ICCO explores creating game-changing African cocoa exchange

Cocoa Farming in Ivory Coast. Pic: Barry Callebaut

A  groundbreaking move is being explored by the International Cocoa Organisation (ICCO), as it sets out studies that could pave the way for creating an Africa Cocoa Exchange (afCX), potential major benefits for the region’s industry, writes Neill Barston.

With market prices hitting 40-year highs on stock exchanges in London, as well as key upturns for the New York US markets, the creation of a trading platform based within supplier African nations has been hailed as having major sector benefits.

According to the ICCO, the delivery of a new regional trading platform could ‘revolutionise the market in Africa,’ and in its view, bring positive impact to achieving a sustainable world cocoa economy, which as market observers have noted, has experienced a turbulent period in recent years.

As the organisation noted, its studies have been devised in the context that “commodity exchange is an inclusive but market-friendly and financially sustainable solution for imposing structure on Africa’s often fragmented agricultural value chain,” which it is using as starting point for its technical feasibility and financial viability studies.

Significantly, the ICCO said its studies have been split into two phases to allow for a constructive stakeholders’ engagement and a systematic and logical approach to identifying a suitable exchange model that is appropriate for Africa.

The first aspect of its study has included an initial detailed analysis of the cocoa value chain and sectoral regulations in Côte d’Ivoire, Ghana, Nigeria, and Cameroon, assessing Africa commodity exchange experience through a survey of Africa’s currently operational commodity exchanges.

This includes the identification of a limited set of institutional design options of a commodity exchange with three components of spot, derivative and finance, and engaging stakeholders for selection of an appropriate model of an Africa Cocoa Exchange (AfCX) for a deep dive analysis.

For the second phase of the study, the ICCO will examine the interfaces between spot, derivatives, and financing components of the AfCX,  examining sectoral regulations, institutional regulations, physical markets, and terminal markets, as well as pilot testing operations. With the first phase of the study now complete, the ICCO said it is to continue its work on the second phase once funding has been secured.



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