Promoting commodities trading

By Isaac Khisa

Deborah Kyarasiime is the executive director of the Uganda Warehouse Receipt System Authority. She spoke to Isaac Khisa about the new commodities trading system and other issues in the commodity trading industry.

What is your personal philosophy of leadership as a manager?

We are responsible for the implementation of the Warehouse Receipt System (WRS), which involves a whole range of stakeholders including; ministries, government agencies such as Uganda National Bureau of Standards, Uganda Development Corporation, Uganda Exports Promotion Board, Uganda Coffee Development Authority, Uganda National Commodity Exchange, and private sector players through their umbrella bodies plus development partners.

This interrelationship brings about my personal philosophy of leadership as democratic/participatory as opposed to other philosophies, while relating with both internal and the external stakeholders of the WRS.

In simple terms, what does UWRSA do?

UWRSA is the regulator of the warehouse receipt system and it promotes it for other stakeholders. We license storage facilities basing on warehousing standards for safety, issue negotiable warehouse receipts to depositors of commodities, monitor and inspect operations of stakeholders participating in the system, build capacity of stakeholders and resolve disputes especially arising from volumes and standards.

UWRSA also promotes the development of effective and reliable market information systems for the benefit of depositors and buyers, fosters access to receipt-backed inventory whereby commodities are used as collateral to secure financing from financial institutions, and promotes  the development of an efficient commodity exchange with other stakeholders by fronting warehouse receipts as trading instruments on the trading floor.

In what ways does an ordinary trader or farmer benefit from embracing the Warehouse Receipt System?

Though Uganda is still a highly small-holder producer economy, we are beginning to experience a rapid transition from subsistence agriculture towards commercialization especially for grains. This new trading system is directly targeting the surplus stocks that would have gone to waste hence affecting production and productivity.  The warehouse receipt system provides title of ownership -a document of value recognized and tradable anywhere anytime backed by law, enabling a farmer or a trader access credit without holding onto physical goods and hence expanding his or her business.  The system also minimises storage costs because of the economies of scale especially where the insurance industry is involved compared to the risk of storage by the producers or small scale traders. The system offers maximum security of the commodities because the stocks are usually insured against fire, and allied perils, burglary, professional mishaps, staff infidelity and public liability. In addition, quality is assured against vermin, insects, fungi, and moulds.  And most importantly, the warehouse receipt system provides a wider market access for the commodities through the electronic warehouse receipt system (e-WRS), which brings local and regional markets together, minimizing on the marketing costs.

It’s now nine years since the government through an Act of Parliament established the Warehouse Receipt System. What is your assessment of the progress so far?

So far, we have a legal and regulatory framework in place (Warehouse Receipt System Act and Regulations). We now have a Board of Directors is composed of a cross-section of stakeholders. We have revitalized the Uganda Commodity Exchange and will be opening for operations before year end, and producers including small scale farmers and cooperatives, associations, have been sensitized about the new trading system.  A total of 26 warehouses with a capacity of 156,499 metric tonnes have been approved for licencing this October. Financial institutions now acknowledge that financing agriculture through the warehouse receipt system is safe and is good business. Stanbic Bank and Housing Finance Bank have already disbursed more than Shs 10 billion to producers and traders through the warehouse receipt system, and we hope that more stakeholders will come onboard.

What would you say are the major challenges facing the new trading system?

Since the system is not about doing different things, but doing things differently, it requires effective coordination and collaboration with core stakeholders. The main challenge had been the disorganization in the grains and cereals sub sector, which is purely private. Also, there is lack of bulk off-takers at warehouses save for the UN-World Food Programme.

Last year, the East African Community Presidents launched the East African commodities Exchange in Kigali. How important is that to Ugandan traders and farmers?

East Africa Commodity Exchange (EAX) is Rwanda’s commodity exchange which was established in 2013.  Since we are working on integration, Commodities Exchanges were included among other projects to be fast-tracked in the EAC. As such, it was agreed by experts between Kenya, Uganda and Rwanda to expedite the processes and activities that support the already existing national exchanges, and then integrate electronically. This means that the East African Commodities – Rwanda will be able to interface with Uganda Commodities Exchange in Uganda and the Kenya Agricultural Commodities Exchange of Kenya.

Going forward, what opportunities does the UWRSA present to the Ugandan economy?

WRS will first and foremost promote structured trading of commodities, formalize trade and promote standards. This will improve and increase our exports in volumes and value, and enable Uganda become the real food basket it ought to be.

Where would you like to see the Warehouse Receipt System at the end of your tenure?

I would like to see every stakeholder in the structured trading of commodities doing their part and coordinating effectively. I would like to see exports standardized and graded commodities add value to our products due to availability of reliable stocks at warehouses. This will streamline operations, create employment and ensure real time delivery and ensure contract performance.