The auction of a full membership seat at the Ethiopian Commodity Exchange (ECX) attracted a 1.3 million Br offer from a single bidder last week.
The seat, which belongs to Oral Agro Industries, was put up for auction on December 7. This was after Oral expressed interest in selling the seat, which it acquired for 50,000 Br, in 2008, when the ECX was first founded.
Oral, run by owner and manager Fasil Tsegaye and his wife, is an agricultural company that has farms in the Southern Regional State, where it grows sesame, rice and maize. Fasil says he is selling the seat because there were too many oversights from the Ethiopia Commodity Exchange Authority (ECEA).
A punishment of 8,000 Br, by the ECEA, for failing to report on a monthly basis was the final straw, which led him to decide to leave the ECX, according to Fasil.
A full membership seat allows customers to buy or sell on the exchange floor, in all of the commodities in which the ECX transacts. Seats are either sold by the Exchange itself, when it wants to increase the number of members, or by members, three years after acquisition.
A member should not be suspended, and must be clear of any outstanding debts when selling their membership.
Having fulfilled these requirements, Oral was cleared by the Exchange to auction the seat. The auction was facilitated by the ECX, but it is up to Oral to make a decision on whether to accept the final offer.
Despite 20 people buying bid documents, only one person made an offer, before the bid closing date, of December 21, 2012. Oral has been informed of the offer and it has made a decision to accept, according to Shimeles Habtewold, chief compliance officer at the ECX.
The amount offered is much lower than previous ones, where ECX itself had floated additional membership seats. A record high offer of 3.5 million Br had come from sesame and cereal exporter, Zablon Trading, when the ECX had offered 92 seats for auction in December, 2011. Out of the 92 seats, 80 were additional ones set by the Authority.
An offer of 3.2 million Br had also come in when the ECX added 150 membership seats two years after it was founded. This had boded well for the Exchange, which initially had to advertise and set a fixed price to attract members to join.
Since the auction of the 92 seats by the ECX, three people, aside from Oral, have come forward to sell their seats.
The highest price fetched so far is 1.8 million Br, offered by Desma General Plc, which bought membership from Smart Business Group Plc. A very low offer of 855,555 Br, by Sultan Selamu Ahmed, for a membership seat sold by Garden Mocha Plc also came in, on May 17, 2012.
The offer Oral received is the second lowest out of the four.
Although the ECX requires that members notify their decision to accept or reject offers within 24 hours, Oral is still considering the offer, according to Fasil. His asking price was one million Birr.
The identity of the person who had made the offer remains undisclosed.