JSE, Lusaka Stock Exchange and ZAMACE progress derivative contract
Zambian Government signs executive order enabling launch Lusaka and Johannesburg, 18 December 2014.
The Johannesburg Stock Exchange (JSE), Lusaka Stock Exchange (LuSE) and Zambian Commodity Exchange (ZAMACE) are able to progress the launch of derivatives contracts on Zambian agricultural products after the Zambian Government’s signing of an executive order enabling this to proceed.
By delegating the oversight of a warehouse receipting system to ZAMACE, Statutory Instrument (or executive order) 59 of November 2014 enables the three organisations to progress the launch of deliverable derivatives contracts for white maize, wheat and soya beans with approved delivery points in Zambia.
“The JSE is delighted that as a result of the foresight of the Zambian Government and industry participants, we are now able to plan the launch of the contracts,” says Chris Sturgess: Director of Commodities at the JSE. “We began the partnership with ZAMACE in 2011 to offer Zambian market participants with price risk management tools via physically settled grain contracts. We are a step closer to extend the liquidity of the JSE”s grain derivative market into Zambia working very closely with the local commodity exchange that will be responsible for providing the spot market. ”
In 2013, the JSE secured the approval from the South African Reserve Bank (SARB) to offer trade in Zambian grain traded and cleared in US Dollars, in collaboration with ZAMACE, to non-residents and qualifying South African and Common Monetary Area corporates. The Bank of Zambia has also extended their support for the collaboration between the Zambian and South African entities.
This offering is envisaged to enhance the price discovery and price risk management for Zambian agricultural commodities. Jacob Mwale, Executive Director of ZAMACE commented as follows, “Through the issuing of SI 59 and appointing ZAMACE Limited as the authorised agency of the Agricultural Credits Act (ACA), 2010 – Zambia can progress the establishment of certified storage and issuance of warehouse receipts.
ZAMACE recognises the responsibilities it has been assigned and will be ready to deliver on them by the start of the agricultural marketing season in 2015. We look forward to working with our partners to execute a successful warehouse receipting initiative and enhance the commodities market as a result. ”“The opportunity for LuSE to partner with both ZAMACE and the JSE to further develop the transparency of the grains market in Zambia is a dream come true. The Government was instrumental and continues to be in the development of the capital market in Zambia. It is only right that as the LuSE we roll up our sleeves and get involved in bringing the competences and systems which we have developed over the last two decades to develop another sector which is key to our expansion, “ says Brian Tembo: CEO of LuSE and who for many years headed up ZAMACE. “There are great synergies in the exchange business and working with these two participants I believe we will be able to evolve our grains industry for the better. ”Musika, a non-profit company that stimulates private sector investment in the agricultural market, has played an influential role in the development of the partnership and has committed to support the establishment of the warehouse receipts system.
Rob Munro, Musika’s Director of Strategy, adds “Musika welcomes the progressive move by the Ministry of Agriculture and Livestock to initiate these market reforms, and looks forward to working with all stakeholders to advance transparency, price discovery and security in the Zambian commodities market which will benefit all market players, including smallholder producers”. The JSE has worked closely with LuSE, ZAMACE and other local market participants to finalise the standardised contract specifications including the terms for physical delivery in completion of a derivative contract. The target date for licensing warehouses in accordance with the Agricultural Credits Act and launching the new derivative products is the second quarter of 2015.
ZAMACE was established in 2007 to provide a commodities exchange to the Zambian market, supported by a warehouse certification and receipting system to enhance market access, liquidity and credibility in the Zambian commodities market. In November 2014, the Ministry of Agriculture and Livestock in Zambia assigned ZAMACE as the “Authorised Agency” of the Agricultural Credits Act 2010 giving it the responsibility to implement a warehouse receipts system in accordance with the Act.
Jacob Mwale, Executive Director ZAMACE6 TUKULUHO ROAD, LONGACRES, LUSAKA.
Tel: +260 (0) 963 719 723
The Lusaka Stock Exchange opened its doors for business on 21st February, 1994 as a response to the economic reforms which resulted from Zambia’s liberalisation of its economy in 1991. The LuSE has facilitated the successful divestiture of the Government from some state owned enterprises and empowered citizens through these IPOs. About half of the listed companies are as a result of this process. The Exchange embarked on a demutualisation process called Project Nkunzi with the view of delinking ownership from brokerage membership and broaden ownership to recapitalize the Exchange so that it can invest in upgrading of its world-class systems and infrastructure. The LuSE has also developed an Alternative Investment Market (LuSE AltM) which is a lower requirements but still high standard listed market targeted at small cap growth companies.
The Chief Executive Officer, Lusaka Stock Exchange, 3rd Floor Exchange Building, Central Park, and Cairo Road.
P. O Box 34523, Lusaka – ZAMBIA.
Tel: +260 228391/228537/228594
Fax: +260 211 225969
The Johannesburg Stock Exchange is based in South Africa where it has operated as a market place for the trading of financial products for 125 years. It connects buyers and sellers in equity, derivative and debt markets.
The JSE is one of the top 20 exchanges in the world in terms of market capitalisation and is a member of the World Federation of Exchanges (WFE). The JSE offers a fully electronic, efficient, secure market with world class regulation, trading and clearing systems, settlement assurance and risk management.
Craig AtherfoldH+K Strategies South Africa
Tel: +27 11 463 2198
Chris Sturgess, Director: Commodities and Key Clients, Capital Market
Tel: 011 520 7299