Smallholder farmers and other operators along the country’s agriculture value chain are set to rake in more returns on their investments following the assurance by members of the Ghana Securities Industries Association (GSIA) to support the Ghana Commodity Exchange (GCX).
GSIA, the umbrella body for brokerage firms in the country, backed the operations of the GCX and expressed the desire for the establishment of a robust regulatory and legal framework that will stimulate trading on the commodity exchange platform.
Lead discussant on the project, Mr Robert Dowuona Owoo, who doubles as the acting Project Director for GCX, explained at a sensitisation programme in Accra that the objective of the exchange was to transform the lives of Ghanaians in general and those who participated in the agriculture value chain in particular.
The sensitisation programme was to share information on the membership and recruitment design and opportunities open to market actors when GCX became operational.
He said the concept of partial mandating was being explored to ensure that the exchange had the needed volumes to make trading attractive to members of the exchange.
mandating concept
According to Mr Owoo, the partial mandating concept would encourage sustained active participation of market actors on the exchange.
The partial mandating concept would permit the regulator to occasionally require that certain commodities or volumes of commodities be traded on an exchange.
This policy, if adopted, would also compel institutions that made purchases of huge volumes of all commodities of the quality that GCX would trade in the future, to be executed on the Exchange through Brokers.
The GCX is a market platform for trading local commodities in a transparent and uniform manner with the view of improving efficiency and profitability of the most dominant sector in Ghana’s economy.
Speaking on the membership structure and requirements design for the GCX, the Membership Manager of GCX, Mr Richard Ankrah, explained that there were five categories of membership, namely: Institutional, Trading, Brokering, Clearing and Associate.
He explained that the categorisation of the membership structure had been done to enable all market actors to participate in the GCX activities through any category as part of the all-inclusive policy of the exchange.
Brokerage forms
He stated that the participation by brokerage firms on the exchange would afford them the opportunity to increase their clientele in terms of access to aggregators, farmers, traders, processors while ensuring trade facilitation which would enable them to execute orders to buy or sell commodity contracts on behalf of clients and charging a commission.
He also hinted that becoming members of the exchange afforded the brokers the opportunity to own propriety rights to membership seats in the trading pit, which could increase in value over time, thereby making it possible for brokerage members to also trade on their own accounts to make profits.
Mr Ankrah also urged representatives of the brokerage firms to consider investment opportunities in other areas of the GCX ecosystem.
The sensitisation exercise also afforded the stockbrokers the platform to know more about the regulatory and policy environment to ensure successful operations of the Exchange, the opportunities for auxiliary services in the transportation, logistics, haulage and warehousing continuum of the ecosystem, technological infrastructure to be deployed and protocols or policy on standards and grading of commodities to be traded in among other concerns.
They indicated their willingness to participate in a similar sensitisation engagement on the Central Depository and Clearing and settlement models of the GCX.
Futures and derivatives
The Ghana Commodity Exchange is expected to start with spot trading and phases in futures and other derivative contracts.
The GCX will start with trading of agriculture commodities, including maize, soybeans, paddy rice, palm oil and groundnuts. Other key agriculture and non-agriculture commodities will be introduced as the exchange develops.
Trade and Industry Minister, Dr Ekow Spio Garbrah, also impressed on financial institutions the need to provide credit support in the initiative.
“About 76 per cent of all the investment of the banks in the country goes into treasury bills. The country cannot be developed on that basis when there is agriculture, industry and SMEs that we must invest in.
The necessary institutions would have to be set up to develop new incentives and disincentives to compel the financial institutions to put the necessary percentage of their loan portfolios in the agro sector as well as in industry,” he said.
