Last Update 16:4
Thursday, 24 September 2020

Egypt to re-establish commodities exchange in 2021

The move is an attempt to better regulate market prices

Safeya Mounir , Saturday 18 Jan 2020
Rice
File Photo: An Egyptian seller shows consumer goods as rice, at a vegetable market in Cairo, Egypt. (Photo: Reuters)
Share/Bookmark
Views: 1806
Share/Bookmark
Views: 1806

Until the 1920s Egypt housed one of the world’s leading cotton exchanges, reflecting the fame that Egyptian cotton had worldwide at the time. However, as the century wore on the exchanges disappeared until recent decades when the country no longer had commodities exchanges.

However, this situation is soon to change, with Ibrahim Ashmawi, head of the Internal Trade Development Authority, announcing recently that transactions will commence in Egypt’s new commodities exchange in January 2021 after the finalising of technical procedures.

The exchange will include facilities for dealing in wheat, rice, corn and sugar, and it will be managed by the Commodities Exchange Company with a capital of LE100 million. The company’s board will be made up of stakeholders including the government with 50 per cent of the shares.

Other stakeholders will include the Egyptian Holding Company for Silos and Storage, the General Authority for Supply Commodities, the Internal Trade Development Authority, Misr Bank, the National Bank of Egypt, the Agricultural Bank of Egypt, IC Capital, the Hermes Financial Group, the Misr Insurance Holding Company, the Misr Authority for Central Clearing, Depository and Registry, and the Federation of Chambers of Commerce.

Establishing a commodities exchange means the creation of an organised market for trading storable goods, and it addresses problems resulting from multiple intermediaries, the dominance of certain dealers in some commodities, the absence of guide prices, and the need to provide better data.

“The commodities exchange will allow traders to know the prices of commodities before buying or importing them, enabling them to determine the cost of products,” said Fathi Al-Tahhan, a member of the Importers Division at the Federation of Egyptian Chambers of Commerce, who stressed that Egyptian traders have been facing problems relating to the fluctuating prices of commodities.

Mustafa Al-Naggari, head of the Rice and Grains Division at the Federation of Egyptian Chambers of Commerce, believes that smallholder farmers and importers will benefit most from the new commodities exchange.

It would make available commodities that importers can purchase at known prices and help farmers to market their produce effectively instead of falling prey to middlemen, he said. At present, many farmers are unable to store their produce, meaning that they sometimes have to accept lower prices.

The new commodities exchange, Ashmawi said at a press conference, would mean the creation of a structured market for trading storable goods, breaking the controlling position of some dealers.

Price discrepancies could arise in the absence of known guide prices, and the exchange would act as a platform and market for trading commodities, as was already the case for the precious-metals exchanges, he added.

Al-Naggari said the absence of guide prices had obliged traders to resort to websites that did not always offer accurate information. He expected the new exchange to offer updated and accurate prices.

According to Ashmawi, the new exchange will benefit all the parties involved in the buying and selling of commodities, including producers, consumers, and intermediaries.

The exchange would also speed up exports since exporters would easily be able to buy the goods they needed, Al-Naggari said, adding that there was a cap on the quantities of products to be offered on the exchange.

The exchange could also reduce losses from agriculture owing to its storage facilities. It could increase the added value of agricultural production and help make use of agricultural waste, he added.

A number of industries in Egypt use rice waste, for example, but they may not be able to acquire enough of it to make its further use worthwhile.

Al-Naggari expected the new exchange to help to reduce the prices of commodities on the exchange by 10 to 15 per cent, while the head of the Internal Trade Authority expected prices to decrease by 25 per cent.

At present, there is no registered commodities exchange in Egypt, with the Ministry of Supply being the only body authorised to issue licences. “Traders and companies will be able to use the new commodities exchange, with the aim being to reach out to producers,” Ashmawi said.

He said that the state would not interfere in fixing prices, which would be set by market mechanisms. However, the government will monitor the performance of the exchange through the Ministry of Supply.

The government will also work on creating a database for merchants, producers, and farmers, in addition to preparing storage units and forming boards to control the rice, wheat, corn and sugar markets.

Farmers will be registered at the new exchange through the Bank for Development and Agricultural Credit, where the names of farmers eligible to receive agricultural fertilisers are registered.

*A version of this article appears in print in the 16 January, 2020 edition of Al-Ahram Weekly

Short link:

 

Latest

© 2010 Ahram Online.