A commodities and currency exchange expected to go live in Mauritius in late March plans to offer Africa’s first currency futures and derivatives market for the Kenyan shilling and Ugandan shilling. This news comes after reports in this past November that Bourse Africa plans to set up an African commodities exchange.
Joseph Bosco, Chief Operating Officer of Global Board of Trade (GBOT) that will run the exchange, told Reuters it would allow market players to better hedge themselves in a region where political risk weighs heavily on the markets.
“We intended to start off with six currency pairs and now we are expanding to eight pairs with the dollar as the base. The two additions are the Kenyan and Ugandan shillings,” Bosco said in a telephone interview on Wednesday.
“Today these markets (Kenya and Uganda) obviously have their own currency trading, but that doesn’t give them the required risk management mechanisms.”
Kenya’s economy spiraled down and its currency weakened sharply when violence erupted after disputed elections at the end of 2007, before being hit by the global downturn last year.
This year is seen by many investors as a year to cement recovery in east Africa’s largest economy.
However, there are fears that any failure by the country’s fragile coalition government to address constitutional reform and the perceived immunity of the architects of the post-election crisis could trigger more fighting and destabilize the economy again.
“We are giving them risk containment mechanisms, we are helping them to hedge themselves against uncertainty of unforeseen circumstances,” said Bosco.
The exchange, which GBOT says will be Africa’s first international multi-asset derivatives exchange, had been due to go live this month. However, Bosco said the end of March was now more realistic with membership applications proving sluggish.
“We need to have a sufficient number of members (before launching) to bring in the liquidity. I would say about 25-30,” he told Reuters.
Regulators in Mauritius, he said, were processing licenses for four members, with another dozen in the pipeline.
The exchange will trade in 14 commodities, such as precious metals, base metals, and agricultural commodities and eight dollar-based currency pairs – including the Mauritius rupee and sterling.
Commodity-hungry economies such as China and India, as well as food-scarce nations in the Gulf, are increasingly eyeing investment opportunities in so-called frontier markets.
However, Bosco was adamant that business will be both ways.
“We are looking ultimately at the whole of Africa, a multi-asset exchange that will be a gateway for Africa to the rest of the world,” he said.
Source(s): Business Daily Africa
