The Ethiopian Commodity Exchange (ECX) is set to launch the first electronic commodity trading center outside its headquarters in Addis Ababa. The centre is scheduled to become operational in January 2017 in Hawassa, 285km south of the capital.
“We’ll go to our clients,” Tewodros Assefa, public relations head at the ECX, told Fortune, highlighting one of the cardinal factors that shaped the Exchange’s decision to set up shop in regional centers – increased market access for farmers and traders.
Accordingly, the ECX has put in motion a five-year strategic plan (2015-2019) to effectively de-centralize its trading center, with ten branches spread out across the country. The trading centers 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 Hawassa, while Kombolcha is known as a major red kidney hub,” Tewodros added.
The ECX, in addition to its Hawassa trading center, will also launch similar trading floors in Nekemte and Humera in the same year. Construction of all three centers is near completion, and has cost the Exchange around six million Br each.
The five-year strategic plan, which targets greater accessibility and is anchored on commodity specialization in a given area, also includes setting up trading centers in ten cities. To this end, the Exchange has commissioned the construction of four such centers in Jimma, Adama, Gondar and Kombolcha. The ECX has set aside a budget of 38 million Br for the construction and operationalization of these four centers.
This puts the number of nearly completed and commissioned trading centers at seven. “The remaining three centers will be introduced next year,” Tewodros added.
The trading centers outside the ECX’s HQ 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 centers, once online, will be connected with each other and the HQ,” Tewodros noted. “The establishment of trading centers 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, decentralizing the trading center 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,” the expert added.
Each trading center 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 centers 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 2007/551.
[addisfortune.net/]