Commodities exchange far from take-off

It is hard to give a time-line for launch of the proposed Ghana Commodities Exchange (GCX), as the requisite framework of rules and policies is still in the development stage, the Deputy Director-General of the Securities and Exchange Commission (SEC), Alexander Williams, has told the B&FT.

The exchange, which will trade agricultural commodities using spot and futures contracts, is one of those projects of policymakers that has been talked about often but hasn’t seen the light of day years after the idea was mooted.

Together with a regulated warehouse receipt system -- whereby farmers can deposit produce for storage in exchange for a receipt that can be sold to a buyer -- the commodities exchange is expected to improve farmers’ access to markets and ensure better prices for their products.

It had been expected to be up and running by December 2012, but the necessary regulations could not be passed to enable the take-off, Mr. Williams said. And regarding the new launch date of early 2015 given by eleni LLC, the Nairobi-based promoter of the exchange, the deputy SEC boss said it is not possible to confirm that timeline because rules for the market are yet to go through a multi-step process of approval.

“Timelines are normally difficult to give, and I wouldn’t want to hazard that. There are a lot of factors that go into this thing; it needs a lot of consultation. We are just praying that all the state institutions involved will do what it is to be done at the right time,” Mr. Williams told B&FT on the sidelines of the West African Capital Markets Conference in Accra last week.

“We (SEC) have looked at the regulations; they’ve gone to the Attorney-General’s Department. The next thing is for it to go to Cabinet and then to Parliament,” he said.

But even when the regulations are passed, implementation will hinge on enactment of the Securities Industry bill that is currently before Cabinet, he added.

“Already, we are behind time because we initially planned to take off in 2012. Before our bill could be considered by Parliament, it was dissolved for the 2012 elections. This meant that we had to restart the process again almost from scratch after the new Parliament was assembled.”

A consortium of public and private partners, with eleni LLC as lead promoter, will own the Ghana Commodities Exchange, according to plans announced in March. The investment partners include Databank Agrifund Manager, Ecobank Ghana and UT Bank Ghana, while government will have a minority stake in the exchange.

Eleni Gabre-Madhin, CEO of eleni LLC who founded and managed the Ethiopia Commodities Exchange (ECX) between 2008-12, has said Ghana’s own exchange -- which her firm is championing -- will start with spot-trading and phase-in futures and other derivatives contracts within a five-year time-frame.

It will primarily trade agricultural commodities including maize, soybeans, paddy rice, palm oil and groundnuts, but other key agricultural and non-agricultural commodities will be introduced as the exchange develops.