The Nairobi Coffee Exchange (NCE) was forced to close due to COVID earlier this year. The exchange relied on physical traders on the floor, which during the pandemic became too risky.
However, there had been a project underway to bring the trading of coffee online via an auction system. The pandemic raised the urgency of bringing the new system online as soon as possible, and now NCE is able to start trading once again.
Online auctions play a role in many industries, beyond the obvious stock market we are familiar with – in the UK most used car dealerships purchase their stock this way, and in the USA, huge amounts of construction equipment are auctioned online via specialised websites.
Auction systems might seem simple at first glance, but there are technical challenges which must be overcome to ensure a level playing ground for all bidders.
Thanks to the fact that buyers can print their own reports, high printing costs for NCE are saved. – Mr Daniel Mbithi , Executive Officer at NCE
The NCE uses a real-time system to enforce ‘falling price’ and ‘rising price’ principles, meaning the price falls on a transaction until a bid is received, which allows another bidder to input a higher price.
Moving from a physical system to an online version requires a process of registration for buyers and it takes some time to learn how to adapt to working with a new system.
However, the benefits are several;
- Can run even during a lockdown
- May result in higher prices to farmers
- Improves transparency
- Ensures fairness in the bidding process
- Will cut costs for the NCE