Structured commodity trading to stimulate small farmers


NAIROBI, Kenya, April 12 – Coffee farmers are on the verge of getting better prices for their produce as the Capital Markets Authority takes over the regulation of trade in the commodity.

This following the publication of the Capital Markets (Commodity Markets) Regulations 2020 and the Capital Markets (Coffee Exchange) Regulations 2020 by the Cabinet Secretary for National Treasury and Planning, Ukur Yatani , April 3, 2020.

The Capital Markets (Commodities Markets) Regulation 2020 will facilitate the licensing of commodity exchanges, commodity brokers and clearinghouse approval. The regulations further provide for the governance, trading and conduct of the business of commodity exchanges and commodity brokers, including disclosure, compliance and reporting requirements.

Confirming this new development, the Acting Director General of the Capital Markets Authority (CMA) Wyckliffe Shamiah said: “The regulations were developed after a comprehensive consultation process including: a benchmarking with the
jurisdictions; expert review by consultants commissioned by the State Department for Trade and Capital Markets Authority (CMA) as well as broad stakeholder engagement at county, national and parliamentary levels. ”

“In order to address the historical and market structure challenges in the coffee subsector, the Coffee Subsector Reform Implementation Committee (CSIC), of which the CMA is a member, developed the Regulations on capital markets (Coffee Exchange) 2020 for the sector to strengthen successful reform initiatives for the Coffee Exchange anchored in a legal framework, ”explained Shamiah.

The 2020 Coffee Exchange Regulation provides for; incorporation of the coffee exchange; broker licenses; the establishment and operationalization of a direct settlement system for the prompt and transparent payment of the proceeds of coffee sales; the conduct of trade in a safe, stable and transparent manner in an environment of fair competition; and the protection of
the interests of the producer, the buyer and other stakeholders in an exchange.

“The need to develop structured mechanisms for commodity trade in Kenya is underpinned by the recognition that smallholder farmers face several challenges due to market inefficiencies which manifest in the form of inadequacies in the market. supply chain, limited access to credit, inefficient pricing, volatility and poor market access. which leads to high production and marketing costs.

“It is widely recognized that strategies to increase production and food security will be futile if they are not accompanied by efficient and robust storage and raw material exchange systems,” the CMA statement said. published following the Gazette notice.

Shamiah said the publication in the Official Journal of Commodity Market Regulation is aligned with the objective of the Capital Market Master Plan (2014-2023) to position Kenya’s capital market as a center of excellence. in spot commodity markets in agriculture, energy, minerals and metals supported by national derivatives exchanges to stimulate development and
transformation in the country. “This is also in line with the Big 4 Agenda on initiatives to improve food security and nutrition in the country,” he concluded.

The CMA statement said, “The development of structured commodity trading should provide a transparent, efficient and structured trading system, quality assurance for commodities, efficient price discovery and, in the long run, facilitate the improving the competitiveness of Kenyan raw material exports.

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“This is expected to boost domestic value addition and transformation, while improving the country’s food security and developing other non-agricultural commodity value chains,” the statement said.

The Capital Markets Law was amended in 2016 to expand its regulatory mandate for spot commodity exchanges. The Authority, in consultation with the National Working Group on the Establishment of a Kenya Commodity Exchange and Coffee Sector Reforms
The Implementation Committee (CSIC) developed the Commodity Markets and Coffee Exchange Regulations to support the establishment of one or more structured commodity exchanges in Kenya.


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