Bourse Africa Limited (BAL) will by the end of this year start trading in Africa’s commodities, currencies and other asset classes through a pan-African network, as part of its effort to stimulate the development of Africa’s commodity and financial markets. This is according to the Assistant Minister of Trade and Industry, Vincent Seretse.
Bourse Africa, an international exchange hub located in Botswana, is expected to link the national exchange platforms in countries across Africa. The trading platform will be Africa’s first commodities and derivatives exchange and central counterparty clearing house outside South Africa.
“The $100 million commodity exchange project will create opportunities for growth in Botswana and Africa’s economy,” said Seretse during this week’s workshop for regulators of derivatives and commodities, hosted in Gaborone.
“Bourse Africa has met a rigorous assessment and approval process that found the project to carry the potential to significantly advance the economic development objectives of both our country and those of the African continent as a whole,” he said.
Seretse said the derivative contracts envisaged to be traded on Bourse Africa will deliver benefits of price risk management through market based instrument. “The derivative contracts will mitigate against the price volatility that is endemic to Africa’s commodity and financial markets,” he said.
He noted that Bourse Africa will provide exchange-generated market information such as pricing data to support decisions regarding optimal production, sales and investment. Seretse noted that the introduction of businesses, such as Bourse Africa, have far reaching consequences for the large businesses, banks, non- bank financial institution and small commodity producers.
“In countries with established commodity exchanges, the activities of the exchanges have given rise to the installation of guaranteed, reliable physical commodity delivery systems and infrastructure, including logistics, storage and quality assurance,” he said. He added that in other countries exchanges have improved access to cheaper sources of finance by reducing risks for both producers and banks.┬á┬á┬á
Regional Director of African Development Bank, Ebrima Faal, added that the network will act as risk management instrument and is expected to improve competitiveness for large multinational traders, small processors and small holder farmers seeking to operate in Bourse Africa. He said when market access is unequal and when farmers and other commodity chain participants cannot get a fair deal, a commodity exchange can level the playing field. “Where currency and commodity volatility exist, destabilising households and threatening our food and energy security, derivatives instruments provide us a means to mitigate these risks,” he said.
┬á“This will in turn ensure effective use of Africa’s significant untapped potential in Agriculture, metals minerals and energy commodities,” said Faal. He said with lingering Eurozone debt crisis and the slowdown in the major emerging markets structural reforms such as Bourse Africa is required to correct financial and labour markets in the continent.
On issues of regulation of commodity and derivative exchange markets, the member of Bourse Africa Pan African Advisory Board, Dr. Kombo Moyana, said African Development Bank, as a development partner has promised to assist with capacity building for capital market authorities, securities and exchange commissions to implement regulatory standards.