MJIEL Vol 14 Issue 2 2017 - Article 5

Rethinking Regulatory Laws for African Commodity Exchanges
Emily Smithman
 
ABSTRACT: Many of Africa’s smallholder farmers are trapped in a cycle of poverty that is detrimental to their financial independence, to the agricultural markets in their countries and to the overall economic development of their countries. Regulatory schemes promoting commodity exchanges need to be developed in Africa in order to help farmers in Africa participate in fairer transactions on a stable platform, make wiser investment decisions, and have more control over prices. This paper argues that African countries should promote commodities exchanges by codifying regulatory laws that advance transparency and efficiency and encourage actors in the agricultural sector to participate.
First, this paper compares nascent and struggling African exchanges, such as the Mozambican Exchange, to a more successful model in Ethiopia. Next, it analyzes what types of regulatory laws support a successful exchange in the unique context of a developing country. The benefits of commodities exchanges in developing countries are well-documented, but many countries face similar problems in developing such exchanges. Comparing less developed exchanges with advanced ones in the context of the unique challenges faced by developing countries in Africa will illustrate how to best overcome these challenges. The paper ends with a brief discussion of the pros and cons of developing strong regional exchanges versus national exchanges.

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