African farmers who have not been getting value on their produce stand to benefit from the muted Pan-African commodities and derivatives exchange that will have a technology hub in Botswana and link to other exchanges in the continent.
However, to arrive at that, Bourse Africa, which has been accredited by the Botswana IFSC to operate the exchange, has enlisted the services of an Indian financial markets expert to audit regulation in Botswana to pave way for the launch by end of the year.
The consultant, Dr Shan Nair, told Sunday Standard in an exclusive interview this week that Botswana needs regulation that has an international acceptance.
“I have an assignment to look at the regulation and familiarise the market,” said Nair, adding that he has identified gaps in the regulatory framework.
“There are gaps in regulation and we have had discussions with the Non Bank Financial Institutions Regulatory Authority (NBFIRA), IFSC and we are to have discussions with the Bank of Botswana,” he added.
Nair revealed that his task will be made easier by the support they got from the Ministry of Finance and Development Planning who the process has been communicated to.
During his three months assignment, Nair will try and come up with the regulation that look at factors like risk aspects and emulate the tougher regulation in India that managed to keep the country out of the global credit crunch.
Bourse Africa says the regulation will create a platform to trade in Africa and allow trade to happen between Africa and the international markets.
Nair, who has 30 years in the regulatory market, said that with the assurance of support from Finance ministry, he can complete his job in three months and pave way for the launch in the last quarter of 2009.
The planned Pan African commodities and derivatives exchange will trade contracts for agricultural commodities, oil and metals across Africa with a hub and spoke model centered in Botswana.
The Managing Director of Bourse Africa, Chris Goromonzi, explained that the exchange should not take a long time to succeed adding that they expect it to be operational by September.
“There are challenges, but Africa has a commodity base,” he pointed out.
“Botswana is well placed to pioneer commodities exchange and we are targeting best practice. The whole of Africa will look into Botswana for best regulation.”
The technology hub will be located in Botswana and link with other exchanges in the continent. Already, Bourse Africa has had talks with East African Green Council and COMESA that has written a letter of support.
Adam Gross, another member of Bourse Africa, revealed that the role of farmers is crucial in the public awareness on the commodities exchange because they stand to benefit from the exchange.
In India, Gross said they have trained over 1 million farmers through their capacity building programme, saying farmers generally do not have control on prices of their commodities.
“They will understand the real value of what they produce. They get bad prices on the world market,” added Gross.
Farmers across Africa will be taught about market information as first step, secondly, how to execute orders and risk management.
The initial investment in Botswana project will be $ 71 million and initially the exchange will have subsidiary markets in major commodities producing countries in Africa with intentions to expand to over 50 countries.
Financial Technologies of India is the principal promoter of Bourse Africa and it operates the Multi Commodities Exchanges of India (MCX India), Dubai Gold and Commodity Exchange (DGCX) and Global Board of Trade in Mauritius (GBOT).