7 October 2013

Ghana: Eleni Receives Green Light to Set Up Ghana Commodity Exchange

Eleni LLC, a newly-formed company based in Nairobi, Kenya, with equity investments by Morgan Stanley, International Finance Corporation (IFC), the private sector arm of the World Bank, and 8 Miles Fund, a private firm in London, has received the green light from the Securities and Exchange Commission (SEC) to set up the Ghana Commodity Exchange (GCX) within a 12-month timeframe.

The Co-founder and Chief Executive Officer (CEO) of Eleni LLC, Dr. Eleni Gabre-Madhin, disclosed this to the Business Chronicle in Accra over the weekend.

Dr. Gabre-Madhin, who was in Accra last week at the invitation of the Government of Ghana, described her trip to Ghana as "very successful."

She told the newspaper: "Our company has been working on a road-map to design the Ghana Commodity Exchange. And having completed that road-map, we have now received a green light to proceed to put together an investment proposal, which will be a Public-Private Partnership to put together the necessary design and implementation and technology to establish a vibrant commodity exchange in Ghana."

Dr. Gabre-Madhin added: "Our thinking is that once the investment group would be formed, and the agreement is reached with the government, then we would proceed with the 12-month timeframe, so, hopefully late 2014, rather early 2015."

Building on the success of the highly-acclaimed Ethiopia Commodity Exchange (ECX), which she founded and managed from 2008 to late 2012, Dr. Gabre-Madhin said her equity investment firm was positioned to be the industry leader in designing, building, and supporting the operations of commodity exchange eco-systems in frontier markets, including Ghana.

The company's business model, which is based on delivering turnkey projects on a Public-Private Partnership (PPP) basis, combining private investment with the best of know-how, technology and management to support exchange projects, revealed that apart from the three investors, they were in the process of working with local partners and co-investors to finance the commodity exchange for Ghana.

When asked how much is likely to spend on the project, Dr. Gabre-Madhin, who is also an Economist, answered: "It is a bit early to say, but it is about the establishment of the commodity exchange and eco-systems, which is the storage, infrastructure and logistics business, so it is a comprehensive investment which may be around $50 million."

According to her, a commodity exchange much like the stock exchange is the way for buyers and sellers to come together and trade in a much transparent and reliable manner.

Now, in the case of commodities, unlike the stock, a commodity exchange involves a number of actors that typically have already been functioning in the informal or traditional agricultural market, namely farmers, small scale traders, commercial growers, processors, exporters, and national buffer firm(s), among others, towards the expansion and improvement of the sector as a whole, she explained.

Dr. Gabre-Madhin further explained that "the landscape is actually quite a bit more diversified and complex than the Stock Exchange. The central advantage of a commodity exchange is to really create a common language and common principles, and set of goals by which the market is organised.

So that, we can achieve a more efficient and very quickly, and readily trade with each other, and without having to face high risk, high cost, being cheated, having contract default, or somebody disappear with the goods or not pay on time, or no delivery on time and other things that currently constraint the growth of our agricultural economies, because of such high risks and costs, she stated.

The Co-founder and CEO of the Eleni LLC stressed: "We can try to find a solution to these through a common exchange, which would basically have standardise contracts, and a very transparent market information system, a way to reliable collect the fees or payments from the buyers and transport them to the payment and settlement systems, when we settle payment to the market in a very reliable and risk free way.

"So, advantages of the commodity exchange are orderliness in the market, efficiency, transparency, and integrity."

An Economist at the University of Ghana, Legon, Emmanuel Nii Abbey, who shared the same sentiments expressed by Dr. Gabre-Madhin, added that the successes of the yet-to-be established GCX would further boost growth in Ghana's agricultural sector, which employs about 80% of the population, and which will then support the industry and services sectors.

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