‘Commodity exchanges can open doors for all’

Seven of those companies showed impressive stock gains, and by November 24, the All-Share Index had climbed 26.48 percent, reaching 1,149.97. Still, this was just shy of the 28 percent gains in 2007 and 27 percent in 2014.

The bulls driving this surge were Umeme, MTN, Stanbic, Quality Chemical Industries, and Bank of Baroda. Their success stemmed from a recovering economy, strong financials, and generous dividends to shareholders.
However, not every company managed to attract investor interest. Those that failed to convince shareholders struggled to see their stock move, creating a drag on overall market activity.
A key issue here is liquidity. Both retail and institutional investors find it difficult to buy or sell shares, and the numbers bear that out.

The Uganda Securities Exchange (USE) has the lowest liquidity in East Africa, with only $5,000 (Shs18.2m) in daily trades, compared to Kenya’s $1.5m.
Mr Paul Bwiso, the chief executive officer (CEO) of USE, points to a fundamental issue: “With institutions holding assets and only selling when performance dips, there’s little incentive to trade. It’s a demand-supply imbalance, and it’s structural.”
The Capital Markets Authority, the regulator, is aware of this challenge and is working on new regulations to expand the range of products institutions can trade to boost liquidity.

A baby is born

Amid all this, a new development has emerged—the Commodities Exchange. Think of it as an exchange but for commodities instead of stocks. It offers a fresh asset class for investors, separate from securities and bonds. Mr Bwiso recalls the idea first being pitched in 2018.

“It was a challenge. We had to work through internal rules, regulations, pro- cesses,and engage with partners like the Uganda National Bureau of Standards (UNBS) and the Warehouse Receipts Authority,”he remembers.
After extensive brainstorming and collaboration within the ecosystem, USE submitted a licence application to the regulator. By December 2021, it had secured approval to operate.

Mr Bwiso and his team were well aware that this new venture—trad ing in commodities—was a completely different ballgame compared to equities and bonds. So, they proposed a 24-month pilot programme, which the regulator accepted.

“We kicked off the first pilot in Jinja with Agroways. We set up systems, brought in the technology, trained people, and started having conversations around quality grains,” Mr Bwiso explains. 
“But we quickly hit the same challenge the government had been facing—aflatoxins.”

He points to maize as an example: “UNBS grades maize into Grade 1, 2, and 3, but the market wasn’t trading in grains. It was trading in processed and unprocessed maize. Processed means the grain is cleaned, dried, and tested for aflatoxins. Unprocessed means you buy maize as is—dirty and ungraded—and then figure out how to clean it.”

The exchange,working closely with the Agriculture ministry, aimed to bring its first batch of grain into Agro, one of the approved warehouses.However,the hurdles were significant.

UNBS sets strict warehouse standards, but the exchange also had its own criteria: the warehouse had to be a registered company, meet all quality standards, be insured, secure, and so on.

Mr Bwiso shares: “We worked with the Grain Council, formed some partnerships, and moved forward. But when we brought in our first truck of maize, it failed to meet the required standards. The maize was poor quality.”

Still enthusiastic 

Despite this setback, Mr Bwiso says the farmers were enthusiastic about the model.

“They liked the idea because when they brought their grain into the warehouse, it was cleaned, dried, and stored prop erly. That meant it could last longer and be graded, giving it a marketable price,” he says.
This process also opened the door to financing.

“Farmers could get loans against their stored grain. The Uganda Commodity Exchange (UCE) would guarantee the transaction, managing the collateral and overseeing the process.

Once that’s done, we issue a ‘silo certificate,’ which is then listed on the exchange. That certificate confirms the quality of the maize—whether it is Grade 1, 2, or 3 allowing it to be bought and sold on the market,”he adds.

In short, the model creates a structured, transparent way for farmers to access capital while ensuring the quality of their commodities.

Despite the early challenges,the potential for a more efficient and reliable agricultural market in Uganda is clear.
The local exchange went through the process, learned valuable lessons, and gradually got to a place where things started falling into place.

Now,it has its first contract, and though it’s still in flux—coming and going—it marks a significant milestone.
 Of the nine warehouses it reviewed, five were admitted and two were rejected.
Currently, it is working with three active warehouses, and it is improving their standards to ensure it meets the criteria.

The next challenge is building the relationship with the farmers. For instance, a farmer brought in 16 tonnes of GradeTwo maize, which was cleaned, graded, and now has a potential buyer at a higher price per tonne.
Mr Bwiso explains that the grain is treated much like a company listing: “You can only trade when you have something to list.”

Right now,the exchange is dealing with five core commodities: maize,beans,sesame,sorghum,and soya beans.
“And now, we’ve added paddy rice to the list, making six. These are the commodities we’ve developed standard contracts for, covering everything from grain quality to aflatoxin levels,”he says.
The goal is to prepare for the harvest season, which begins in January and peaks around March.

“During this time, prices are typically low, but they rise as the dry season progresses. We’ve done a lot of groundwork and are now deep in the details of preparing for January’s grain.”
The process is straightforward: farmer groups bring their grain to the warehouse, where receipts are issued,and the grain is listed on the market for trading.
Meanwhile, the exchange is also engaging with millers, schools, large buyers, and even international partners like those in Kenya.

Towering challenges

The challenge is that this model is different from trading equities.
“It’s more similar to the bond market—where deals depend on who knows what and when. But the key difference is that here, you’ll know the daily market prices of quality grain, which is a big shift.”
The hurdles are not small. Running operations in rural areas, training farmers, and managing language barriers are all part of the challenge.

But Mr Bwiso is optimistic: “The warehouses have been very supportive. If we get this right, the warehouses, millers, and everyone involved will profit. We’ll also solve one of the government’s biggest problems: ensuring grain quality.”
This shift is already attracting attention from schools and government buyers.

“The government has said ‘If you’re buying grain for schools, make sure it’s top quality.’ So, we’re working with UNBS on QMARC coding and following PPDA [Public Procurement and Disposal of Public Assets Authority] guidelines to make sure everything is up to standard.”
With strong collaboration between stakeholders, and clear bjectives in sight, Mr Bwiso is confident: "It’s still early, but the potential for this model to transform the marketplace is enormous."

When the grains come in, they’re carefully bagged, labeled, and processed by UCE. Here, they’re weighed, cleaned, graded,and prepared for the market.
In parallel, UCE is working closely with banks like dfcu and Uganda Development Bank (UDB, who are interested in providing funding to farmers upfront.

This allows for collateral management, ensuring farmers can access financing based on the value of their grain.
Mr Bwiso adds: “The reason we haven’t launched on Medina yet is because we’re still in the learning phase.
We’re not quite there yet, and we want to fully understand the dynamics on the ground.What works in Gulu is not necessarily the same as in western Uganda or eastern Uganda. Each region has its own unique challenges, and we need to be sensitive to that.”

Solutions at farmer level

With that in mind, Mr Bwiso and his team are giving themselves 18 months to fully refine and scale the programme.

“We benchmarked the Ethiopian Commodities Exchange, the South African Suffix, and even looked at models in Malawi and Nigeria. The potential for growth is enormous. If we get it right,the impact will be profound. You won’t even need to ask about it because it will be a success.”

The key, Mr Bwiso says, is solving problems at the farmer level.
“If you can solve the problems farmers face—whether it’s securing fair prices or protecting their harvests—you solve the grain market. Uganda is a food basket. If we can protect that food, give it a longer shelf life, and ensure farmers get better prices,we create a sustainable market.”

As for the competition, Mr Bwiso is aware that other entities, like Hensley, are trying to implement similar models.
“Yes, we’re aware they’re doing something similar. We’ve spoken to them, and we’re open to collaboration. If they bring funding to the table, we’d be happy to partner. But we’ll continue executing our vision regardless. If they have money, will they offer it? If they want to partner, we’re open to it. It’s about mutual benefit.”

Mr Bwiso sees a future where UCE’s commodities exchange not only supports farmers but also helps investors find opportunities.
“If Hensley or others come in as market makers, they can finance farmers in advance, make returns, and help build the market. It’s about creating a solution that benefits everyone involved—the farmers, the investors, and the market as a whole.”

Commodity exchanges in Africa have become vital platforms for trading both agricultural and non-agricultural commodities.
They provide essential services such as price discovery, risk management, access to finance, and the establishment of quality standards.

These exchanges contribute to greater market efficiency, price stability, expanded market access, and financial inclusion. To unlock their full potential, however, overcoming challenges is key.
Issues like inadequate infrastructure, underdeveloped regulatory frameworks, limited capacity building, and weak integration across value chains must be addressed.