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• where feasible, food aid agencies should divest themselves of warehouses and auction facilities in favour of local operators and institutions (this also applies to USAID-Food for Peace). Specific recommendations for farmer-focused approaches • Governments in the region should prioritise the integration of SACCOS into wellmanaged rural MF networks • MF and rural marketing specialists should assess whether and how they can adapt Malagasy approaches to rural microfinance and inventory credit to their own circumstances. • There should be periodic reviews of progress and issues with MF-linked and cooperative approaches with grains in Tanzania, and ‘bulking by trade intermediaries’ in Malawi and Zambia. In the case of Tanzania, there should also be reviews of farmer linkages to coffee warehouses. There should be a study to re-evaluate of storage losses in staple crop at farm level, and financial losses through circuitous marketing in some countries, notably Malawi and the efficacy of different approaches to their reduction, including the use of hermetic structures • Organisations promoting such storage hardware (e.g. FAO) should review their marketing approaches (as discussed in the sub-annex to Annex 2) A training programme for practitioners UNCTAD should also support a training programme for practitioners, giving serious consideration to one which EAGC is in the process of developing. It will cover a range of ‘modern market institutions’ (i.e. contracts and arbitration, warehouse operation and collateral management, commodity handling and grading, warehouse receipting, warehouse regulation, exchanges, clearing and settlement), and be implemented at three levels: Development of training materials; training and certification of trainers, and grants for incountry organisations to hire trainers. 6
Purpose and activities CHAPTER 1: INTRODUCTION This report on the development of supply chain finance in Eastern and Southern Africa focuses mainly on warehouse receipt and inventory credit systems for durable agricultural commodities. It was commissioned by UNCTAD under the auspices of the EU-funded All ACP Agricultural Commodities Programme (AAACP). The consultant was to review present and past initiatives in this area and thereby seek to draw lessons about best practice. This included identifying countries and projects with prospects for early take-off, based on progress to date, stakeholder commitment and other factors, and to propose specific technical support activities, including training packages for various stakeholders and local implementation work. To complete these tasks he carried out extensive desk research in the UK and six weeks of fieldwork covering six countries (Tanzania, Kenya, Uganda, Madagascar, Zambia and Malawi), meeting with banks, microfinance institutions, government departments, food reserve agencies, agribusiness, development projects, producers’ organisations, and others. Time spent in each country varied according to information requirements. He also made a one-day visit to Pretoria, South Africa, where he held a half day meeting with grain industry players who had interests in and/or were knowledgeable about developments in the abovementioned countries. Annex 1 shows the persons and organisations contacted. Authors’ general approach Africa has seen a number of publicly-sponsored warehouse receipt and inventory credit initiatives over the last two decades, and an increasing effort since 2000. Looking at South and East Africa, the author tries to answer some of the main questions arising from this effort, i.e. is the effort justified? What has been achieved? Why hasn't the system taken off in a bigger way? Where the best opportunities for are take-off, and what should be done to bring it about? Warehouse receipts are of use both in financing against stocks of goods and trading in them, and may initially be adopted for one or other purpose. Rather than focus exclusively on one particular function, the author considers the overall viability of the instrument and the factors impinging on its adoption. A wide range of factors is considered including matters of public policy, leadership, governance, law, demand, prior trading practice, scale of operation, and project implementation. Through the examination of the six country cases and other sources, the author tries to identify where promoters of warehouse receipt systems can best orient their efforts. A note on terms: transferability and negotiability of warehouse receipts These two terms are often used interchangeably, but have different meanings. A warehouse receipt that is ‘transferable’ can simply be transferred to another party, for example in exchange for a loan. A warehouse receipt is ‘negotiable’ when it confers upon the transferee a direct interest in the underlying property free of any outstanding claims not noted on the 7
Page 1 and 2: Review of Warehouse Receipt System
Page 3 and 4: CHAPTER 5: ALTERNATIVE APPROACHES F
Page 5 and 6: GLOSSARY OF ABBREVIATIONS Collatera
Page 7 and 8: SUMMARY Introduction The report is
Page 9 and 10: Category 3: Farmer-focused approach
Page 11: involvement in EAGC, its regional f
Page 15 and 16: and ungraded, due to a chicken-and-
Page 17 and 18: CHAPTER 2: REVIEW OF INTERNATIONAL
Page 19 and 20: oversight system is funded by user
Page 21 and 22: Where implementation has failed or
Page 23 and 24: to the silo operator; or investors.
Page 25 and 26: CHAPTER 3: COLLATERAL MANAGEMENT AN
Page 27 and 28: CHAPTER 4: EASTERN & SOUTHERN AFRIC
Page 29 and 30: Malawi The main food crop is maize,
Page 31 and 32: Although the CECAM network has rece
Page 33 and 34: companies), who hold the processed
Page 35 and 36: curing companies), and the requirem
Page 37 and 38: Kenya is in some ways suited to fol
Page 39 and 40: to see it through its current initi
Page 41 and 42: decade 25 . The WRS Regulations of
Page 43 and 44: these are purely private initiative
Page 45 and 46: officials never accepted moving the
Page 47 and 48: eceipts, unreceipted third party st
Page 49 and 50: The networked MF system has certain
Page 51 and 52: TABLE 1: ALTERNATIVE APPROACHES FOR
Page 53 and 54: 3c. Technological improvements in r
Page 55 and 56: It is even more important to streng
Page 57 and 58: distrust of the unknown and interes
Page 59 and 60: FIGURE 2: CAUSE AND EFFECT IN THE D
Page 61 and 62: Of particular, but not exclusive, r
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BIBLIOGRAPHY Beaurre d’Augères,
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ANNEX 1: LIST OF PEOPLE INTERVIEWED
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South Africa - half-day meeting at
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ANNEX 2: ZAMBIA CASE STUDY Backgrou
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with other parties. USAID provided
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trading in the same, along South Af
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ANNEX 3: MALAWI CASE STUDY Backgrou
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uyers. The mere availability of mor
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operators who can offer a ‘one-st
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With this in mind the author has pu
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The CECAM (Caisses d'Epargne et de
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TABLE 4.1: RATE OF PEPAYMENT BY CEC
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duration of the loan; (b) by a tech
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committee and carries out a classic
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ANNEX 5: TANZANIA CASE STUDY Note:
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While the Warehouse Licensing Board
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which farmers in different district
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TABLE 5.3: MAIZE & PADDY STORED, BY
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Expenses directly related to storag
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TABLE 5.5: FINANCIAL ANALYSIS OF ST
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WFP’s involvement with ‘new mar
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Work by David Tschirley (2009), of
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ANNEX 7: QUESTIONS AND ANSWERS 1. W
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and arbitrary basis, in order to me
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