The United States Agency for International Development’s (USAID) Senior Deputy Assistant Administrator for Africa Ramsey Day delivered opening remarks at the Africa Investment Forum’s (AIF) Investing in Commodities Exchanges session in Johannesburg, South Africa. The interactive session, organized by the Hub and the African Development Bank (AfDB) sought to increase the understanding of the benefits of regional commodity exchanges and to generate broad international support to finance a more transparent commodities exchange system across Africa.
The session highlighted business opportunities within Africa for producers and buyers in a more structured commodities (food) trade eco-system. Large and growing net food imports demonstrate there are substantial markets within the continent that will be worth over US$ 1.0 trillion by 2025. However, currently Africa’s participation in the global agricultural commodity and value-added market remains limited at only 2%. Trade finance is widely acknowledged to be a limiting constraint to expanding both intra- and external agricultural export initiatives. One increasing popular window of opportunity is “warehouse receipts”. Warehouse receipt financing is a lending technique that allows farmers, producers, and traders of agricultural commodities to access bank loans by pledging their warehouse receipts issued against commodities deposited in warehouses.
As was noted by many of the session’s participants, robust warehouse receipt programs and commodities exchanges can deliver the necessary conditions for achieving successful agricultural transformation in Africa. Agricultural commodity exchanges are important within the context of increasing trade among African countries, and growing interest from agribusinesses to source commodities locally. The AIF session closed with a call to action for international financial institutions (IFIs), development agencies, and investors to forge stronger ties between finance and agriculture to broaden investment in commodity exchanges.
Going forward the Hub will continue to work closely with its partners at the Agricultural Commodity Exchange (ACE) from Malawi, Africa Exchange Holdings (AFEX), East Africa Exchange (EAX), Zambian Commodity Exchange (ZAMACE), Alliance for Green Revolution in Africa (AGRA), the USAID East Africa Trade and Investment Hub (EATIH), and other partners to advance regional commodities exchange development through the one-stop electronic trading portal being developed with the Johannesburg Stock Exchange (JSE).