Kebede Bilbila and Beza Trading both offered the highest price for Ethiopian Commodities Exchange (ECX) membership seats at eight million birr. The Ethiopian Commodities Exchange (ECX) opened the bid it floated to sell 30 membership seats on November 2, 2021.
This is a slight increment from the seven million birr it fetched last year and five million birr from two years ago. The lowest offer during the latest bid was 3.5 million birr.
According to people close to the matter, eight million birr is far below the expected price.
“Four coffee exporters were in preparation to offer between 10 million and 11 million birr. But they withdrew because coffee is currently being sold outside the ECX floor under the direct marketing introduced by the Coffee and Tea Authority. Coffee has already left the ECX floor. There is no guarantee that other major crops like sesame will stay at the floor. Plus the current conflict and political instability has eroded the confidence of potential buyers. Why should we buy a seat, while rumors are circulating even more commodities will leave the floor and directly be traded between producers and international buyers,” remarked Anwar Ahmed from Afro-color Ethiopia business consulting company.
Owning an ECX seat gives you the privilege to buy commodities directly from the ECX, and also buy for those who do not have such privileges. Seat owners charge one percent of the transaction, when they buy on behalf of other suppliers and exporters who do not have a seat.
For instance, if an exporter with no ECX seats buys commodities worth one billion birr, the exporter has to pay 10 million birr to the seat owner who buys the product representing the exporter. The commission soars as the transaction volume grows.
Thus, buying a seat for as much as 10 million birr is feasible, instead of paying a commission to intermediaries. Plus, the seats are considered as active capital by banks. Simply put, buying commodities from the ECX is difficult for exporters who have no seat.
However, many argue the fact that major crops leaving the ECX floor are escalating unprofessional price speculation and artificial scarcity, widening gaps between domestic and international markets, which the ECX has bridged over the decade.
Others argue that the Authority’s push for direct marketing has shadowed the significance of ECX.
However, Wendimagegn Negera, CEO of ECX, argues that the ECX remains to be significant.
“We are introducing more commodities including minerals and four spice items, among others. We are also providing other services like warehousing and quality certification services for coffee suppliers and exporters in a bid to compensate for the commodities leaving in favor of direct marketing,” Wendimagegn told The Reporter.
According to Adugna Debela (PhD), director general of Coffee and Tea Authority, over 90 percent of the coffee exported in 2020/21 was bought under the new direct marketing model, outside ECX.
In fact, most exporters prefer to buy commodities under the direct marketing scheme when the price of the commodities is lower outside ECX, and switch back to ECX whenever the price outside ECX is inflated.