The rapid expansion of many African economies has been accompanied by an increasing volume of goods that need to be transported across the continent. Competition between African and international carriers for the growing cargo slice is intensifying.
One of the most significant developments in Mauritius over the past year has been the establishment of Global Board of Trade (GBOT), a multi-asset exchange currently offering futures trading in commodities and currency derivatives.
At a stroke, it connects Africa to the world and allows banks, brokers, traders and companies to participate in a host of products.
GBOT’s ambition is to create a financial market that is on a par with the best in the world to empower Africa with a medium to catalyse its growth prospects. “Africa is an exciting continent with enterprising people and a wealth of natural resources,” says Joseph Bosco, managing director and CEO of GBOT.
Most of these resources are exported in raw form fetching far lower prices than the finished articles sold in foreign markets. GBOT believes that Africa thus needs a market that will not only bring more value for its produce but also attune it with global financial markets and provide an avenue to safeguard it against volatility – be it in commodity prices or in currencies.
Bosco says the endeavour is to constantly improve GBOT’s offerings through innovative products, superior technology and IT infrastructure, transparent and efficient rules, capital market research and also by bringing in intellectual capital of the highest calibre with vast experience in the global financial markets arena. Developing the markets of Africa by creating a financial market ecosystem in Africa is only part of GBOT’s ambition. It is also coming up with initiatives to educate the masses and create a culture of investment and risk mitigation.
GBOT plans to connect Africa to its exchange platform at speeds and costs which are unparalleled in these markets. “The income of farmers and various producers and exporters in India increased substantially after the establishment of the Multi Commodity Exchange (MCX) of India, the world’s sixth-largest commodity futures exchange in terms of trading volumes, promoted by the Financial Technologies (FT) Group. GBOT and its product offerings, if understood well can bring similar advantages to the producers, miners and exporters of Africa,” Bosco says.
The Exchange is also geared to facilitate trade in equities once it receives the requisite approvals. This will create an efficient and transparent medium to enable local firms to raise the required capital for expansion and development and for Africans to channel savings towards development. The currency derivatives segment of GBOT will enable foreign investors to invest in Africa without the fear of being exposed to currency volatility.
Bosco also emphasises that integration of the fragmented markets of Africa is required to leverage strengths and enhance efficiencies. He adds that GBOT has been constantly interacting with regional regulators, central banks, exchanges, local banks, and brokerage houses to understand the needs of the market in the region and create products accordingly.
GBOT has been sketching alliances with regional African exchanges to grant their members access to GBOT’s global products and its trading platform. GBOT has also been working closely with leading banks in the continent to ensure that the clients of these institutions derive the benefits of the products it offers.
GBOT members are based in diverse geographies including Africa, Asia, the Middle East and Europe, and the performance so far has been good, according to the figures it publishes regularly. As an example, on the launch day in October 2010, a total of 418 contract lots were traded for a value of $10.72m. This is among the highest trading volumes clocked by any greenfield exchange in this region on its first trading day. Since then, the average daily trading volumes have increased and have been consistently in the range of $35–$40m, reaching a peak of $65.24m on 27th July 2011. New products are being planned with regional players in Africa. In the currency markets, it is looking at the Ugandan and Kenyan shillings against the dollar.
The exchange has recently launched a WTI futures contract which clocked $5.12m in trading volumes on the very first day. With the contract size of 250 barrels, GBOT has again ensured that anyone from a large oil conglomerate to a retail investor having exposure to oil and its refined products can mitigate risks on its exchange platform.