The East Africa Commodities Exchange is in talks with the Rwanda government to purchase strategic grain reserves using the exchange’s electronic platform.

The deal is expected to boost liquidity in the market that is depressed due to low grain production in the region.

“We look to the government to use the exchange as it is a more transparent model for procurement,” said Joshua Rugema, the country director at the East Africa Exchange (EAX) Rwanda, after meeting government officials.

Should Rwanda turn to EAX to buy and sell beans and maize to stock its strategic national food reserves, it is hoped other East African Community states will follow suit.

Analysts pushing for governments to list their bids on the commodity exchange board say that besides tapping into bigger and cheaper grain markets, governments will also enjoy a high level of transparency which would check irregular deals. Currently, governments in the region purchase grains through an open tender system that is prone to manipulation.

Boosting volumes

“The move is plausible as biding through the exchange brings in institutional buyers needed to boost volumes. This will also expedite the regional integration of the commodity market,” said the executive director of the Rwanda Capital Markets Authority, Robert Mathu.

While EAX is a regional commodity exchange with operations in Kenya and a presence in Uganda through a warehouse operator in Kasese, its market is concentrated in Rwanda. This has limited the volumes traded.

In the 2016 trading season, the market failed to meet the target of 12,000 tonnes of grain it had planned to stock, blaming the shortfall on low supplies. Data from EAX shows that only 6,000 tonnes of maize and beans was handled, eating into commissions for stockbrokers and fees charged by the market management.

READ: East Africa Exchange faces drop in revenue

According to Mr Mathu, the fact that only a few commodities are traded — maize beans, soya, sorghum — contributes to the low volumes of trade on the EAX.

“I appreciate the market is still young but other varieties of commodities are needed on the market,” he said.

The exchange is looking to Kenya, the largest grain producer in the region, to boost the volumes traded on its platform and handled in its warehouse. It has signed big trading contracts with Unga, Jamii and Mombasa Maize Millers in the country.