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29 May 2008
Pan African Commodity Exchange to set up in Botswana
The Botswana International Financial Services Centre has been actively engaged in following up various opportunities to establish a Pan African commodities exchange in Botswana and now it will facilitate the establishment of a Multi Commodity Exchange (MCX) initiative here that will house commodity trading infrastructure and clearing systems.
Commodity Exchanges as defined by the United Nations (UN) are: "organizational entities which allow those active in the production, trade, processing and consumption of physical commodities to reduce transaction costs. They provide discipline and act as a source of market information, and give those active in the commodity sector both the tools and the incentives to improve the way they operate. In this role, they can contribute substantially to the economic development of a country and the well-being of its population".
The MCX initiative is in line with the Arusha Declaration and Plan of Action on African Commodities of 2005.
Speaking at the inception of the project Vice President Lieutenant General Mompati Merafhe said the MCX seeks to redress the problems that challenge African commodities.
MCX Africa project would establish and operationalize a Pan African commodity exchange to trade agricultural commodities, oil and metals across Africa on a hub and spoke model, with the hub located in Botswana under the Botswana IFSC, he said.
The MCX Africa project would trade commodities across Africa and integrate the efforts of numerous African countries. These trading activities would show that Pan African initiatives can be exploited for the benefit of the continent as a whole, he said.
Botswana would take the opportunity to join other international commodity exchanges around the world that are operated by Financial Technologies of India Limited, such as the Multi Commodities Exchange of India or MCX India, Dubai Gold and Commodity Exchange ("DGCX") and the Global Board of Trade in Mauritius ("GBOT").
Merafhe said the project would boost the development of Botswana's financial services sector and yield other significant benefits. “It is our expectation that the MCX Africa commodity exchange project will enhance the profile of the Botswana financial services industry,” he said.
Considerable benefits that are expected for Botswana include employment creation, tax revenues, infrastructure development, transfer of technology and expertise, and economic empowerment of Batswana.
He was confident of the competence and the ability of the Financial Technologies India Limited (FTIL) and the MCX Group to diligently execute what is otherwise a highly complex and sophisticated undertaking.
Merafhe said other commitments contained in the Arusha Declaration included the "establishment of a forum to discuss the implementation of the commodity exchange initiatives, and in particular, to enable private sector parties to discuss such initiatives, their requirements and potential obstacles".
He said the participation of the IFSC in the MCX Africa initiative would grow and would strengthen Botswana's status as a preferred Pan African financial centre.
“It is encouraging to learn that MCX Africa is being promoted by a leading Financial and Technology Company based in India,” he said.
The establishment of MCX Africa in Botswana was consistent with Botswana’s economic diversification strategy. It deepens the sophistication of our capital markets, will create employment and promote the transfer of new skill and technology, Merafhe said.
He noted that favourable conditions in Botswana influenced MCX Africa to locate MCX in Botswana.
The Botswana Gazette
