New exchange to change terms of trade

On May 30, a ceremony marked the opening of the first agricultural commodities exchange in Francophone West Africa, the Bourse des Matières Premières Agricoles, or BPMA CI.

The principal drivers of this initiative are the government of Côte d’Ivoire and regional stock exchange BRVM, which lists companies from the eight members of the West African Economic and Monetary Union (Weamu): Côte d’Ivoire, Senegal, Mali, Togo, Benin, Burkina Faso, Guinea Bissau and Niger. 

Indeed, prominently present at the launch were Côte d’Ivoire’s minister for agriculture and rural development, Kobenan Kouassi Adjoumani, and BRVM director Edoh Kossi Amenounve, who called the first trading day, on May 28, a resounding success. 

The basic idea behind the commodity exchange is that trade in agricultural produce is far too often dependent on informal contacts, where farmers exchange the fruit of their labour for cash from middlemen with varying degrees of trustworthiness. Instead, there should be a trading system that is transparent and reliable. The ultimate aim is to improve farmers’ income – something the initiators of the BPMA CI explicitly state as their agenda. 

How it works

The BPMA CI trades in produce that farmers or their co-operatives deliver to two approved warehouses, one in the northern hub of Korhogo and another in the central city of Bouaké, Côte d’Ivoire’s second largest. Both urban centres are close to important producer zones.  

An added advantage is that these two cities are linked to the country’s principal economic centre, Abidjan, by good roads, rendering logistics manageable. 

The government has put in place a regulatory authority that supervises the warehouses and monitors the quality of the produce, 500,000 tonnes of which can be stored there.

At the warehouses, producers are issued with receipts that are legal proof that they own the produce they have just delivered. These transaction documents will link producers with brokers at the BPMA CI, who come from three approved brokerage houses: the West African Commodities Market, Raw Material Trading and African Commodities Brokerage House.

Brokers look for potential buyers, who could be exporters or indeed in-country processors or manufacturers; the Ivorian government has a policy in place that encourages the transformation of agricultural produce inside the country, not elsewhere. 

Trading is done every working day between 10am and noon, and happens in real time through a state-of-the-art digital platform, which is there to ensure that trade is transparent and secure, and the produce thus traded once again meets all requisite quality standards. 

The BPMA CI currently trades in three commodities: cashews (Côte d’Ivoire is the world’s leading producer), maize, and kola nuts (a multi-purpose crop that is popular throughout West Africa). Others are set to follow, including rubber, palm oil and, ultimately, Côte d’Ivoire’s premier foreign exchange earner, cocoa, which it also leads the world in producing.

The question is: will it work? 

Prospects

Commodity exchanges have been established throughout the continent, but their fortunes have varied wildly.

A 2011 study for the International Institute for Environment and Development (IIED) covered five commodity exchanges and found that in some cases the exchanges had been reduced to the status of “a rudimentary market information service”, while others were found to be underperforming.

The biggest trap, according to the report (and one which the BPMA CI is avoiding), is in the process of establishing an exchange. If it is done top-down and driven by external donors the basic message is: forget it – it won’t work. 

While there are obvious other risks involved, such as limited access to finance, problems with scaling up the operation and low awareness among stakeholders, positive steps include the fact that the Ivorian government is involved, and that farmer co-operatives are present as participants. As the IIED report notes: commodity exchanges “must be run by the people that use them”. 

It is too early to tell which direction the Ivorian bourse will take, but the early signs are encouraging. This is certainly the view of BRVM director Amenounve, who sees a bright future for the new commodities exchange – even a reference for the West African region and beyond.

With a combined consumer base of about 150-million people, the Weamu region certainly has that potential. After all, Ghana and Nigeria have commodity exchanges that appear to be doing well. South Africa also provides an example of a functioning commodities exchange, given the significant volumes traded there, UN Food and Agriculture Organisation economist Nicholas Sitko told French daily Le Monde.

The challenge for the BPMA CI is then to augment the volume traded while avoiding falling into the trap of having a few very large companies control it all, to the exclusion of everyone else. 

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