ETHIOPIA – The Ministry of Trade (MoT) is establishing a new enterprise in order to manage the Ethiopian Commodity Exchange’s (ECX) warehouses.
The Ministry has finished the necessary draft directive, which is ready for discussion with the relevant stakeholders before passing it on to the Council of Ministers, according to Kebede Chane, minister at MoT.
“The initiation to separate the two bodies came from the Ministry,” said Abenet Bekele, chief strategy officer at the ECX.
The draft directive is prepared by a committee that was organized by the MoT comprising experts from ECX, Ministry of Agriculture (MoA), representatives from the regional Trade and Industry Bureaus and Ethiopian Commodity Exchange Authority, (ECXA)according to Kebede.
The new enterprise will be responsible for the construction and management of new warehouses, including the existing 60 warehouses at 19 different sites, which the ECX rents from the Ethiopian Grain Trade Enterprise (EGTE) and other private owners.
The ECX has been in business since April 2008 with 100 members, it trades six types of commodities, of which three of them have rules and regulations at the floor including sesame, coffee and white pea beans.
The other three commodities traded on the floor are mung beans, wheat and maize. In addition, it manages warehouses in which commodities will be stocked before and after sales until its delivery takes place.
The reason to separate the management of the warehouses, according to Kebede, is because the ECX is expanding and opening branches starting this September in regional towns, including Adama, Hawassa, Jimma, Gonder and Humera.
There were reports that the ECX had been facing challenges in warehouse management, where the quality of the produce traded on the floor would be different upon delivery at the warehouse; some workers at warehouses are accused of removing high grade commodities from their sacks and replacing them with lower grade qualities, with the sacks still displaying the high grade labels.
The ECX had to fire some people because of this. The separation will minimize the problems of the ECX related to handling the processes both at the trading floor and warehouses, kebede says.
The new enterprise will deploy Inventory Warehouse Management System to ensure quality and to reduce wastage during the commodities stay at warehouses.
The committee drafted the regulation based on the experiences of South Africa and Colombia, said Kebede.
The ECX, MoT, Ministry of Agriculture (MoA), and the Ethiopian Commodity Exchange Authority will discuss the draft regulation in the coming two weeks, says Kebede. This discussion will also decide whether or not the new enterprise will be under the ECX or the MoT.
The warehouse enterprise will also serve other clients than the ECX, with the latter being its main client.
In the last fiscal year ECX has seen increasing its members from 100 to 346 – 33 of which are cooperatives and unions, with 2.7 million small scale farmers under them.
The ECX also has 14,725 buying and selling clients with a trade volume of 586,000 tns during the just ended fiscal year and a revenue of 26.2 billion Br.
Trading volumes of commodities at the floor amounted to 391,000tns in 2009/10, 500,000 in 2010/11 and 601,000tns in 2011/12. It declined to 539,000tns in the following year.
Since ECX is the expected main client of the enterprise, the new framework will be the advantage of ECX, says Abinet
ECX announced the launch in September 2014 of a 3.8 million dollar online trading system which enables online trade from Addis Abeba directly with remote online trading centres.
The other system to be launched on September is Traceability, 1.3 million dollar project which uses software to trace commodities every step of the way from farm to warehouse.