Government has pledged to refurbish storage facilities, especially in rural areas, in a bid to promote the use of warehouse receipts for agricultural financing.
According to Trade minister Francis Mwebesa, this will be through the Uganda Warehouse Receipts System Authority.
Warehouse receipt financing is the use of securely stored goods as loan collateral. These programmes allow producers to deposit a finished good or agricultural product in a secure warehouse where the producer receives a receipt certifying the deposit of goods of a particular quantity, quality, and grade.
Speaking on the commemoration of the International Cooperative Day on Saturday, June 3, 2021, Mr Mwebesa said his ministry is kin on addressing the challenges like inadequate, standard storage facilities, poor post-harvest handling and agro-processing infrastructure, which are hindering the growth of the agricultural sector.
While agriculture is seen as the ‘green gold’ that can transform Uganda’s economy, its contribution to Gross Domestic Product, according to Uganda Bureau of Statistics (Ubos), has been falling. It dropped to 21 per cent in the 2017/18 financial year compared to 21.5 per cent in 2016/17. Statistics from the National Household survey 2016/17 show that 52 per cent of households in rural areas do crop farming as the main source of income.
But officials at the Trade ministry say with a national commodity exchange to regulate prices, quality and trade online will revive the sector. Such an exchange is a trading floor/platform for commodities from the warehouses especially agricultural commodities, grains in particular according to the ministry. Other commodities are expected to come on board later.
The commodity exchange has been transformed and is now called the Uganda National Commodity Exchange Ltd (UNCE) with 80 per cent shares owned by the Private Sector and 20 per cent owned by government through the Uganda Development Corporation (UDC).
Ms Khadija Nakakande, the senior public relations officer, Ministry of Trade, says the UNCE is supposed to operate in tandem with the warehouse receipt system which is managed by the Uganda Warehouse Receipt System Authority.
Through the two systems, small scale producers and traders will deposit their commodities at certified and licensed storage facilities (silos & warehouses) owned by the private sector.
It is at this level that quality of exportable agro-commodities will be assured.
The farmer takes the commodities to the warehouse where he/she is given a receipt for the value of the commodities. By getting onto the system, farmers will decide on the price of commodities. It is that receipt that he/she takes to the UNCE Ltd to be transacted on the trading floor.
“Commodities in the warehouse are sold by the warehouse depositors using the electronic warehouse receipts to the trading floor to sell for them. It is after the quality has been ascertained that a warehouse receipt will be issued to the depositor – that is a farmers group, commercial producer or small scale trader),” she says.
This receipt can then be traded on the Commodities Exchange as an avenue that exposes the small producer group to the exporters. The trading floor is supposed to get a percentage of the payment when the transaction is complete. The figure for the percentage has not been agreed on yet but initially, it stood at 0.5 per cent.
Together with the Warehouse Receipt System, the new National Commodity Exchange will be beneficial to exporters (Cooperative Unions, Companies & Millers) as it promotes access to formal markets, credit, standardised storage and professional handling facilities.
It reduces working capital requirements, as banks provide direct financing through the use Warehouse Receipts (WRs), and depositors just have to undertake only marketing of the commodities.
On Saturday, the Trade minister said he is aware that a majority of Uganda do not have adequate knowledge about cooperatives.
“My Ministry would like to encourage all cooperators, especially leaders and managers, to acquire the requisite knowledge on Cooperative ideology and philosophy. In this regard, all cooperative training institutions are to revert to this Ministry, as the one responsible for cooperatives. These cooperative colleges will reinforce the Management Training and Advisory Centre (MTAC), which provides business and management skills,” he said.