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Benchmarking across East Africa to boost Tanzania’s Agricultural Commodity Exchange

Published on November 30, 2018

The USAID Hub organized a study tour for a delegation of seven staff from the Tanzania Mercantile Exchange (TMX) to the Ethiopia Commodity Exchange (ECX) in Addis Ababa, Ethiopia. The study tour provided TMX staff with first-hand experience and training on best practices in managing an agricultural commodity exchange to build their capacity on exchange operations. By enhancing staff capacity, the newly formed TMX will be better positioned to introduce a more efficient trading system for staple foods in Tanzania.

ECX senior staff led training sessions over the five-day visit. They shared their experiences managing $1.5 billion in annual trades and discussed specific challenges raised by TMX staff members. Specifically, they addressed trading rules and agreements formulation; exchange structure and technology; commodity contracts approval process; commodity exchange trading and surveillance; commodity exchange clearing and settlement arrangement, including strategies to mitigate default risk.

“The visit enabled the management and staff of the TMX to acquaint themselves with successful experiences and challenges in operationalizing the commodity exchange. The team garnered experiences and was exposed to challenges of running and operationalizing the commodities market,” said Godfrey Malekano, Chief Executive Officer, TMX.

TMX was incorporated on August 25, 2014, under the Companies Act, 2002, and licensed in accordance with the Commodity Exchange Act, 2015, and Commodity Exchange Regulations, 2016. Since then, TMX has completed all the necessary preparations to enable agricultural commodity trading by open public outcry. TMX listed seven commodity contracts, registered six members and empanelled six settlement banks. The exchange also acquired all needed technology. The study tour to ECX complemented these preparations by focusing on the skilled human capital that is also required to manage the exchange’s complex operations.

The study tour contributed to the USAID Hub’s efforts to promote structured trade in staples food to enhance food security in the EAC region. TMX has the potential to modernize the trading of staples foods in Tanzania by offering a platform for competitively matching a broad range of buyers and sellers in agricultural markets. A more professional structured trade in staples food in Tanzania will improve the region's food security outlook and reduce dependence on food aid, and thereby contribute to Feed the Future objectives.

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