Ethiopia Commodity Exchange eyes more traders with regional online centers
The Ethiopia Commodity Exchange (ECX) has announced that its first online commodity trading center outside its headquarters in Addis Ababa as it seeks to reach out to more farmers and traders.
The center which will go live in January 2017 is part pf the ECXs strategy to set up regional centers across the country.
This has seen it put in motion a five-year strategic plan to effectively de-centralise its trading centre, with ten branches spread out across the country. The trading centres will not be established randomly, but based on the area’s comparative advantage in producing a certain commodity.
“Around 60pc of coffee traded at the ECX’s HQ passes through key areas of Hawassa, while Kombolcha is known as a major red kidney hub,” Tewodros Assefa, public relations head at the ECX said.
The five-year strategic plan, which targets greater accessibility and is anchored on commodity specialisation in a given area, also includes setting up trading centres in ten cities. To this end, the Exchange has commissioned the construction of four such centres in Jimma, Adama, Gondar and Kombolcha. The ECX has set aside a budget of $154,000 for the construction and operationalisation of these four centres.
This puts the number of nearly completed and commissioned trading centres at seven. “The remaining three centres will be introduced next year,” Tewodros added.
The trading centres outside the ECX’s headquarters will be serviced by its in house built trading engine. The Exchange first implemented the electronic system at its Addis Ababa floor in July 2015.
“The new centres, once online, will be connected with each other and the HQ,” Tewodros noted.
“The establishment of trading centres in different parts of the country is a welcome development,” an expert in commodity trade in Ethiopia noted, speaking on the condition of anonymity. “Primarily, decentralising the trading centre will boost transparency for traders who can monitor the process in a close proximity.”
“Moreover, the current sole dependence on Addis Ababa’s trading floor and its inconvenience will be addressed,” he added.
Each trading centre will have 50 member seats, who will be taking part in the transaction process. The seats will be allotted to cooperative unions and individuals who will acquire the right to trade through competitive bids.
“Addis Ababa’s ECX floor currently has 347 seats; cooperative unions have 33 seats and represent no less than five million farmers,” Tewodros said.
In total, around 17,000 clients are serviced by members who have seats at the floor. Close to eight billion birr’s worth of trade has been transacted since July 2015, according to the PR head.
Despite the benefits that decentralizing the trading centres brings to the market, there are some challenges and shortcomings in promoting the increased benefit for farmers.
“Lack of capacity in easily utilizing the electronic trading system was an issue when it was introduced at the Addis Ababa floor,” the expert stated. “This issue will prove to be a problem, at least during the initial period of its implementation, unless proper training is given.”
The ECX previously used the “open house cry” method to conduct its trading.
The expert, though very appreciative of the effort to spread trading centers closer to clients, fears that the current scheme will not totally ensure the benefit of farmers.
“There will still be middlemen, who will take commissions for trading commodities from farmers,” he underscored.
The ECX was established in 2008, aiming to “ensure the development of an efficient modern trading system” that would “protect the rights and benefits of sellers, buyers, intermediaries and the general public,” according to its establishing Proclamation.