Commodity exchange set to push out informal trade

By September, the Trade ministry hopes to have launched the Uganda National Commodity Exchange to regulate prices and allow online trading, Eronie Kamukama writes.

Whatever middlemen do in the trade value chain, they will soon have to do formally or face punitive action given that government is finalising work on the Uganda National Commodity Exchange.
Last week, Trade minister Amelia Kyambadde said the ministry is working around the clock to ensure the Uganda National Commodity Exchange takes off quickly to streamline the country’s trade.

“We need the national commodity exchange to regulate prices, quality but also to trade online. We have work in progress and we believe by September, we shall be able to launch the commodity exchange,” Ms Kyambadde said during the launch of the National Grain Trade Policy Implementation Strategy aimed at increasing farmers’ incomes and ensuring effective supply of quality grains and cereals.

The National Grain Trade Policy Implementation Strategy spells out several interventions that aim at improving the trade of quality grains through adopting best postharvest handling practices, using modern storage infrastructure and value addition facilities.
Middlemen have for a longtime fleeced Ugandan grain farmers and deprived the country of millions of revenue.

Low prices
Enabling Environment for Agriculture Activity chief of party Mr Milton Ogeda said his findings in Kiryandongo District recently revealed middlemen are buying a kilogramme of maize at Shs250, a price he called “rock bottom.”
“The average farmer realises about nine bags which is about 900 kilos and that would give you Shs225,000 as the gross revenue for this farmer compared to a gross margin of about Shs1m and so the farmer is already at a big loss,” he said.
Asked what kind of punitive action will be taken against informal middlemen, Ms Kyambadde said, “This will be mainly charging them fees or disqualifying them because you have to license everybody dealing in this trade. If you are not licensed, automatically, you will not be able to deal in this trade.”

In Uganda, grains such as maize, millet and sorghum provide food for household consumption, key inputs for manufacturing of animal feeds and are also traded across borders.

Informal trade
The ministry cannot ably quantify its exports because a lot of grain is traded informally but available statistics show Uganda exported 534,000 metric tonnes of grains and earned $253m in 2016. Ms Kyambadde said Ugandan grain traders need to focus on adding value.
In spite of the role informal trade plays in the economy, players in the grain trade agreed that formality of the export trade would create a golden age for the economy.

“This will play a big role in ensuring the incomes that we earn as a country are increased. We earn between 50 and 130 tonnes less than we would have if we exported grain formally, grain that is at least minimally processed and standardised,” Mr Henry Musisi, chief executive officer of the Grain Council of Uganda.
However, should rendering middlemen prove successful, one big fight will remain - improving the quality of grain.

Exports
Potential. Uganda has potential to export and sell up to $260m worth of grain to one market every year.
Challenge. But this will remain impossible as long as it fails to reduce the amount of aflatoxins which are considered harmful once consumed in grain.