Trade Minister speaks on commodities exchange

Government is facilitating the speedy completion of the commodities exchange to stabilise commodity prices and create alternative exchanges to accommodate small and medium enterprises, Hannah Tetteh, Minister for Trade and Industry, has stated.

“Next year, the commodities exchange for the country will be in operation to create huge opportunities for the agricultural sector,” she hinted at a forum in Accra.

Securities and Exchange Commission (SEC), the lead promoter of the commodities exchange and warehouse receipts system in the country, is mandated to develop the need¬ed regulatory framework to facilitate establishment of the exchange once gov¬ernment accepts the recommendations.

SEC is evaluating the submitted applications received from experts for the drafting of the needed framework, which will be the blueprint document for the operations of the exchange, a senior official at SEC disclosed to B&FT in a recent interview.

The legal and regulatory framework, which will regulate the modalities in which commodities exchanges may be established, organided and operated, is to ensure that all those in the supply and value chain in agriculture sector benefit from their involvement.

The exchange when fully operational could raise the hopes of millions of farmers, especially large-scale farmers and make their lives more meaningful. It provides for market transparency, efficient price discovery and standardisation, and the attendant improvement in quality standards thereby assists farmers to gain easy access to ready markets - both local and international.

The exchange’s establishment will help to deal with challenges facing the supply of agricultural produce, which in turn will deal with food inflation. It will as well provide a potent tool for a farmer to manage price fluctuations, stabilise his/her income and gain access to relatively cheaper credit.

Ghana has suffered three failed attempts towards the establishment of a commodities exchange, due to the unavailability of a regulatory framework.

A commodities market or exchange is a platform where various commodities and derivatives are traded.

Most commodities exchange trade in agricultural products and other raw materials like wheat, barley, sugar, maize, cocoa, coffee, cotton, milk products, oil and the metals.

“There is no doubt that a commodity exchange for futures trading is necessary for the efficient functioning of an economy,” a commodity price expert has opined.

In West Africa, and across sub-Saharan Africa, it is rightly envisaged that properly functioning exchanges that play a big role in poverty alleviation initiatives would increase the incomes of agricultural producers.

Ghana will be the fifth country in Africa, after South Africa, Nigeria, Kenya and Ethiopia, to operate a commodities exchange that aims to embark on an aggressive over¬haul of its agricultural sector.

This will promote the use of derivatives like forwards, futures and options in Ghana as the door is opened to foreigners to participate in speculating on agricultural products or metals traded on the exchange.

Dr. Boeh-Ocansey, Director-General, Private Enterprise Foundation, has also endorsed the idea. He said: “Since Ghana’s economy is basically agricultur¬al, it would make a lot of sense to see to the establishment of an effective commodity exchange that would not only eliminate the regular post-harvest losses through the buy¬ing of produce for storage, but also put money in the pockets of farmers in the short¬-term to facilitate their downstream opera¬tions.”