Tech Meets Treasure 💎

Welcome to the latest edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Topics coming your way:

• 📱 Ethiopian Commodity Exchange’s Modernization Efforts

• 🧈 Gold Mining: A Shiny Opportunity in a Challenging Economy

• 🗝️ The Key Takeaways

Thanks for reading!

ECX Goes Digital: Ethiopian Commodity Market Steps Up

Investing

In case you haven’t heard, the Ethiopia Commodity Exchange (ECX) is entering a new era—one that doesn’t involve the proverbial long lines at trading centers. That’s right, folks, ECX is going digital. Starting next year, traders from all corners of the country will be able to buy and sell commodities with just a few clicks, no matter where they are.

For a country where agriculture still accounts for over 70% of employment and about 39% of GDP, this is massive. Whether you’re a smallholder farmer in a remote area or an urban trader juggling multiple deals, you’ll be able to access real-time pricing and trade directly on the ECX platform, cutting out the middleman and saving time​​.

So, What’s New with ECX?

• Digital Access: Customers could only trade electronically at six designated centers across the country, whereas now it will be available on your smartphone, leveling the playing field for rural traders.

• More Commodities: The list of commodities is also set to grow as barley and niger seeds are set to be added to the exchange, broadening the range of products available. ECX already has a long list of commodities on offer such as ቡና, ሰሊጥ, wheat and beans.

• Increased Transparency: Digital trading brings with it a boost in transparency, allowing traders to see real-time prices and trends.

Why Does This Matter?

Ethiopia’s agricultural market is still the backbone of the economy, and ECX’s digital transformation could be the downstream catalyst for growth supporting the upstream recent productivity initiatives— mechanized cluster farming and low-land irrigation for wheat cultivation. To date, ECX has facilitated the trade of over 8 million tons of commodities worth more than ETB 384 billion. With these new changes, those numbers are expected to climb even higher​.

But here’s where things get really interesting: ECX’s move to digital trading might also coincide with the launch of Ethiopian Securities Exchange (ESX). Yes, the much-anticipated capital market is expected to offer dynamic financial investment opportunities facilitated by investment banks and brokerage platforms.

With the advent of investment banks, we might see the development of financial derivative products like the commodity futures contract— an agreement to buy or sell a predetermined amount of a commodity for a specific price at a future date. Commodity futures can be used to hedge against unexpected price movements for food processers like soybean oil, wheat flour or beer factories. Whereas investment banks and other institutional investors provide liquidity to the futures market as they attempt to predict price movements.

In short, whether you're trading sesame in the north or preparing to invest in Ethiopia's stock market, these changes signal a new, tech-forward chapter for the country’s economy. The future of trading in Ethiopia looks fairly bright—and digital.

Catch us next week as we delve further into futures contract and its potential for Ethiopian businesses!

Key Takeaways:

• ECX will allow online trading from anywhere in Ethiopia, removing the need for physical visits to trade centers.

• The exchange is adding new commodities like beer barley and chickpeas to its portfolio.

• ECX’s digital shift might pave the way for financial derivative products, setting the foundation for a more modern, interconnected financial market.

ፍራንክ Picks 

🚶🏽 Event: [Sat, October 5th] Founders Live: Global Pitch Competition

🗞️ In the news: Ethio Tele commits USD 1B investment

♟️ Innovation of the week: ChipChip revolutionizes produce sourcing

Ethiopia’s Gold Rush: Can We Mine the Benefits?

Mining

Not all that glitters is gold. Yet gold is glittering brighter than ever in Ethiopia. With exports reaching 75% of the annual target in the first nine months of the 2023/24 fiscal year, gold mining is finally on an upward trajectory after successive declines since 2020. The Ministry of Mines reports that over 3 tons of gold were exported in this period, generating a significant $274 million in revenue—an 83% increase from last year​.

The Gold Rush & Key Projects

One of the most promising projects is the Tulu Kapi Gold Mine in Oromia developed by KEFI Minerals, which is expected to produce 140,000 ounces of gold per year for the next seven years. This project alone could generate over USD 2.5 billion at current market prices.

There’s also the long-standing Legdembi Mine operated by Midroc Gold Mine which was acquired during the privatization wave back in 1997. Midroc has taken the lion’s share for gold exports and continues to develop new sites such as Sakaro and Metekel.

However, it’s not all smooth sailing. Issues like security, land disputes, and lack of clarity on profit repatriation have historically hindered progress. The good news? New directives aim to ease these bottlenecks by allowing mining companies to open foreign offshore accounts to streamline equipment imports, service foreign loans without interest rate caps and repatriate profits.

While the potential is huge, challenges remain. Smuggling continues to siphon off revenue, with much of Ethiopia’s gold slipping out through illicit channels. Addressing border customs security is key to realizing the full potential of the sector.

The Future of Gold and Beyond

Ethiopia’s mining sector as a whole is still in its infancy, contributing 0.6% to GDP. But gold is leading the charge, with several new projects in the pipeline. These include ventures like the Tigray Resources project, aiming to tap into gold and other precious minerals​. The hope is that as Ethiopia ramps up its gold export, it can strengthen foreign currency reserves, helping to stabilize the often depreciating Birr.

As Ethiopia continues to lay the groundwork for its economic future, gold mining is poised to be a key contributor. The sector could very well play a role in attracting more foreign investors, improving trade and boosting the country's overall trade balance.

Key Takeaways:

• 75% of annual gold export target met in first 9 months of 2024 Ethiopian fiscal year.

• $274 million in gold exports, an 83% increase year-on-year.

• Tulu Kapi project to produce 140,000 ounces annually, potentially worth $3 billion.

• New government directives could encourage Foreign Direct Investment and boost exports.

Thanks for sticking with us, ፍራንክ family! Keep those wallets smart and your inbox open - we’ll be sliding in next week!