was closed in 2001 when the government gave the monopoly on corn and wheat trading to the state grain procurer, the Grain Marketing Board (GMB). In February 2011, the Zimbabwean government attempted to launch the commodity exchange once again, but due to the lack of political will and funding challenges, the project didn't launch.

Moreover, agriculture once again became a central issue with the land distribution program. Agriculture's GDP contribution, which is always experiencing fluctuations, reduced to less than 9% to its GDP in 2020. The fluctuations are mainly due to political interference and lack of investment.

The land distribution program confiscated land from commercial farmers and put it in communal farmers' hands. Critics of the program noted that these farmers lacked the experience, capital, and machinery to take full advantage of the land's commercial opportunity. But these critics also misunderstood the nuanced value of the land to Africans, which had cultural, spiritual, and historical significance.

But the lack of production from the farms has become a national security threat. Zimbabwe is not producing enough food, has a high unemployment rate, and unproductive industries (including agriculture). Thus, the government is desperate to maximize critical assets like farms.

The Possible Benefits of the Exchange

The exchange will utilize the WRS to ensure future delivery contracts for graded commodities such as grains, cotton, sugar, and coffee are bought and sold, so the government will no longer have to fix the prices of agricultural commodities.

The government hopes that the exchange will bring:

Various key players in the agricultural sector together, namely farmers, buyers, regulators, retailers, banking institutions, and warehouse operators
Direct access between farmers and buyers while closing arbitrage gaps caused by the middlemen
Efficient price discovery
Logistical and storage support for farmers

Learn More with EXIMA

EXIMA is here to help make your entrance into the world of international business and trade smooth and easy. Join our network of trade experts today!

#EXIMA #exchange #agriculture #agriculturalcommodity #Zimbabwe #benefits