13 May 2008
interview
Uganda Commodity Exchange (UCE), a body charged with regulating and implementing warehouse receipt system. Joseph Olanyo talked to the Uganda Commodity Exchange Manager, Mr Alex Rwego, on the significance of the project. Excerpts
On April 28, you launched the first licensed warehouse (Agroways Ltd) under the Ware House Receipt System Act 2006. How will this project help farmers?
The basic problems farming communities face in this country are market and storage.
This facility we have put up, will handle commodities entering the warehouse. The commodities will be graded, processed and looked after in the warehouse until the owner is ready to sell it. They will take insurance so it is covered for theft, burglary and fire.
What is Warehouse Receipt System (WRS)?
It is a system where people deposit commodities of certified grade and receive a document of title called warehouse receipt. WRS specifies the quantity and quality of the commodity. The document has two aspects to it.
You can trade it by transfer from one party to another or you can use it as collateral for a financial institution. It guarantees that the commodity is of the grade and quantity.
The commodity can only leave the building with the instructions of the warehouse receipt holder. The holder owns the commodity, the warehouse only cares for it. The receipt, just like a land title, proves that you own the deposited commodity.
What kind of commodities will the warehouse handle?
The licence issued in Jinja was initially targeting only maize, beans and rice. But we can also store other non perishable agricultural products over a period of time.
We are also having meetings with Uganda Coffee Development Authority and Cotton Development Organisation so that we can bring coffee and cotton on board.
How will it help farmers get market and improve their incomes?
One of the things farmers lack is information of what is going on in the market.
We shall make sure farmers get the right information and are able to make right decisions. In addition to storage, we shall introduce depositor's portals, which will enable them see the status of their goods. The portal has prices of commodities and they can make their own informed decisions on what to sell.
They will be able to assess prices through the warehouse electronic system. We intend to open up commodity trading where you offer your warehouse receipt for sale if you have tones of commodities. We are also setting up a commodities exchange where the commodities will be offered for sale. Farmers will be able to sell their commodities to competitive buyers.
The country is currently facing a food crisis, which has led soaring commodity prices. How will this project avert the crisis?
I don't think we have a food shortage. It is commodity prices that have gone up.
The only thing is that people have now known that prices are going up so if you store the goods will get a good price. It has both a positive and negative impact.
There are allegations that you [current management] have hijacked the project from those who first initiated it. What is your take on this?
I don't think that is right. The warehouse receipt system is an Act of parliament. The regulations were put in place and signed by the Ministry of Tourism Trade and Industry.
People have tried to come up with the warehouse receipt system, but if it is not regulated by UCE then what are they talking about. The only institutions that issues warehouse receipts are banks.
Any bank that is financing an exporter can do that. There have been pilot projects like Support for Private Enterprise Expansion and Development working on this.
But the thing is we are trying to introduce a system, which we believe is beneficial to farmers. The integrated system involves market information and collective dissemination of information. Dispute resolution system will sort out any stakeholder within the system.
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