Govt urged to leave Comez
January 6, 2013 in Business
FARMERS have urged the government to stop interfering in the setting up of
the Commodity Exchange of Zimbabwe (Comez), insisting the process must be
private sector-driven to ensure efficiency.
REPORT BY OUR STAFF
Comez was launched two years ago but has not operated because of
bureaucracy, lack of co-ordination between various government bodies and
poor funding.
Zimbabwe Commercial Farmers Union (ZCFU) president, Donald Khumalo,
expressed dismay that there has not been activity on the market since the
launch of Comez, a brainchild of the union and other private sector players.
“It [Comez] would be valuable to farmers, it will unlock the agricultural
sector’s potential while also delivering cost-effective solutions,” he said.
A commodity exchange is an organised market place where trade, with or
without the physical commodities, is funneled through a single mechanism,
allowing for maximum effective competition among buyers and sellers.
For agricultural commodities, trading would be on the basis of warehouse
receipts issued by the exchange operated or approved warehouses which
guarantee quality and quantity of products.
Zanu PF last year resolved to take an active role in the exchange at its
Annual National People’s Conference held in Gweru, adding to the melee
surrounding the much-anticipated exchange.
“Conference resolves that the party takes a leading role in the
establishment of an Agricultural Commodity Exchange that should provide a
vibrant market to drive the agriculture sector,” reads part of the
resolutions.
Industry and Commerce minister Welshman Ncube however, dismissed the idea
saying progress would go on in accordance with a Cabinet resolution passed
last year.
“What I know is that there is a Cabinet resolution for the setting up of the
commodity exchange. How then can the party set up a state institution?” he
said.
Benefits of the exchange for farmers are that it provides a platform for
hedging and price discovery, an increased market, price transparency, risk
mitigation, eliminating delayed payments to farmers.
It also eliminates the need to use title deeds as security for financing
grain production. The exchange would also maintain a system of surveillance,
where experts monitor market player’s behaviour in order to hedge against
manipulation, speculation and other malpractices.
Commercial Farmers Union (CFU) vice-president, Peter Steyl, said the
exchange was an efficient method of providing value for products delivered
by farmers. He also said the process was supposed to be driven by the
private sector to make it efficient.
“We had one which was very useful for farmers about 10 years ago, but it
shut down,” he said.
“This one [exchange] should be private enterprise-driven without need for
government involvement.”
The preceding exchange, termed the Zimbabwe Agricultural Commodities
Exchange folded in 2001 after the Grain Marketing Board (GMB) was granted a
monopoly to purchase wheat and maize.
Market distortions became prevalent as the GMB set the maximum buying and
selling prices. Farmers faced problems ranging from poor pricing, vague
market signs, delayed or no payment at all despite crop delivery and major
challenges of contract farming.
In his budget statement last year, Finance minister Tendai Biti urged
relevant parties to set aside administrative “jealousies” and make the
exchange a reality.
Exchange promotes market sanity: Robertson
Independent economic analyst, John Robertson, said the exchange would be a
good mechanism for bringing about discipline in the market.
It would best serve the interests of competent people farming the land, he
said.
“The ministries must back off, there is no need for officials trying to
regulate things, they should simply set the rules and stand aside. this
should be a private sector-driven process,” said Robertson.
“There isn’t need for government involvement. all this interference is
slowing it down.”