Three things we know about Africa: 1) Improving agrarian economies dramatically reduces poverty and improves a nation’s overall economic strength; 2) East Africa is the hottest place on the globe for agriculture-based profit opportunities; and 3) As we watch the South African Exchange (JSE/SAFEX) continue to flourish, the political interest in replicating a successful futures and derivatives exchange is at an all-time high.
But does a national exchange make good business sense? If an exchange needs government support (and likely international aid funding) to keep it alive, does it provide any benefit to the nation’s economy and the well being of its populace?
International aid should focus on empowering smallholders through education and helping organize the cooperative buying of inputs and marketing post-production. Governments should focus on agricultural infrastructure — both the physical infrastructure (roads, ports, etc.) but also market structure – so that an efficient procedure will make contracts more enforceable for freer movement of goods, including support of standardized contract terms and quality specifications.
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