Govt’s intervention in agricultural sector undermining ZAMACE – CUTS

The Consumer Unity and Trust Society (CUTS) says government should establish a legally-binding document that outlines its interventions in the agriculture sector to avoid inconsistency and unpredictability of policies.

And CUTS has observed that government interventions and limited participation of the financial sector has continued hindering the Zambian Commodity Exchange (ZAMACE) from achieving its full potential in developing the country’s agricultural sector.

In a statement, CUTS centre coordinator Chenai Mukumba noted that ZAMACE plays a crucial role in the agricultural sector, and that it is important that government starts making more use of it.

“Some of the things that have continued to affect ZAMACE have been the inconsistency and unpredictability of government policy, therefore, we recommend that: A legally-binding document that establishes the principles for government intervention in agriculture needs to be established. The Agricultural Marketing Bill would be a first step to achieving this role as it establishes an Agricultural Marketing Council. However, some stakeholders are of the view that such a council would be limited in scope. Rather, the proposed recommendation is that the sector requires a council that has a purview much wider than marketing and instead, supports the government on all aspects of the agricultural value chain and not just marketing. There [also] needs to be a substantive institution akin to [the] South African Grain Information Service (SAGIS) or the Crop Estimates Committee (CEC) to provide the necessary information to feed into evidence-based agricultural policy decisions. Such a move would be the first step to building confidence for all actors and would contribute significantly to the success of ZAMACE,” Mukumba noted.

And she stated that there needs to be a strong information exchange system between ZAMACE and partner banks to promote transparency and free flow of information.

“The participation of the financial sector has continued to affect ZAMACE’s performance in many ways. To this end, there needs to be a strong reporting and information exchange system between the exchange and the partner banks. Such a reporting system in Zambia could serve to promote transparency and free flow of information between ZAMACE and the banks, and ideally contribute to confidence-building with the financial sector. Banks should also be shareholders. This has allowed the financial sector in other countries to have an interest in the success of the commodity exchange. Bank participation at this level could potentially also attract other financial institutions. This could play an important role as many banks are waiting to see increased participation by their counterparts in ZAMACE before they, too, can follow suit,” Mukumba added.

Meanwhile, Mukumba stated that a more concerted effort to raise awareness in sensitising farmers about ZAMACE needs to be undertaken.

“ZAMACE plays a crucial role in the agricultural sector and so it is important to start making more use of it. ZAMACE provides benefits for all: if more small-scale farmers were to store their maize and other commodities in ZAMACE-certified warehouses, it would greatly reduce their level of exploitation by middlemen, give them the best possible price for their hard-earned produce and provide them with access to the formal financial sector. Similarly, if more millers were to buy their agricultural commodities from ZAMACE, they would have access to the most competitive prices for their inputs, which ultimately benefits consumers. There are number of issues that are still hindering ZAMACE from achieving its full potential and these are: limited volumes; government intervention and limited participation of the financial sector,” Mukumba observed.

“More concerted awareness raising efforts to sensitise farmers about the exchange need to be undertaken. One of the major reasons for this is that Zambia’s agricultural sector is dominated by small-scale farmers, and ZAMACE has not yet managed to leverage their potential and boost their participation on the platform. Mechanisms that allow farmers to receive some of their cash as soon as they deposit their commodities would improve the participation of farmers, particularly those who know about ZAMACE, but do not participate due to the need to pay for some of their more immediate needs. The Food Reserve Agency (FRA) should seek to purchase at least 50 per cent of its reserves through the platform. This would be the quickest way to address the lack of liquidity and low volumes on the platform. Such a move combined with measures to bring in small-scale farmers would contribute to the issue of ZAMACE’s market thinness,” stated Mukumba.

         

Mirriam Chabala

About Mirriam Chabala

Mirriam Chabala is a Zambian journalist who covers current affairs and writes in-depth feature articles on social issues.
Email: mirriam [at] diggers [dot] news

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