Last month the East African Exchange had their first Commodities auction, bringing the spotlight to the commodity trading industry in Africa. Located in Kigali Rwanda, the East African Exchange (EAX) is not the first Commodity exchange. There are others, such as the Abuja Securities and Commodities exchange (Nigeria), Makola Agriculture exchange (Ghana), South African Futures Exchange, Bourse Africa (Formely Global board), Africa Mercantile Exchange (Kenya), Ethiopia Commodity exchange, Agriculture commodity exchange of Africa (Malawi), Auction holding Commodity Exchange (Malawi) and Mercantile Exchange of Madagascar
However, thanks to some very strong partnerships, the EAX does seem to be the one that shows the most promise. Powered by the NASDAQ OMX -Xstream system, EAX provides the opportunity for farmers and speculators alike to trade commodities from the comfort of their offices. This is important, because it is the next step in ensuring the growth of the underutilized African agriculture Market.
In America, farming is big business. If you have time, take a trip to Iowa or anywhere else in middle america and take a gander at the vast farmlands, high tech farming techniques and the upper middle class farmers that operate them!
Agriculture exports represent more than 100 Billion dollars in revenue annually, and are responsible for hiring over a million people in the county. African economies could definitely use numbers like this! The business of farming is also closely related to the commodities trading business.
Let me explain, Say you are a farmer that grows corn, you want to be able to guarantee yourself revenue for sale of your crops by the time the crops are harvested. In America, the way to do this is to sell a Corn futures contract on the commodity exchange. A futures contract is an agreement to sell a particular amount of product at a particular price. If at the time the corn is to be delivered, the price has fallen you would have saved money by selling it on the exchange. If it has risen you would have lost some money, but for farmers it is still better to have the guaranteed revenue. This type of financial Activity is severely lacking in many African Countries and that is what Exchanges like the EAX are trying to fix.
EAX is a subsidiary of the African Exchange holdings (AFEX). AFEX was formed through a partnership of Heirs Holding, Berggruen Holdings and 50 ventures, and their goal is to strengthen Commodity Exchanges across the continent. A worthy project that if done right will create wealth for millions of Africans. Let us hope it is done right, let us hope that the parties involved understand that everybody can win if it is done right, let us hope they are interested in legacy and not just profitability. Only time will tell, but for now we will continue to ………………………..Stay Mobile!