Sunday, May 19, 2024

JSE to launch Zambia dollar-denominated maize contract

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The Johannesburg Stock Exchange (JSE) is setting up a contract for Zambian maize that will be denominated in US dollars.

The contract will add liquidity to the Zambian market and provide the South African grain industry with better access to Zambian grain.

“We are in the process of launching a contract listed on the JSE, denominated in U.S. dollars, which will be the first foreign currency listed contract in any asset class on the JSE,” Donna Nemer, the bourse’s director of capital markets, told Reuters on the sidelines of the World Economic Forum for Africa in Durban.

“It’s for Zambian maize for delivery points in Zambia. That product is ready to go and hopefully we’ll get our first trade within the next couple of months,” she said. 

Zambia will allow monitored maize exports this year as the country expects to have a surplus after foreign sales were suspended in 2016 as a drought threatened output and pushed up prices.

Zambia’s maize crop is seen exceeding the 2.87 million tonnes produced last year but the figure has not been finalised. Annual consumption is 1.8 million tonnes. 

36 COMMENTS

  1. It is amazing how Zambia is now truly a South African province. JSE has come up with a maize derivative contract. Something that we could have done as a way of providing liquidity and price discovery though our own derivative exchange, and therefore providing a hedging mechanism for farmers.

    Ours is a country of politicians and our so called professionals have no understanding of Risk management and hedging products that can eliminate price fluctuations. All we know is politicking and Government price controls.

  2. Not all that glitters is gold. Government must be careful here. The farmers must be protected. This is pure white monopoly capital at play. The maize speculators will buy the maize even before it is harvested at the price that the JSE commodity speculators will purchase. These contracts have complicated middle men that use different derivative instruments, such swaps, options, over the counter, etc. This stock exchange jargon requires an institution to protect the poor peasant farmers and recommend that the food reserve agency establish a commission such as Commodity Futures Trading Commission (CFTC) which must regulate trade to the benefit of the farmers.

    • And we do have Hon. Minister and her PS which are well versed in trade (LOL) and of course they will be assisted by Hon. Minister of Justice whose drafting department “expertise” (LOL) is reflected in the MESS of the Constitution and Constitutional Court Act?
      Almost forgot Hon. Minister of Finance who may see possibility of borrowing couple hundred USD millions as a matter of “pride”(LOL)!!!

  3. UPNDonkeys, what is your take on this one?
    But do you really understand it anyway? Maybe I expecting too much from people who have reduced themselves to donkeys.

  4. The first two bloggers are right on track and providing some knowledge on the contract until politics or cadrism enters @Terrible. This is what is killing Zambia because politicize everything. Once in a while LET US REASON TOGETHER and let those who know teach us something. I personally can’t comment on the “dollarisation of maize @JSE”.

  5. The world is based on derivatives trading. It allows the farmers to sell their produce in advance. You can tie up your maize right now for sale and delivery in December or even January next year. Whether the spot price on those days is more or less, you are tied up to what you sold your contract at.

    Basically, its a forward sale market, that all this is. Buyers can buy forward, and sellers can sell forward.

    Embrace technology or die. We can’t go back to the stone age.

    I object to the racial innuendo that white capital will exploit poor peasant farmers. It is indeed that same white capital that owns our seed companies in totality. The same whites own every fertiliser supplier in Zambia, and the same whites supply all the farming implements. Most banks in Zambia are white…

  6. And you then make a noise as blacks tend to do, mzungu, mzungu !!!

    Yet you go kneeling with begging bowls to the IMF.

    If thats not white capital I don’t know what is !!

  7. Joseph, am being serious here as you speak wth knowledge and without political bias, my concern is that the small scale farmer will find it difficult to participate in this market and ir will lead to an increase of “cartels” who will be the major beneficiaries. Can the FRA be used as a vehicle to sell into this scheme. Is my take on this correct. I am not that knowledgeable when it comes to stock exhange dealings. Sorry, but why in US $ thanks you if you can expand further

  8. The Lusaka Stock Exchange should’ve come up with such an initiative and marketed it on CNBC, Financial Times, Bloomberg etc but rather the chaps are interested in running around with female students in the luxury SUVs, we have a serious problem in Zambia-we fail to plan ahead because such an initiative takes a lot of planning. My understanding here is this maize contract is basically a foward contract which falls as one commentator correctly puts it under the futures market – futures being just another derivative or an underlying financial instrument. Generally how is LuSE’s derivative market performing, is it even there? The only market that I believe is performing at LuSE is the security market where these Zambeef, CEC etc are listed. We have an underdeveloped securities and exchange…

    • Why did not do just that?
      Luck of 2020 vision?
      After all, we do have “experts with diplomas” touring NGO’s conference circuits and praising vision-less leadership contribution?

  9. Ctn.. We have an underdeveloped securities and exchange sector which only needs the right tweaking to become competitive regionally, after JSE, the Nairobi Stock Exchange is the main financial exchange in the region- there is a big gap between these two centres geographically and economically which as Zambia we could take advantage of but these daft economists we have here in Zambia and so called chartered financial analysts are failing to make this happen! Hopeless cretins!

  10. 2020 but why in US $ this intrigues me because all zambian transactions have to be in kr. If small scale farmers sell forward in US $ isn’t that illegal. The whole jse cocept is confusing to me because i cannot see how the small scale farmer can participate. It will be cartels or FRA. . If pipo commit to jse forward sales how can we maintain food security. If we maintain food security is there sufficient surplus to play in that futures market. Idont understan enough please can someone expand thanks

  11. Ok TERRIBLE can you enlighten everybody on this please. Am not upnd or donkey but need you knowledge on this thanks for education a lot of bloggers on this.

  12. The producer should be able to sell to the highest bidder. If you need food security don’t be lazy. There is a lot of land in zambia go and grow your own food. Why put a low price on maize that the farmers are so much working hard for. Let this sector develop for once. It will also bring in a lot of forrex

  13. @4 Brown Envelope, I was simply asking UPNDonkeys their opinion and YOU take offence. I am aware that the Donkeys claim to have the best economists and even possess the economic manager. Were you aware of that Mr Envelope?

  14. @11 Masalamuso, good morning. I didn’t think you meant that technical question to me, as you know even I asked the donkeys to comment. But when I saw that you mentioned donkey, I suspected you wanted an answer from me. So I will try best since the donkeys do not want to share their economic knowledge with other Zambians.

    Based on the information provided in this article we cannot tell whether this is a derivative ot futures or forward market. A simple interpretation for now is that intending sellers in Zambia will place their offer on JSE and intending buyers in South Africa will make their bids. JSE will match the bids and offers and arrange the payment to the seller. It is denominated in US $ probably because Zambians prefer their forex transactions in that currency, and you know…

  15. @masalumuso unfortunately you are right the small scale farmer might actually be disavantaged- unless these “collection points in Zambia” according to the JSE will be dealing directly with small scale farmers. The payment system I’m assuming will be in local currency but dollar equivalent, so what will happen is the JSE will deposit the forex into the Central Bank (BOZ) then ultimately the commercial bank of the JSE agent (the ones running the collection points- maybe NWK, Afgri, Cargill etc) they will make the payments to these farmers etc It is actually a good thing but sadly looking at it indepth we just don’t have the capacity to do what JSE is doing- after 50 years of independence so sad!

  16. Thanks Terrible, but who will the sellers be because i cannot see small scale working, 2020 if collecting in us$ and paying in kwacha then the the seller is carrying the risk on exchange rate.
    Good to see you mentioning Cargills, I believe they are the partner in IDC. Please research CARGILL as i have read research thar theyare connected or ar part of the Illuminati . That is the the upper echelon of the Freemasons.
    I make this statement not to cause controversy but to make pipo aware of the economic reach of Cargills.
    Thsnks again Terrible and 2020 vision

  17. @ joseph & Terible: Let us debate issues for common good of Africans and basically your future generation without prejudice. Not everything that is white is holy. The sugar we eat in Southern Africa, RSA, Botswana, Lesotho, Namibia is the sweat of Zambians at Nakambala sugar estates and SWAZILAND. There is no commercial and viable sugar estate in RSA, but Ilovo Sugar company, (RSA owned), bought off the trading rights of sugar supplies in both Zambia and SWAZILAND to the extent that no one, including the two of you is allowed to bring even 2.5 kg of sugar in Southern African states except their cartel. White spoon sugar was a patent of Zambia for decades feeding the masses and exporting some to as far as Drc, tanzania, etc. These are industries that sustained Zambia’s land locked…

  18. @ joseph & Terible: These are industries that sustained Zambia’s land locked economy and the first agro processing facility in independent Zambia. Thy are coming to Zambia because RSA is currently facing low rainfall to sustain their agricultural sector. They do’nt want to buy processed maize flour from Zambia but want to buy the speculative harvest from zambian farmers, meaning basically the farmers are going to produce for South African maize dealers. Remember once they profile all your farmers that contribute to the food reserves and these farmers receive their payments in advance you have no control over your maize produce. It belongs to someone and therefore the country can as well wallop in starvation unless you request RSA to sell you processed maize flour. I don’t think you…

  19. @ joseph & Terible: I don’t think you are going to like this situation. In every transaction there is a risk and the risk is normally taken in ignorance if the other party is not enlightened. I know the Afrikanners very well. I know financial markets very well and how they operate. Equally so, when their farming sector was doing very well, Zambian maize was regarded as second grade to theirs. Today because they are in desperate situation they are floating it on the JSE Futures exchange. Those that care for the citizens of the country must look into this issue very carefully.

  20. It is interesting we talk about small scale farmers understandbly with passion and sympathy clearly due to their position in the equation. The last marketing season in most parts in Eastern Province FRA was not a factor in maize marketing. FRA offered to buy k65 a 50kg bag, in addition sellers were or are required to transport their produce to the grain point which is an additional cost depending on the distance, then packaging, waiting time before they are attended to (normally days and cold nights), and of course we all know the delayed payments up to six months and the struggle and costs associated to get to the bank’s and recieve their payments. What happened last season was different, private grain buyers mostly from Malawi moved in and went to the village’s and bought on the spot…

  21. guess the farmers will sell the grain to FRA and it’s the FRA who will sell the maize on the stock market. With our unstable ZMK it’s Zambia who will end up losing. We depend on rain so if you sell on Future you need to honor the contract in some way during the life of the contract. We need to understand the implications than just get excited. If we used irrigation then at least you have a better chance of continuous having better harvest year on year.

  22. @ Terible: Grain is traded on JSE Futures @ Options. They are using price hedging as an excuse to lure the Zambian producers. RSA has a body called SAVI,(South African Volatility Index), which predicts price fluctuation over a period of 3 months. The hedgers use this index to forecast the possible price shift and so are the speculators. Mark my words, this will benefit the farmers, but the common man on the street will suffer sadly. there will be definite shortage in the supply of maize to the local millers.

  23. LT please bring more of such topics. I can not believe the maturity of the discussion. Terrible and 2020 despite your somewhat coarse language on political topics you have something that we can all learn from you. Congratulations

  24. Njoko Sitoto i dont kniw so with regard to sugar, is that RSA policy /law or monopoly enforcement.
    If either case doesnt that break conditions of SADC agreement. I thought there was virtually free trade between states. Thanks

  25. Njoko sitoto. This is why i mention cargills , it is RSA arm with broad interests ,so my concerns with regard to their involvement in IDC was that their loyalty might be to RSA. If they are a grower here and also a collection point for payments would they not be benefitting botn ways. Growing/selling and trading

  26. @Masalamuso. RSA arm. It is a monopoly policy. Period. The reasons: The sugar is grown in Zambia, but no Zambian is allowed to bring in Sugar to South Africa, at the border except their own agents. The agronomic board together with customs will impound it. There is a catch here. Namibia, RSA, Lesotho, Swaziland and Botswana are all SACU member states and the customs union does not charge tariffs for anything imported with the union. These countries are also members of SADC, but the wider SADC members hip eg Zambia, Zimbabwe, DRC, Angola etc are not SACU members and therefore not in the union. The white compatriots are clever and have studied the SADC trade protocol document which provides guide lines for the rules of origin. Under this any goods from within the SADC states enjoy access…

  27. @Masalamuso. Under this any goods from within the SADC states enjoy access to the member states, but their own baby SACU policy does not allow this without imposing heavy tariffs. So what they do they procure or bring in imports through INBOND FACILITIES that SACU clause provides, to suggest that the gods are destined for re-export. Eg from Zambia. These facilities are managed by commercial haulage, Logistics and trucking companies to get a relief on customs duties or tariffs. For this reason if you are within the customs union and you purchase stock the supplier company will not usually allow you to use your own trucks, but they rather use their own trucks to deliver the stock to you, otherwise you must declare a roadbond of not less than 2 Million Rands if you are to use your own…

  28. @Masalamuso. transportation. These trucking and Logistics companies have inbond facilities. The secret of a bond facility is that your goods do not pay duty because the goods are deemed to be in -transit. Once they arrive the bond facility,they apply for what is called AN OVERRIDE, with customs and give reasons that the goods are declared for re-packing inbond. SACU provides a clause that once goods are declared for re-packaging it is assumed that value addition and employment creation has taken place and therefore can now be sold within the country and VAT is then charged. But duty was skipped in that way. Tricky trade. On this issue, prove me wrong, once the Zambian farmers start to trade with RSA for their maize, you will never see any truck with logos for top milling companies…

  29. @Masalamuso. in RSA, but private haulage and Logistic companies with special delivery or collecting trucks that have inbond facilities. IDC. The industrial Development Corporation is an investment arm of RSA. Where you see this then the government of South Africa is well represented. That is the catch.

  30. @NJOKO SITOTO and Masalamuso, thank you for your valuable comments, advice and insights. You will notice that I kept safely away from discussing the merits or demerits of such transactions as I have insufficient knowledge and information to get that far. But I am taking a keen interest in the proposed contracts and your contributions.

  31. And the donkeys, wont you share your economic knowledge with the rest of us? Or is it locked up in a notebook in the correction centre?…..kikikikikikiki

  32. Thsnk you njoko sitito, understand the in transit and bonded warehouse system . Technically it has not entered Sth Africa. Really it is also a matter of preferential interpretation of manufacturing under bond to benefit the cartel. Would love to read those documents. So in essence it is a cartel supported from within Government. The IDC i was referring to is Zambias, which has Cargills as partner. I take it that Cargills is a major futures player in RSA
    Thank you again and to Terrible and Joseph also thank you

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