Stock and commodities exchanges on the African continent are often small or volatile. In the past few years, agricultural commodities exchanges that were set up in countries such as Zambia, Nigeria, Uganda, Kenya and Zimbabwe have needed financial revamping and repositioning whiles others have gone bust. Stock exchanges in the meanwhile on the African continent are trading at rather low volumes. African stock exchanges are almost always dominated by a few large multinational. Our exchanges across the continent has been labelled as ‘bleak’, unexciting and minute by economic experts all over the globe. The volumes traded in the best performing stock/commodities exchange in Africa which is the South African stock exchange comes nowhere near to best performing stock exchanges in other continents such as the Americas and Asia. Where trading volumes range in the billions and thousands of companies are listed ranging from old corporate giants to new high-growth companies.
The reason of the woeful performance of stock and commodities exchanges has been attributed to the lack of technological infrastructure in order to monitor real time value as well as prices of stock and commodities. The lack of access to up-to-date information breeds disinterest and apathy on the side of people who are genuinely interested in trading stocks. Customers will rather invest in a mutual fund which in turn will invest in low risk stocks and pay out interest to contributors. Another cause for the low patronage for stock and commodities can be attributed to the desire for foreign aid by financial regulators on the African continent. Most African securities and exchange commissions have modelled their commodities and stock exchanges to resemble what our donors have back in Europe and the United States inadvertently superimposing finance structures that do not make a lot of sense to Africans. The lack of information and the close-knit nature of stock/commodities market traders leads most Africans to perceive or view stock and commodities exchanges as something for the elite or the rich in society.
What we as Africans must do is to get our finance structures right by developing a system that is truly unique to us rather than practise a system that aims to enrich a select few. It makes no sense to superimpose a finance structure that a lot of people do not understand on an economy. Economies are built for the locals living and ostensibly producing their due quota to its development therefore it is imperative that finance practises and tools do not exclude the local populace.
Ghana is in the works of setting up her own agricultural commodities exchange which will be fully operational in the middle of 2016. Donors and technical advisors for the upcoming project include European Union, United Nations Development Programme (UNDP) together with Eleni LLC. It must be noted that Ms Eleni Ghabre-Madhin who founded the Ethiopian Commodities Exchange and was its first director is now the founder of Eleni LLC. In a Bloomberg news interview she agrees that a lot more has to be done infrastructure and information dissemination wise in order to have a solid commodities exchange. Since its inception in 2008, the Ethiopian commodities exchange was praised as a beacon of what commodities trading must look like in Africa. The Ethiopian government enacted laws that will allow the commodities exchange be the sole trader of the country’s main export which is coffee. Yet the fragmented and not properly streamlined barter agricultural economy did not support such a move warranting the commodities exchange to re-strategize.
A cursory look at the Ghanaian financial and agricultural system will show that the country is not very different from other lower middle income countries such as Uganda and Kenya in terms of financial and agricultural experiences. Statistics show that Kenyans are bit advanced in using technology to transact business and impacting their daily lives than Ghanaians. Internet penetration is relatively higher as well. Therefore Ghana is walking a tight rope in trying to setup a commodity exchange where other identical African countries have shown to be struggling and generally not doing too well. No amount of government regulation and coercion can force increased volumes of trade on an exchange unless the general public are carefully guided and concientized into seeing the real value that an exchange will bring to them.
Employing the use of bitcoin across exchanges will greatly help streamline activities of stock and commodities markets in terms of financing and making payments. Everybody who is involved in running a productive venture knows it takes a lot of capital and liquidity. Businesses and farmers through their brokers list on exchanges essentially to create capital and pre-finance their activities. It is therefore important for financial regulators to find quick, easy and simple ways stocks and commodities can be traded without much hustle. For observers who would want to partake in the profits and opportunities stock and commodities exchanges provides, their excitement is rather short-lived when they find out funding accounts, and getting up-to-date information from a broker is a challenge. The entire investment chain in the stock and commodities market needs an over haul. By integrating bitcoin into their systems, outsiders can invest in stocks and commodities in real time via their brokers.
Bitcoin in itself is a commodity, therefore individuals who invest in stock and commodities exchanges via bitcoin are likely to make double returns on their investments. Stock and commodities markets are great tools for streamlining and harmonizing finance and capital operations across the African continent and if it must be done, it should be done our way. Our way is the bitcoin way.
Kwaku Abedi is a freelance writer/editor based in Accra-Ghana. He has an interest in bitcoin and writes on bitcoin integration in Africa.