Commercial

May 2018

Briefing
Commodity Exchanges in Tanzania
The Tanzania Mercantile Exchange PLC
(TMX) was set up in 2014 as a public private
partnership between the Treasury Registrar,
TIB Development Bank, the Public Service
Pension Fund and the Tanzania Federation
of Cooperatives. TMX is set to be the first
commodity exchange in Tanzania, with a key
focus on agricultural commodities. According
to the National Bureau of Statistics' latest
reports, the following agricultural
commodities are the most produced in
Tanzania:
market licensed by the Capital Markets
and Securities Authority (CMSA) in which
offers to purchase or sell commodity
contracts are made on a centralised
basis.
• "Commodity contracts" are defined as
including:
− Spot commodity contracts – contracts
wherein commodities are traded and
delivered within a two day period

1. Sugar – around 295,000 tonnes − Commodity futures contracts – contracts

produced annually wherein commodities are traded and
delivered when a specified event occurs
2. Cashews – around 155,000 tonnes in the future
produced annually
The regulator
3. Cotton – around 150,000 tonnes
produced annually • The CMSA is responsible for regulating
and supervising commodity exchanges in
4. Tobacco – around 60,000 tonnes Tanzania.
produced annually
• Amongst other functions, the CMSA is
5. Coffee – around 60,000 tonnes produced tasked with:
annually − licensing commodity exchanges
− promoting fairness and efficiency across
In this month's briefing, we look at the legal commodity exchanges
regime governing commodity exchanges in − exchanging information with foreign
Tanzania. regulators of commodity exchanges
− formulating principles for the commodity
Commodity Exchanges Act 2015 exchanges market
− approving commodity contracts
The Commodity Exchanges Act 2015 (CE
Act) is the main law which governs Licensing of operators of commodity
commodity exchanges in Tanzania. Some of exchanges
the key issues that the CE Act deals with are
summarised below: • In order to set up and operate a
commodity exchange, the following key
Definitions
criteria would need to be fulfilled:
• A "commodity exchange" is defined as a
− Tanzanian company – an applicant must be a
company incorporated in Tanzania
− "Fit and proper" credentials – an applicant
must have the financial and technical means
to run an effective commodity exchange
− Operating rules – an applicant must have its
own operating rules that will ensure that the
commodity exchange runs effectively
Rights and obligations of operators of commodity
exchanges
• When a person is licensed by the CMSA to
operate a commodity exchange, they have the
right to operate a commodity exchange in
Tanzania. In addition, in the event the
commodity exchange licence is revoked by the
CMSA, a person has the right to appeal that
decision.
• The right to operate a commodity exchange is
subject to complying with all obligations
imposed under the CE Act or as may be
prescribed by the CMSA from time to time.
These obligations include:
− operating the commodity exchange in a fair,
transparent and efficient manner
− managing risks associated with the commodity
exchange in a prudential manner
− complying with the anti-money laundering and
anti-terrorism laws in Tanzania
− submitting annual reports to the CMSA
− employ personnel that are competent enough
to run the commodity exchange
Approval of commodity contracts
• In order to ensure that a commodity contract is
approved by the CMSA, the following key
criteria would need to be fulfilled:
− Investor information – a commodity contract
must contain all information as investors would
reasonably expect to find for the purpose of
making an informed assessment of the
commodity and the right and liabilities
attaching thereto
− Expert opinion – in certain circumstances, an
expert opinion may need to accompany a
commodity contract. The CE Act does not
specify which persons are authorised to issue
expert opinions.
Commodity Exchanges Regulations 2016
The CMSA has the power to create regulations
under the CE Act. Through this power, the CMSA
has created the Commodity Exchanges
Regulations 2016 (the CE Regulations). Some of
the key issues that the CE Regulations deal with
are summarised below:
Application forms
• Depending on the issue at hand, a certain type
of application form would have to be used. For
example:
− Application to operate a commodity exchange
– this would need to be made via application
form no. 1
− Application to be a commodity broker or
commodity dealer – this would need to be
made via application form no. 2
− Application to be a commodity trading
adviser – this would need to be made via
application form no. 3
− Application to approve a commodity
contract – this would need to be made via
the application form prescribed under
schedule 9 of the CE Regulations
Inspections
• The CMSA is obliged to carry out adhoc
inspections on all licensees at least once
a year.
• During an adhoc inspection, licensees are
obliged to be cooperative and provide all
the information that the CMSA may
request in a timely manner.
Clyde & Co Tanzania
11th Floor, Golden Jubilee Towers
Ohio Street, P.O. Box 80512
Dar es Salaam, Tanzania
T: +255 768 983 000 / 022
F: +255 222 103 004
Further advice should be taken before
relying on the contents of this summary.
Clyde & Co Tanzania accepts no
responsibility for loss occasioned to any
person acting or refraining from acting as a
result of material contained in this summary.
No part of this summary may be used,
reproduced, stored in a retrieval system or
transmitted in any form or by any means,
electronic, mechanical, photocopying,
reading or otherwise without the prior
permission of Clyde & Co Tanzania.

Contact us for further information

Peter Kasanda
Partner, Dar es Salaam
E: peter.kasanda@clydeco.com
T: +255 767 850 056

Michaela Marandu
Senior Associate, Dar es Salaam
E: michaela.marandu@clydeco.com
T: +255 768 983 024

Kankiza Tibaijuka
Associate, Dar es Salaam
E: kankiza.tibaijuka@clydeco.com
T: +255 768 983 023