Trade ministry drafts rules for commodities exchange

The Trade and Industry ministry has prepared draft laws for the establishment of a commodities exchange as it rushes to beat a December deadline agreed among East African countries.

The draft laws include several amendments to the Capital Markets Authorities Act and a set of standards to guide the exchange. Commodities Exchange is a platform where various commodities and derivatives are traded. Agriculture and raw materials like wheat, barley, Sugar, maize and milk are popular products in commodities exchanges.

The draft laws will be presented to the Cabinet when it meets probably next week as the president is in Brussels this week. If the Cabinet approves the proposed laws, they will then be tabled in Parliament.

According to Trade and Industry Principal Secretary Chris Kiptoo, the amendments to the CMA Act will empower the authority to regulate the commodities exchange.

Dr Kiptoo said they expect all legislation needed to set up the exchange to be passed by December. Among the proposals is that the exchange will trade in 18 mostly agriculture commodities.

“We have already developed standards for six commodities and we are working on the rest,” said the PS. He was speaking during a visit to Arrabrawn milk plant in Ireland, one of the biggest milk factories in the country with a processing capacity of 1.6m litres a day.

Which commodities

He however did not divulge which commodities they have drafted standards for opting to wait until the Cabinet discusses the memo before the information is made public.

He is leading a Kenyan delegation to the country that includes agri-processors, Kenya Investment Authority managing director Moses Ikiara and officials from the chamber of commerce, Kepsa and KAM.

Already, the Ministry of Agriculture has tabled the Warehouse Receipt Bill in Parliament, which is needed to operationalize the commodities exchange. It is in the third reading after which it moves to the Senate as most agriculture functions are devolved.

Other proposals include reviving the defunct Kenya National Trading Corporation which will manage the warehouses envisaged in the Bill.

The ministry targets the commodities exchange to be up and running by March 2017. The setting up of the exchange was one of the deals reached under the Northern Corridor Infrastructure Project that brought together Uganda, Rwanda, and Kenya.

Kenya is lagging behind as according to the PS, Rwanda has already set up the exchange and Uganda passed all laws required.

“Each country will set up its exchange then we will later on merge them to create an East African platform,” said Dr Kiptoo. He is the chairman of the regional technical committee working on the project.

According to KenInvest CEO Moses Ikiara, the exchange will help rope in investors and big traders in agriculture who are looking for efficient and predictable markets.

It will help producers to know when to trade and the receipts on certificates a producer gets can be used as a collateral to borrow funds.

Ms Eunice Mutua and Joy Kyula of Select Fresh Produce, who buy and export cereals and fruits, said the exchange will help them negotiate for better prices with farmers.  

“The Futures contracts will also protect us and even farmers from price volatility,” said the exporters.

Exporters have complained that they cannot get enough bulk produce to export as commodities are strewn across the country and it is expensive to aggregate them for bulk export.