Agric revolution in Ghana

Commodities Exchange, the catalyst

Ghana is working towards setting up Africa’s fourth Commodities Exchange, and market watchers say it might set the stage for a revolution in the country’s agricultural sector that has remained messy since the founding of the country.

The establishment of a Commodities Exchange is expected to bring some form of organisation into the country’s agric sector, resulting in the standardization of agric commodities and the streamlining of the entire food distribution chain.

With the transformation of South Africa, Tanzania and Ethiopia to net exporters of grains following the adoption of Commodity Exchanges, Ghana is expected to go the same way in its latest desire to bring drastic change in the agric sector, which is the main stay of the economy.

Giving update on progress made so far in the establishment of the commodities exchange, Emmanuel Ashong Katai, Head, Research and Market Development for the Securities and Exchange Commission (SEC) told the Financial Intelligence in an interview that the Natural Resources Institute, the consultancy wing of Greenwich University in charge of the project, have submitted the final draft on rules and regulations for the exchange to the securities regulator.

According to him, a series of workshops have been held that aided the consultants to identify the likely challenges the project will have to surmount in the country.

“Having satisfied themselves with inputs from various interest groups at workshops held in Accra, Kumasi and Takoradi, the consultants have prepared a final draft on rules and regulations that would be scrutinized by SEC and government’s economic managers, before it is taken through the due legislative drafting procedures”, Mr Ashong Katai said.

With the establishment of a commodities exchange, graded commodities would be bought and kept at warehouses who would issue certificates to farmer groups supplying these products. Commodities likely to feature on the exchange initially would include maize, sorghum, rice and probably cocoa.

The issuing of certificates upon supply would enable farmers take up bank loans with such certificates of receipt, providing credit for farmers and farming groups.

He explains that these selected commodities would be listed on the Commodities Exchange, providing reference prices with which all market participants would trade.

The inception of trading on the Exchange will allow farmers to sell their wares to warehouse operators ahead of their harvest, contributing to the development of a futures market.

Capital market experts have said that Ghana stands to reap the most benefit from its cocoa if the product gets traded on the local exchange, eliminating the role of numerous middlemen who have amassed wealth from deals in Ghana’s cocoa on commodities exchanges in developed economies.

The project is sponsored by the World Bank as part of the Finance Ministry’s Financial Sector Reform Programme.

In a recent interview, Deputy Minister for Agriculture, Dr. Alfred Tia told the Financial Intelligence that government is in the process of revamping the now defunct Ghana Food Distribution Company (GFDC)’s warehouses to begin to store grain whose bumper harvest is expected this year.

He hinted that government is beginning to look at regulations for the market because Ghana risks continuous grain shortage in spite of bumper harvests since the United Nations food programme currently buys grains from Ghana for African countries under its food support program.

Dr. Tia also disclosed to the FI that South African farmers who have been forced to withdraw from Zimbabwe have been trooping into Ghana to hold discussions with government on possible investments in the country’s agric sector, and said it is a good omen for government’s desire to revamp agriculture to create more employment avenues.

The Deputy Minister was upbeat about the possibility of these large-scale grain croppers from South Africa investing in Ghana.

Commenting on the establishment of a Commodities Exchange in Ghana, Secretary of Dahwenya Rice Farmers Association, Isaac Fianko believes the initiative is long overdue.

“We have been proposing this over the years and so if the state is coming out with it now, it is very pleasing”, he noted.

The Securities and Exchange Commission (SEC) has in recent times stressed the need to strengthen the country’s capital markets as a means of creating wealth for corporate bodies and individuals. It has therefore been working feverishly towards the streaming of the over-the-counter (OTC) markets otherwise known as the unlisted equities market, and has been pushing for the establishment of a Commodities Exchange.