Rwanda beats Kenya to first commodities trade deal

Rwanda has beaten Kenya in the race to establish an East African commodities exchange with conclusion of the first regional trade auction.

Tuesday, the East Africa Exchange (EAX) concluded trade of 50 metric of tonnes of maize valued at Sh34,000 ($398) sold by a Ugandan to a Rwandese.

Kenya’s dream of establishing a commodities exchange is still stuck at the formulation of a legal framework for the market, expected to boost farmer’s earnings by providing a ready market for their goods.

“The auction took EAX one step closer to its ambition to create “one African market” and has given further credence to the importance of regional commodity trading,” said the company in a statement.

EAX is owned by Nigeria’s Tony Elumelu’s Foundation, Heirs Holdings, Berggruen Holdings, 50 Ventures and Rwandan-led Ngali Holdings.

Paul Kukubo, a Kenyan and former chief executive of ICT Board, is EAX chief executive. 

Talks on setting up a futures market have been ongoing in Nairobi since September 2010 when Futures Market Committee was set up.

The agricultural sector has been the main focus on the need for a futures market due to the expected gains in helping famers and consumers sail through the annual wild swings in commodity prices. Draft rules to guide the market have been released to the market for public debate.

The Capital Markets Authority is also processing applications for licences to operate the derivative exchanges, which includes the commodities market, from local and foreign firms.

In July, Nairobi Securities Exchange said that it had started testing a new IT system for trading currencies and other commodities in partnership with a South African firm, Securities Trading and Technology.

Kenya has been seeking to boost its profile as the financial hub in the region a position that may be challenged by the younger but the ambitious and aggressive Rwandese market.

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Rwanda has consistently ranked higher than Kenya in the Ease of Doing Business report prepared by the World Bank.

In the four months prior to this first auction more than 50 traders from Rwanda and the East African region have visited EAX offices for training on the electronic trading platform.

A commodities exchange is a marketplace offering price transparency and wider market access to traders. Kenyan farmers are currently exploited by brokers who buy from them at low prices to sell it to the urban market with huge margins.