Egypt takes steps to launch commodity exchange in 2016

Legislative amendments on public business sector law to offer increases of holding companies' capitals in EGX

The government has been taking concrete steps towards the establishment of a commodities exchange this year, according to Minister of Supply Khaled Hanafy.
Hanafy said on Tuesday, during the Capital Markets & Financing Growth conference, that the steps to establish the commodity exchange have been taken in cooperation with Egyptian Financial Supervisory Authority (EFSA) and Egyptian Exchange (EGX), as well as global consultancies, to draw on their experience.
He noted that the commodity exchange is expected to accelerate development in Egypt and will be launched during 2016.
Hanafy said that Egypt trades grains worth billions of pounds, noting that the idea of establishing a commodity exchange is based providing an infrastructure for grain products. He pointed out that agricultural lands in Egypt are quite fragmented, as they function in a "perfect competition market".
Egypt suffers from the distortion of a large number of products' and services' prices and the government is currently working on setting a guideline for prices and products, starting with the ration commodities.
The Ministry of Supply is working on building a large number of barns and silos to store different kinds of wheat and is identifying specific places where the state receives the grain from farmers, in exchange for a certificate of origin.
The activation of the commodity exchange, in which the securities of commodities such as grain will be traded, will begin very soon after the completion of the exchange's infrastructure and the development of mechanisms for pricing grain securities.
Hanafy noted that serious negotiations were conducted with global consultancies to prepare a large zone in Damietta to receive and trade the grains that Egypt imports for consuming purpose and providing neighbouring countries with their needs of grains.
The commodity exchange will include farmers as producer of commodities, hubs for the storage and grading of the goods, and a spot market to buy and sell the securities of the goods.
The Food Industries Holding Company's (FIHC) financial status is stable and currently makes good profits. The ministry is preparing a financial study to increase the capital of the FIHC and provide alternatives to finance this increase in conjunction with an investment bank to promote for this increase.
Increasing the capital of FIHC will provide liquidity used in financing the expansions of profitable and losing affiliated companies, on mortgage of those companies' assets such as the lands.
Hanafy said the ministry will amend Law No. 203 regulating public sector companies, to allow for increasing the holding companies' capital in the exchange market.
The government-owned FIHC aims to primarily adjust the status of the real commodity market and provide alternative products and goods at competitive prices. Consumer cooperative companies under the Ministry of Supply that aim to provide goods and products to citizens at low prices are now recording reasonable profits.
He said the global trade chains are currently coordinating with several consumer cooperatives to sell their goods in the local market.