The Zambian Commodity Exchange (ZAMACE) has recently announced that it will sign an agreement with Johannesburg Stock Exchange (JSE), the largest stock exchange in Africa, to launch the warehouse receipt system which is meant to raise liquidity of agro-commodities and improve farmers’ access to finance from banks.
The system, which was proposed in 2010 by the United States Agency for International Development (USAID) as an alternative to provide the Zambian agricultural sector with increased flexibility in marketing decisions as well as a mechanism to obtain financing for farm operations, just started with the live test runs at the warehouses and is expected to be launched late this year according to ZAMACE’s Executive Director, Mr. Jacob Mwale.
Under the new warehouse receipt system, a farmer will deposit agro-commodities at certified warehouses regulated by ZAMACE and will then receive a warehouse receipt, which is a certification of legal ownership of a particular commodity stored in a specific location and with specified quality and condition.
According to the United Nations Conference on Trade and Development (UNCTAD), a warehouse receipt will help to raise liquidity by being used as a trading instrument since grain characteristics stored does not need to be verified, something that will allow transfer of ownership without physical delivery.
On the other hand, it will help to improve access to finance by using the receipts as a secure collateral to obtain credit from banks according to its specifications.
It is not the first time Zambia is working on setting up a warehouse receipt system, in the year 2000 it established Zambia Agricultural Commodities Agency (ZACA), with a total capacity to certified 26,000 tons of grain but which merely issued 17,400 tons of receipt commodity to finally cease operations in 2006.