[2008-07-01]  Commodity Exchange Needs $500m
The total cost for setting up the proposed West African Commodity Exchange in Ghana is estimated at about $500 million, Professor Thomas Kubi, Chief Executive Officer of the exchange told CITY&BUSINESS GUIDE in an interview.

To be known as the Economic Community of West Africa States (ECOWAS) Exchange, the venture would operate from Accra next year and have 15 regional offices around the region.

The objective of the exchange would among other things include provision of a facility for the trading of agri-products and other commodities.

It would also aim at providing information and other services to both buyers and sellers within the West Africa sub-region.

The exchange, according to Prof. Kubi, is expected to trade a range of commodities including cocoa, coffee, cashew nuts, sunflower seeds, fruits, vegetables, timber, gold, diamonds and crude oil.

The prime client base for the exchange would consist of farmers, producers, processors, traders, wholesalers, retailers, buyers, sellers, carriers and transportation companies, he added.

It is also expected to handle imports and act as a direct replacement for the former state-owned procurement agencies.

“In Africa today, governments control all imports but with the exchange that will go as liberalization, will allow everybody to import,” he stated.

The exchange would set the price and because the traders would have to borrow money from the banks to buy produce, they would have to sell immediately to pay back the banks. That way, there would be no scarcity, Prof. Kubi added.

He further told this paper that with the commodity exchange, everybody would know the price, noting that, “at the moment, there is no transparency in Africa and this is affecting the farmers as they do not know the world price of the crops they produce.”

The Chief Executive Officer of the proposed West African Commodity Exchange said plans were underway to begin construction of exchange approved warehouses.

He said a Swiss credit support firm, Ace Audit & Control Expertise, had already agreed to back the project and the African Development Bank had offered to provide funding.

Meanwhile, two institutions namely London International Financial Futures and Operations Exchange (Liffe) and Cocoa Association of London (CAL) have pledged to support the setting up of the exchange.

Bill Smit, who is the head of non-financial products at Liffe, described the setting up of the West African Commodity Exchange as an interesting idea, saying electronic commerce had made worldwide trading much easier.

He believed that the ECOWAS exchange could be part of global network of exchanges working together to produce more efficient means of distribution and price discovery.

Mr Smit added: “We at Liffe are interested in this project and would like to be kept abreast of any developments. We would welcome the opportunity to utilize our skills for the commodity exchange in Africa.”

Phil Sigley, Chief Executive Officer of CAL, on his part, said: “I am discussing the provision of the framework to manage such an exchange with Liffe and the New York Board of Trade in order to assess the extent to which reliable experience and resources already available can be directed to assist in this project.”

Information reaching this paper indicated that the National Resource Institute (NRI) of the Greenwich University in the United Kingdom has been appointed by the Securities and Exchange Commission (SEC), regulator of the capital market to conduct studies into the possibility of establishing a commodity exchange.

NRI would conduct studies for crops such as cocoa, cotton among others which would enable it to come out with a grading or standardization system for the crops that would be traded on the exchange.

Industry players have already welcomed the move to establish the commodity trading exchange to deepen Ghana’s financial sector which is gradually becoming a hub in the West African sub-region.

Source: Daily Guide