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Benefits of the Kenya Commodities Exchange :-

Common Benefits to all the Commodities Market Participants:-
  • Access to the National Electronic Commodities Market
  • No Counter Party risk (Central Counter-Party Model)
  • Guarantee of Settlement through banks and warehouses
  • Availability of grading and standardisation through professional agencies

Benefits to the Farmers:-

  • The best possible price on sale of agriculture produce
  • Increase in holding capacity due to easy access to warehouses
  • Direct sale to the users
  • Increase in the negotiating power
  • Reduced cost of handling and other activities
  • Availability of Warehouse Receipt Financing

Benefits to the Traders:-

  • Common platform for buying and selling commodities
  • Possibility of procurement and disposal in bulk
  • Business expansion to multiple commodities through

Introduction

Agriculture and related activities are the main source of income and 60 percent of employment for over 80 percent of Kenyans. The sector accounts for more than half of the country’s gross domestic product (GDP). The Government of Kenya (GoK) depends for about 45% of its revenue from this sector. Agriculture also makes up more than 50% of the country’s export earnings. Accordingly, the GoK has placed a great deal of importance and due attention to the development of agriculture in Kenya.

To address the growth and development challenges of the sector, the GoK has expressed a strong policy commitment to supporting the establishment of a public-private sector-led National Commodities Exchange (“the Exchange”). The Exchange will materially impact on the livelihoods of millions of Kenya’s smallholder producers and other actors, in both agricultural and non-agricultural commodity value chains, and the agricultural development led industrialization.

A transparent and efficient marketing system for key commodities in the country helped by the Exchange will have significant economic impact not only in terms of improving the export competitiveness of Kenyan commodities but also in stimulating domestic value addition and processing and other post-harvest activities. A marketing system that enables all actors to participate in a “level playing field” will further enable Kenya to achieve its goals of financial inclusion and support to less advantaged actors in the economy, particularly small-scale farmers and traders, largely operating in the informal economy.

A vibrant Exchange, powered by appropriate information and communications technology (ICT), will also strengthen the vision to place Kenya as an African, and potentially global, powerhouse in ICT. The Exchange shall be regulated by the Capital Markets Authority. A further ambition would be to ensure that a commodity exchange, while initially and primarily serving the needs of the Kenyan economy, evolves to potentially become a regional and continent-wide hub for the structured trading of commodities. The establishment of the Exchange in Kenya should finally be a private sector-led undertaking, with the concrete support and enabling environment provided by the public sector in various ways, such as policy and regulatory support, legal framework, and other measures.

The State Department of Trade, to lead the project for establishment of the Commodity Exchange in Kenya, has hired the Consultants to implement the framework of commodity exchange. A Task Force comprising representatives of relevant line ministries has been set up. It is thus envisaged that the Consultants will work on implementation of the Commodity Exchange in regular close interaction with the Taskforce.

Kenya Vision 2030is the country’s new development blueprint. It aims to transform Kenya into a new industrializing, “middle-income country providing a high quality life to all its citizens by the year 2030”. The adoption of the Vision by Kenya comes after the successful implementation of the Economic Recovery Strategy for Wealth and Employment Creation (ERS) which has seen the country’s economy back to rapid growth since 2002, when GDP grew from a low of 0.6% and rising gradually to 6.1% in 2006. The Vision 2030 is based on three “pillars”: the economic, the social and the political.