THE Victoria Falls Stock Exchange (VFEX) is working with the Dubai Gold and Commodities Exchange (DGCX) in framing a clearing and settlement commodities exchange framework, which will pave the way for increased investment on the platform.
Speaking at Victoria Falls commodities exchange workshop in the resort town yesterday, Finance minister Mthuli Ncube said DGCX would extend technical support, knowledge and skills to VFEX with the ultimate aim of establishing an international commodities exchange in Zimbabwe.
“My ministry has supported the VFEX since it was mooted as an idea and we are encouraged to see that such a young exchange is quickly looking to broaden its products and services…DGCX is a leading derivatives exchange in the Middle East and has played a pioneering role in developing the regional market for derivatives trading, clearing and settlement. It is, therefore, prudent and opportune for VFEX to tap into their expertise in setting up a commodities exchange,” Ncube said.
The treasury boss said the government was exploring the setting up of an offshore financial services centre in Victoria Falls of which the envisaged commodities exchange will be a key component.
He said the offshore financial services centre would help develop and deepen the financial service sector through provision of opportunities for global investment.
“We can all agree that investment is essential in driving economic growth and creating an attractive investment climate is one step towards achieving that.
“An offshore financial services centre is in reality an attempt to create an investment environment in which international capital can flow freely.
“Free flow of capital requires both the supporting legislation, and the underlying products — of which the commodities exchange is part of the infrastructure that provides the investment products,” Ncube said.
A commodity exchange encompasses both the physical spot and derivative markets. The physical market is where buying, selling and subsequent delivery of commodities like oil, grain and metals takes place whilst the derivative market deals with financial securities that help participants in the physical market to hedge risk.
The physical commodity markets can also be subdivided into agricultural, base metals, precious metals and energy markets.