The UK-based Warehouse Receipt Systems Consultant, Nicholas Budd, said Botswana’s plans to introduce Warehouse Receipt (WR) legislation in September or October 2012 giving leeway to the establishment of Commodities Exchanges will enable the country to acquire or sell goods without the hassle of transferring from storage to storage.
Budd, the retired legal practitioner with years of experience in commodity markets said when the Act becomes law Botswana would also broaden its commodity based products with the added benefit of inspecting their quality on site.
In an interview during the Pan African Workshop for Regulators of Derivatives and Commodities Exchanges held in Gaborone from July 25 to 27, Budd explained that a Commodity Exchange comes into being after an arable agricultural farmer harvest grain and pays for safe storage in grain silos.
“On payment, the warehouse operator gives the farmer a receipt (WR) as acknowledgement for storage indicating quantity and type of grain in storage. The operator’s responsibilities apart from maintaining the grain’s quality include security or insurance against risks such as weather or fire damage and pilferage,” Budd said.
“WR also holds the farmer’s or depositor’s details, name, contact address and quantity authenticated by the operator; whose responsibilities conform to and are determined by the WR law of the country.”
The farmer can sell the receipt to a buyer or usher it as collateral to a commercial bank for securing a loan.
However, as Botswana does not have any such legislation in place, establishing Commodities Exchanges for grain or other cereals will not be feasible in the short term without outsourcing as the country is a net importer of grain, Budd stated.
In Africa, South Africa and Ethiopia are the most advanced in WR’s because they have Commodities Exchanges that have been in existence over the years.
For instance, the 100 percent government owned Ethiopian Commodities Exchange for coffee has played an important role in its export the world over. Other countries which are in the process of upgrading their WR’s in paper or electronic-based formats include Zambia, Zimbabwe, Ghana, Kenya and Tanzania.
However, there has been a growing realization across a broad spectrum of African private and public sector stakeholders outlining efficient financial and commodity markets are a pre-requisite for equitable, incisive and sustainable development. This has been manifested in the African Union’s Arusha Plan of Action and Declaration on African Commodities in 2005 as well as in the Final Communiqu├® from COMESA-EAC-SADC Tripartite of Heads of State and Government of 2008.Generally, African countries have adopted WR’s; these are important in finance and training of Commodities Exchanges.
Budd has been a consultant to the Common Fund for Commodities, the United Nations, European Bank for Reconstruction and Development, World Bank and USAID in connection with the modernization of agricultural credit, WR’s and commodity exchanges in China, Ethiopia, Ghana, Kenya, Nigeria, Russia, Tanzania, Uganda, Ukraine, Zambia, Zimbabwe and the Pacific Islands.
The sponsors of the three-day 2012 Conference were the African Development Bank (AfDB) and Bourse Africa, an upcoming Botswana-based company.
