Fresh move to establish commodities exchange

The government has taken a more central role in the push to establish a commodities exchange in Kenya that would make it easier for local farmers to access markets.

In a newspaper statement on Friday, the Ministry of East African Affairs, Commerce and Tourism called on consultants to advice the government on the technical aspects of setting up the Kenya Commodities Exchange (KCX).

Although the ministry envisions KCX as private-sector led, it stipulates that the exchange should be developed in close consultation with a government taskforce that brings together Agriculture and Mining ministries, as well as the Attorney General’s office and the national Treasury.

Kenyan farmers, who often find themselves at the mercy of middlemen, are expected to be the immediate beneficiaries of a commodities exchange.

The exchange would increase transparency in the marketing of agricultural commodities as farmers gain access to real-time information.

“A transparent and efficient marketing system for key commodities in the country will have a significant economic impact in terms of improving the export competitiveness of Kenyan commodities and in stimulating domestic value addition and processing and other post-harvest activities,” said the ministry in a statement.

The exchange will also deal in non-agricultural commodities. This is in anticipation of greater demand for services as Kenya explores its mineral and oil wealth potential.

Beaten by Rwanda

Kenya has been attempting to establish a commodities exchange for the past few years and has been beaten to the punch by Rwanda and Uganda. 

ALTX Uganda opened its doors to Kenyan farmers earlier this year.  

Although the East Africa Commodity Exchange (EAX) in Rwanda has been operational for months, it was officially launched last week by the presidents of Kenya, Uganda, Rwanda and South Sudan.

Following the establishment of a legal framework last year, the Nairobi Securities Exchange (NSE) has applied to set up a derivatives market.

On this market, investors would trade on contracts for delivery of commodities or financial products at a specific date and a specific price.

Although the NSE’s derivatives market is also expected to be beneficial to farmers, the Capital Markets Authority (CMA) said it would differ fundamentally from the proposed KCX on regulatory requirements.

“The commodities exchange envisioned in the advertisement by the Ministry of EAC & T appears to be in nature a spot commodities market which would not fall within the supervision of the Authority.

“However, in the event that such an exchange would ultimately commence to also trade derivatives on commodities, then it would be required to bring itself within the regulatory requirements of the authority,” said the CMA in a statement to the Nation.

The authority also said it was in talks with another derivatives exchange that plans to set up in Kenya “shortly”. 

In June, CMA submitted regulations that will govern day-to-day operations once a derivatives exchange goes live.