Business Day has a fascinating report on the new Zambia Agricultural Commodity Exchange (ZAMACE) which is breaking new ground in terms of how food is bought and sold in Zambia.
Alongside the usual substantial gains that trade in commodities bring, ZAMACE would contribute towards the development of fair, orderly, and efficient marketing systems, and; moves us towards more efficient and reliable supply chains, thereby helping smallholder Zambian farmers to produce more for the market. This will all contribute towards a growing and competivitive domestic agricultural industry and in turn lead to enhancement of Zambia ’s export competitiveness. There many ways in which it does this, but I have fingered out two specifically . First, it increases transparency and price discovery. That's critical because for many small farmers, the lack of information on alternative offers certainly prevents them from realising tradeable opportunities. Secondly, as ZAMACE grows it should increase the level of trading activity and thereby provide more certainty to farmers atleast at the aggregate level. Partly this stems from increased trading opportunities with international buyers who may distribute demand shocks more evenly (the point here being that trading with several people distributes the risks of "bad times" better than trading with a single person), and also through providing a mechanism efficient and reliable transactions.
Of course that is not say ZAMACE is panacea for agriculture growth or ending poverty. Contrary to recent disgraceful claims of UNECA, no free trade of any kind can ever be a panacea for ending poverty. Similarly, although ZAMACE can contribute towards better long term alignment of supply and demand and provide better regulation of market conduct (through encouraging better trading standards), it will not solve other agricultural challenges we have discussed many times on this blog e.g. the urban poor and food insecurity. So government priority must focus on a duo strategy of tackling the issues I raised in the securing our food blog and supporting private initiatives like ZAMACE that provide solutions to market conduct and encourage transparency and price discovery.
Which brings us to the monster in the room. The Business Day article rightly pinpoints the parastatal Food Reserve Agency (FRA) as a significant distortion on trading due to its monopsony power. Clearly one of the advantages of the FRA is that it goes some way to providing the level of certainty in demand that farmers need. Perhaps one way to preserve these advantages (assuming they are substantial), whilst retaining the strategic food security role of the FRA, is to encourage FRA to buy a proportion of its food through ZAMACE. What do others think?Update: By the way if you are interested in knowing more about ZAMACE you can contact Executive Director Brian Tembo directly.