review of warehouse receipt system and inventory credit initiatives in ...

CHAPTER 5: ALTERNATIVE APPROACHES FOR AFRICA
Introduction
Based on international practice and experience in the six countries of Eastern and Southern
Africa reviewed here, one can categorise the following main approaches to commodity
financing and storage. Notwithstanding some overlap, this typology should help the reader to
better understand the alternatives.
There are three major categories: 1. public warehousing, 2. private warehousing, and 3.
farmer-focused approaches. The first and third categories (public and farmer-focused
approaches), are further subdivided, making a total of eight different approaches, as follows:
Category 1: ‘Public warehousing’, This term does not imply public ownership, but refers to
a company storing goods for public in general, on behalf of whosoever wishes to
deposit in the warehouse, and issues to the respective depositors warehouse receipts
that can be used for trading purposes (as documents of title), or as collateral for
raising finance. This is in turn divided into:
A. Unregulated independent warehouses
B. Warehouses regulated by the State
C. Warehouse regulated by a trade body
D. Bulking by private trade intermediaries
Category 2: ‘Private warehousing’, i.e. warehouses which provide similar services to those
in Category 1, but with no obligation to receive deposits from the public in general
Category 3: Farmer-focused approaches, to finance the storage of food for consumption
during the lean season, and the bulking of surpluses to be marketed at a later date.
This is divided into:
A. Cooperative approaches to warehousing, supported by bank lending
B. Microfinance-linked approaches
C. Technological improvements in rural storage
We describe Categories 1 and 2 as ‘commercial approaches’ because they are carried out on
a relatively large scale and can involve many different kinds of depositors, and contrast them
with Category 3, where farmers are the only (or near-only) depositors. In the following
subsections, we describe these approaches and discuss their advantages and disadvantages.
This is also summarized at the end in Table 1 at the end of this Chapter.
Approach 1.A: Public warehousing by independent unregulated
warehouse operators
These build on the experience of countries with more highly developed marketing systems,
notably in North America and South Africa. A trading company concerned sets up business
in the country concerned, invests in grain handling and storage plant, and uses it to trade and
provide a variety of other services, including storage and warehouse receipting. In principle
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