Moving forward with warehousing and collateral management in Africa technical presentation
-
Upload
cta -
Category
Presentations & Public Speaking
-
view
123 -
download
0
description
Transcript of Moving forward with warehousing and collateral management in Africa technical presentation
J O N AT H A N C O U LT E R A N D I B RA H I M A I D I A K H O U M PA
AT T H E C TA / A F R A C A I N T E R N AT I O N A L C O N F E R E N C E O N R E V O L U T I O N I S I N G F I N A N C E
F O R A G R I -VA L U E C H A I N SK E N YA S C H O O L O F M O N E TA RY E C O N O M I C S
N A I R O B I , 1 6 J U LY 2 0 1 4
MOVING FORWARD WITH WAREHOUSING AND COLLATERAL
MANAGEMENT IN AFRICATECHNICAL PRESENTATION
J COULTER CONSULTING LTD
WRS & COLLATERAL MANAGEMENT STUDY
• Commissioned by: CTA, IFAD and AFD• to foster emergence of warehousing and collateral
management services, in favour of smallholder farmers
• Subject countries: Burkina Faso, Cameroon, Côte d’Ivoire, Ghana, Madagascar, Mozambique, Niger, Senegal and Uganda
• Study consortium: J Coulter Consulting + Sullivan & Worcester LLP• Plus local technical and legal consultants in Subject Countries
• Activities: • legal and institutional due diligence• identify obstacles and make recommendations for Subject
Countries and OHADA region
STUDY TYPOLOGY• Type A: Private warehouses, under control and
responsibility of a collateral manager (CMA)• includes field warehouse, i.e. goods held in borrower’s store
• Type B: Public warehouses• Type C: Community inventory credit• usually supported by MFIs, and • refinanced by commercial banks• double-padlock arrangement• bags marked in name of individual depositor
• Type D: Lending against the security of current or future production • documentary security, as with Brazilian Agricultural Bonds
(CPRs)• not practiced in Africa
• There is also lending against stored commodities, with surveillance by stock monitor (SMA) or lender
TYPE C: COMMUNITY INVENTORY CREDIT
MAIN TYPE C CASES
Country Commodity Volume stored per annum (tons)
Participating depositors (est.)
Madagascar GCVs
Mainly paddy (also cloves, coffee & others)
100,000-120,000
> 80,000
Niger Grains, oilseeds, pulses & dehydrated prods.
5,000(as of 2008/09)
12,500
Burkina Faso Grains, oilseeds and pulses
3,400 4,000
Commodities overwhelmingly stored in name of individual depositorsMadagascar mostly stores in homes; Niger & Burkina Faso in community storesRepayment reported close to 100%
HIGHLIGHTS OF MALAGASY “GCVS”
• Farmers storing mostly in their own homes• Current trend to centralised storage
• Wholehearted adoption by MFI networks• >40% of loan portfolio of CECAMS and TIAVO• 25% for OTIV-Tana, more urban-based network
• Strong impact on farmers and seasonal price stabilisation• Needs/opportunities for further development:• improve risk management• develop post-harvest handling + diversify commodities,
esp. maize• develop warehousing profession from bottom up
WARRANTAGE COMMUNAUTAIRE IN NIGER AND BURKINA FASO
• Mostly semi-subsistence approach, farmers selling individually• Some groups more market-oriented or federated
• Positive impacts on household resource management, livelihoods and food security
• Key elements of sustainability• Local appropriation, peer pressure, accountability• forced savings aspect• decentralised management with low operating costs• favourable public policy, but with contradictions
• Key elements detracting from sustainability• inflexibility of product (fixed calendar for depositing, borrowing and
reimbursement)• Rural MFIs less developed than in Madagascar • price movements difficult to foresee accurately• dependency on outside support to build warehouses
• Positive externalities may justify continued support
TYPE A: PRIVATE WAREHOUSES USING
COLLATERAL MANAGEMENT
AGREEMENTS (CMAS)
PRIVATE WAREHOUSING IN SUBJECT COUNTRIES
• All countries except Madagascar• Mostly in and around port, focused on imports and exports • Côte d’Ivoire pre-eminent: est. $2.6 billion for export CMAs• The only Subject Country to regulate collateral managers
• more patchy services in up-country areas and land-locked countries• sometimes in support of international buyers and cotton companies,
using both CMAs and SMAs• often in support of processors
• smallholders making very limited use of CMAs, with some exceptions (Burkina, Uganda)• high fixed costs (usually US$ 1,000 per site per month or more)• versus atomisation of production and trade• producer orgs. rarely enjoy confidence of financiers• limited success of Government & aid inspired initiatives with cocoa
in Côte d’Ivoire & Cameroon
CHICKEN-AND-EGG PROBLEM INHIBITS BANKS FROM LENDING UP-COUNTRY
• lack of experience in lending to producers• approach conditioned by financing international
trade• expecting structured financing + known off-takers • without which they often request other collateral
• multiple apprehensions about: performance of warehouse operators, producer orgs., pricing of commodities, need to foreclose• leading to: little lending activity, and• non-development of skills/procedures like price
monitoring, hair-cutting, marking-to-market
INNOVATING AT THE MARGIN
• Regional banks (e.g. Coris, BRS, Ecobank) investing in, or in partnership with, CMs in West Africa
• CMs in Burkina Faso (SEGAS-BF, Expertis and Auxigages) innovating with farmers and small-scale processors:• structuring the value chain• a source of both opportunity and risk
• Ugandan CM (Coronet) active in CMAs involving smallholder farmers
• We need to leverage this, through capacity building support, focusing on banks, CMs and clients
RECENT SENEGAL INITIATIVES ILLUSTRATE BOTH OPPORTUNITIES AND
CHALLENGES
TYPE B: PUBLIC WAREHOUSING
KEY CONSIDERATIONS WITH PUBLIC WAREHOUSING
• Stronger case for regulation than with other Types of warehousing• large number of depositors’ goods at risk
• Scale is key to viability:• At level of warehouse capacity: units < 1,500 tons maize
likely to be uneconomic (Onumah et al., 2013)• When warehouse also trades, breakeven threshold may
be lower• At regulatory level: throughput < 100,000 tons maize pa
may be uneconomic
APPROACHES TO PUBLIC WAREHOUSING
Country Commodity Warehouses and capacity
Tons deposited or financed
Legislative approach
Tanzania (Act 2005) Mainly cashews & coffee
60 licensed w/h, 260 Kt
Deposits > 170 Kt pa
Uganda (Act 2006) Mainly maize 5 licensed w/h, about 22 Kt
Deposits 22.6 Kt in 5 years to 2013
Voluntary, contractual approach
South Africa (since 1995)
Maize, wheat, sunflower, s/beans
Over 200 SAFEX reg. sites, >10 Mt
Several million tons financed pa
Ghana Grains Council (since 12/2012)
Maize 7 certified w/h,36 Kt
Deposits 29.5 Kt Repo financed 6.9 Kt
ECX “big bang” approach
Ethiopia Commodity Exchange
Coffee, sesame, pea-beans
Circa 17 large w/h sites
Deposits > 500 Kt pa
PROS & CONS, SELF-REGULATORY APPROACH
• likely to be responsive to stakeholder concerns • can react quicker to changes in the industry and
market, but• Requires high stakeholder cohesion• Need to self-finance through voluntary levies• Transparency may prove challenging• Difficult to protect depositors against w/h failure;
need to restrict entry• Legal risks: good title; claim over commingled goods;
protection re third party claimants, and; enforcement of rights re defaulting debtors
PROS & CONS WITH LEGISLATED APPROACH
• It can: • render WRs negotiable documents of title, and overcome
legal risks• facilitate intervention in failing warehouses, and • increase number of eligible storage facilities, but
• Legislative process is often long and has uncertain outcome
• Will not work without a coherent & widely shared national vision for WRS
• Risks of underfunding and understaffing of regulatory agency, + weak public sector management
PROS & CONS OF ECX BIG BANG APPROACH
• Can build critical mass, in political & financial terms• Overcome regulatory and institutional obstacles,
and reach break-even, but• Ethiopian case very difficult to replicate:• lower enforcement capacity• “mandating” food crops creates massive parallel trade
• Risks appealing to short term dirigiste politics• Large prestige projects may inhibit open debate
about pros and cons
WE CONCLUDE
• There is no magic bullet!• In general we prefer:• a stakeholder-driven approach• leading to • a well-informed legislated approach
KEY SUCCESS FACTORS WITH WAREHOUSING INNOVATIONS
• Objective factors:• The underlying demand for the innovation• Scale economies in Type A and B operations • Scope to massively scale-up Type C operations
• Process factors:• Vision and leadership of promoters• Private sector involvement and initiative• Scope to modify approach in the light of experience• The role of Government, the degree to which supportive or
otherwise
• Implications for international promoters:• Vital to address objective factors up front• Addressing process factors calls for patient long-term
programme
SUGGESTED PROGRAMME CONTENT
• Independent analyses and backstopping for the Funding Agencies
• Building capacity of players (banks, MFIs, CMs and POs)• a challenge fund for training initiatives• certification of CMs working in up-country locations
• Develop and test a robust PPP model for funding warehouse construction
• Coordinate with international companies and other development programmes
• Support specific country initiatives• Capitalise experiences and feed them back into public
domain
SUMMARY POINTS
• We have identified three main financing Types A, B & C, each with its merits and constraints
• Success with Type C (community inventory credit) can be a springboard for types A and B, particularly in Madagascar
• The main priorities are:• to build capacity of collateral managers and bankers willing
to innovate• National WRS initiatives require: (a) close examination of
demand and economics; (b) strong stakeholder institutions, and; (c) coherent & shared vision
• International partners require long-term programmes, more than projects, to push the envelope