Mr Mohammed Iddrisu Ngmenipuo, a Commodities Exchange Analyst, on Friday commended Government for setting-up the Ghana Commodities Exchange (GCX).
“The decision of Government to take promoter risk in rolling-out the exchange platform is highly commended, since the operational system can be considered as an economic infrastructure that Government needs to invest in,” Mr Ngmenipuo told the Ghana News Agency in an interview in Accra.
He said the commodities exchanges and related Warehouse Receipt System (WRS) are the highest form of free enterprise as “its performance impacts all consumers.
Tracing the genesis of the development of the commodities exchange in the country, Mr Ngmenipuo said: “our research shows that among others, a private company, Commodity Clearing House Limited (CCHL) started the promotion of the exchange and warehouse receipt system, as far back as 1993.
He said at the same period, the CCHL served as a member of the Ghana Futures Exchange Committee (GFE) Standing Committee, which included the Bank of Ghana, Securities and Exchange Commission, Ghana Stock Exchange, and other bodies for the promotion of the development of commodities and financial futures markets in Ghana.
Mr Ngmenipuo said the GFE’s Standing Committee represented Ghana at the SAFEX’s 10th anniversary, which was held under the theme: “Commodity Markets and Derivatives”, as a capacity building and sensitization exercise for the development of the markets in the country.
In 2000, CCHL co-sponsored and jointly funded with the Bank of Ghana (BoG), a programme that sent two senior staff of the Bank to visit SAFEX in South Africa for two weeks, to build the capacity of the Bank in the commodities trade and risk management and related financial markets.
He said on completion of the programme and a workshop, sponsored by the company for the Bank and the commodities industry actors; a provisional license was issued by the BoG to CCHL to present a business model and a legal framework for the implementation of the company’s proprietary commodity finance scheme, under conditions to be set by the Central Bank.
Mr Ngmenipuo said after investing a lot of money to develop the business model and related legal framework, as per the requirements of the BoG, the documents were presented in 2002, within the required timeframe.
He said a meeting was organized in 2004, chaired by the then Governor of the BoG, and in attendance, were representatives of the Minister of Finance, the Director General and Deputy Director General of the Securities and Exchange Commission, together with the Directors and advisors of the Company.
Consequently, it was then agreed that the legal framework for the scheme, as presented, required that the proposed scheme be regulated under the Securities Industry Law (SIL).
The project was to be moved to, and be supervised by the SEC under the SIL, with a suggested new name ‘Ghana Commodities Exchange’, as a self-regulated organization.
Mr Ngmenipuo said a “Working Committee” was set up between the Central Bank and the SEC for the transfer of capacity acquired and to oversee the implementation of the project.
He said a company, Ghana Commodity Exchange, was formed and registered by the CCHL and applied to the SEC for license for operating a commodities exchange, using a modified business model of the company’s scheme.
The SEC requested authority from the Ministry of Finance to develop the necessary regulatory framework.
“The then Finance Minister responded to SEC, advising the latter to develop the necessary regulatory framework for a commodities exchange,” he said.
In addition, the Ministry of Finance set up a Technical Committee for the development of a GCX, chaired by a Deputy Minister, and the Special Advisor to the Senior Minister in 2004, with the company as a member.
Mr Ngmenipuo said it is on record that, as a result of a request from the CCHL, the Ministry of Finance included a draft prepared by the CCHL, “development of regulated warehouse receipt system”, in the 2004 Annual Budget which empowered the SEC to develop the regulatory framework.
“It is noteworthy that, the World Bank provided a grant to the SEC thereafter for a study of the feasibility of a commodities exchange and related warehouse receipt system in Ghana,” he said.