Africa: Countries to Benefit from Interconnected Commodity Exchanges
By Staff Writer
NAIROBI---The African continent, particularly countries in the Eastern and Southern Africa region, could gain a lot from interconnecting their commodity exchanges. Pursuant to a study published by the African Union as far back as 1991 recommending a continent-wide commodity exchange, the African Commodity and Futures Exchange (ACFEX) has begun to be implemented spearheaded by various prominent commodity experts in Africa and in the diaspora. ACFEX Director of Development, Dr. Cris Muyunda, speaking August 9 to stakeholders of the 9 nation Nile Basin under the Regional Agricultural Trade and Productivity programme at the Silver Spring Hotel, in Upper Hill, Nairobi, has indicated that ACFEX is the first true Africa-wide commodity Exchange and is a derivative market offering Futures and Options or Forwards as well as Electronic Warehouse Receipts (EWRs). Dr. Muyunda said, over the next few months ACFEX will be making significant contributions to facilitating smooth flow of commodities on the continent and reduce food insecurity in areas such as the horn of Africa.
Dr. Muyunda stated that through ACFEX Options, commodity buyers and sellers throughout the continent will have the right to buy or sell commodities at specific prices and will be able to choose whether to exercise that right or not. Using Futures, commodities such as maize will be delivered to various locations on the continent at an agreed future price. On the other hand, Electronic Warehouse Receipts will allow farmers to approach banks and use the EWR as security to obtain short term loans. Within a few months, producers will be able to close out the EWR contract at a higher price and pay off short loans.
ACFEX is inviting clearing firms, trading firms, financial institutions and producer organisations to work with it to increase agro incomes in Africa and eliminate the spectre of surpluses in one part of the continent and chronic shortages of food commodities in other parts of the continent.
The ACFEX electronic trading platform developed by experts in North Carolina, USA, allows trade in agricultural futures, metal futures, energy futures, currency futures, single stock futures and equity index futures. Presently 15 agro products namely, cotton, cashew nuts, wheat, coffee, cocoa, rubber, cattle, cow milk, rice, yam, wheat, maize, sorghum, palm oil, groundnuts and cassava can be traded on ACFEX. The organization is presently launching a sensitization and awareness campaign for traders, producers, national commodity exchanges, financial institutions and the media to acquaint them with the ACFEX Trader Platform.
As a priority activity, ACFEX has opened up discussions with various national agro commodity exchanges to work on restructuring efforts to allow for expanded continent-wide commodity trading opportunities. ACFEX plans to offer white label service to all national exchanges throughout Africa saving about 80% of the cost of implementing their own platforms and services.