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Interview: Dr Eleni Gabre-Madhin
The four-year-old Ethiopian Commodity Exchange (ECX) is a runaway success. The floor, crowded with dealers, handles spot trades amounting to $1.2bn annually in coffee, wheat, maize, haricot beans and sesame. By 2012, some 2.4m farmers were represented via 193 cooperatives registered as sellers. It also runs 55 warehouses all over the country, as well as offering a wide variety of services.
Farmers can use warehouse receipts as collateral for loans. The exchange sends out latest prices across the country by SMS and IVR (interactive voice response) to ensure small farmers are up to date with the latest market prices and get better deals from buyers.
There are 800,000 mobile subscribers and over 1m call-ins from rural areas. Overall, the farmers' share of export earnings has climbed over the years, nearly doubling, and this has encouraged more production.
In October 2012, Dr Eleni Gabre-Madhin, who designed, built and ran the ECX, handed the institution over to new Ethiopian management, and many wondered what she would do next.
The waiting ended in January, when she announced that Morgan Stanley and the International Finance Corporation are investing $5m in eguity in a new company she will head, eleni LLC, based in Nairobi, Kenya. The new company will incubate and support the formation of new commodity exchanges across Africa.
AB: What is the opportunity for Eleni?
Gabre-Madhin We have taken three lessons from our Ethiopian experience for the new initiative to go across Africa:
One: It can be done. You can create a commodity exchange that is world class and that is situated in a developing economy. There was a lot of scepticism that the idea was even possible and that it could be tailored to also include the small actors.
Second: It can be commercially viable. People were not sure when we started whether it was financially sustainable, so the ECX had public-sector backing as there wasn't any evidence to draw up a business model of a profitable commodity market, although I had argued that we could make earnings in three years. We broke even in the second year and became profitable by the third year, and this has been continuing to the fourth year. We can be attractive to private investors. We...