In recent years significant investments have been made to improve the market infrastructure that enables grain to be traded at the national and regional level. With efficient market infrastructure surplus grain from one country can effectively be traded to another country with a deficit. To do this however, certified warehouses must be in places that aggregate, process and store grain. To understand more about what warehouse certification is, why it’s important and how it works, FoodTrade ESA interviewed Gerald Masila, Executive Director of the Eastern Africa Grain Council.
FoodTrade: What are the benefits of warehouse certification on the regional grain trade in general and for farmers?
Gerald: Warehouse certification benefits all stakeholders in the value chain.
- The first advantage is to the warehouse operator that upgrades its facilities to improve grain management. The warehouse operator benefits from being advised by EAGC in terms of knowing the best grain management and grain handling methods procedures and processes which is what EAGC considers in certification.
- When a warehouse is certified it is then authorised to receive grain and store on behalf of depositors. Therefore it gives an opportunity to farmers to deposit their grains to a professional for safe keeping and good professional management so that the grain maintains a good quality.
- Once the warehouse has received commodities for warehousing it gives a warehouse receipt to the depositor. The depositor can then take the warehouse receipt to a participating bank to obtain a credit advance. The warehouse receipt serves as collateral against that credit advance. EAGC has signed a tripartite agreement with banks as part of its G-Soko program.
- With the grain in the warehouse when a buyer, trader or miller needs to buy grain they do not need to go to the open market or from one farm to the other, they only need to go to the certified warehouse and buy the grain. They can also buy the warehouse receipt through the trade platform which is the G-Soko platform that EAGC is working on. This is the one that is being developed with support from DFID and FoodTrade ESA. The trade platform is going to allow the buying and selling process an exchange offer and sale, of trading commodities that is in the warehouse using the warehouse receipt therefore that makes the chain more efficient, reduced transaction costs and improves the safety and quality of commodity and with that consumer can get good quality commodity at affordable prices because the transactions cost of have been reduced.
FoodTrade: What does it mean to be certified?
Gerald: To be certified means a warehouse facility has met the agreed upon requirements of EAGC and thus is given a certificate of certification.
Requirements have been developed in different areas such as the physical structure of facility, the equipment for grain handling and grading in the facility, and the qualifications of the team managing the warehouse (e.g., grain handling knowledge and qualifications), commodity care requirements which is how to care for a commodity and commodity insurance which involves making sure the commodities in the warehouse are fully insured.
The physical storage requirements are the most important. The facility must have proper aeration and ventilation to keep the commodity cool, dry and free of pests. The facility must also be able to retain the quality of the commodity under storage.
Warehouses interested in becoming certified undergo training during the initial assessment. EAGC provides the warehouse management a report and trains warehouse operators on the requirements.
FoodTrade: What does automation and certification entail?
Gerald: Warehouse processing and storage of grain used to be done manually, including the recording of weights and temperatures and the issuance of receipts, delivery notes and dispatch.
An automated system has been developed to replace almost all manual operations. It includes automatic capture of the weight of the commodity, moisture and quality parameters. The system then produces an electronic goods receipt note and an electronic warehouse receipt note.
FoodTrade: Why has EAGC decided to take on warehouse certification and automation now?
Gerald: EAGC started operations since 2007. It piloted a warehouse receipt system in 2008 and scaled up the project between 2011 and 2014. Therefore EAGC has been involved in warehouse certification. Now with support from DFID and FTESA the process is being done automatically and a trade platform has been formed.
FoodTrade: What is EAGC’s role in warehouse certification?
Gerald: EAGC have designed and developed the system and is the implementers and regulator of it. It is an EAGC certification standard.
FoodTrade: Why should private sector organisations invest in certified warehouses?
Gerald: Simply put, because there are good business opportunities in warehouse and grain handling processes.
FoodTrade: Can you share any results with us?
Gerald: EAGC has been able to inspect 25 to 30 warehouses in the region and has certified about 10 warehouses. There are substantial quantities of grain that have already been deposited in the warehouses. This has enabled more lending to farmers participating in the G-Soko system. There are certain criteria’s that EAGC follows in assessing warehouses in order for them to meet the requirements for certification and eventually be certified. When EAGC assesses the warehouses they look at the areas of conformity and give a report to a warehouse operator stating areas that need fixing.