Traders blame ECX for alleged failings

By Muluken Yewondwossen
Capital Ethiopia

May 29, 2010 (VOLUME 12 NO. 597)

Some of the Ethiopian Commodity Exchange’s (ECX) trading members have complained about the trading system and other facilities of the new system, but ECX officials have rejected the complaints. Some of the coffee traders Capital interviewed said from time to time the exchange is failing in terms of the trading system, quality grading, warehousing facility and payment resettlement.

The traders also blamed the ECX for suspending the establishment of an association that was initially given the green light by the Ethiopian Commodity Exchange Authority, which has a mandate to give a right to form trade associations and control the trading activities.

The traders, who demanded anonymity, said the National Exchange Actors Association (NEAA) formed by members of the ECX in August last year was given six months to form the association, call a general assembly and to elect board members, but the association was suspended by ECX.

The exchange prevented a call for the general assembly, saying the general assembly should follow the finalisation of new trader registration. “We waited the exchange until it is finalised the registration process, but the final date of the license given by the authority has expired because of ECX,” traders said.

“If we have the association we may have more conditions to solve our problems that occur during trading,” they added.

Alongside the development of the ECX and the regulatory body, the NEAA will play a vital role upholding and maintaining the standards of integrity, professionalism, and skills of all exchange actors.

The NEAA will keep a database of exchange actors and be responsible for developing; commodity marketing and ECX training standards and proficiency testing. They will also work on self-audit programs for members to enforce compliance with relevant ECX rules and directives governing accounting, financial standards, and trading practices. A directory for complaints the public filed against exchange actors will be publicly accessible. Another key role is to raise the profile of the ECX through media sensitisation aimed at policymakers, stakeholder groups, students and exchange traders.

According to these traders, they accepted problems occur as it is a new system, but the problems are getting worse.

They said the absence of products at the warehouse is a major problem in the current condition. “Sometimes we do not get the product when we go to the warehouse to collect it. However, we buy it on the trading floor and settle the payment,” they explained.

They added when this problem occurred, the exchange settled the repayment, but did not include 15 percent VAT.

In addition, the coffee traders complained about the quality of the products and the grading system. They said the grading system is corrupt and made it difficult to get products of equivalent quality for the same price.

If the buyer of the product complained about the quality of the bean, ECX has a facility to reexamine the product. “Cuppers of the bean are the same on the first time and on the reexamination,” the traders complained. They suggested that the exchange should facilitate neutral cuppers for reexaminations.

Some traders complained about the trading system, but exchange officials, including other traders, rejected the complaints. Although they accepted problems occurred sometimes, they said they were being exaggerated.

Bemnet Aschenaki, senior business development manager of the exchange, told Capital that the ECX is not accountable for the holdup in the establishment of the trade association. Bemnet said this is the responsibility of the authority.

He added that if the product is not available in the warehouse that could be due to weight loss related to evaporation and the exchange would settle repayment with the client.

On the tax issue, Bemnet explained: “We do not have a right to return VAT. The only organisation that has a right to do that is the Ethiopian Revenue and Customs Authority.”

He also said that due to the exchange being new and expanding its services, problems may occur. He explained confidently that the ECX has settled problems on a number of occasions through discussion and collaboration with traders and relevant employees.

Bemnet denied the quality and grading problem identified by the traders. He clarified that the grading system is using a new electronically technology and based on codes, so the problem could not occur.

The exchange was introduced in April 2008 and commenced coffee trading at the end of the same year. The trading system was not only new for the country; it was new for the continent. The structure of ECX is being adopted by other African countries because it is thought it will boost agricultural trading system, and be advantageous for small scale farmers. The system is heavily supported by the World Bank.

Recently, the World Economic Forum on Africa held in Dar es Salaam, Tanzania agreed the trading system is the most preferable system for the development of agriculture in order to boost economic growth in Africa.