Ethiopia, like many African countries has its economy is heavily based on agriculture. It is responsible for 46.6% of the gross domestic product and a large 85% of total employment. It goes without saying, it is a large industry. For years the farmers who were driving this industry were finding it very hard to make a profit or break even from it, but now thanks to the Ethiopia Commodity Exchange that has all changed.
Heartbroken by the 2002 famine in her country, Dr Eleni Gabre-Madhin -a Stanford alumnus- was driven to do something. She wanted the country and specifically the farmers to focus less on production and place more attention on distribution. The problems in the supply chain that she identified were; the sellers would never get paid by the buyers, the buyer was never really assured of quality until they laid their hands on the product and lastly, you’d have some parts of the country with a surplus while others with a deficit. She decided that it was time this changed.
So what exactly is the Ethiopia Market Exchange? It has successfully managed to create a market place for all market actors; such as farmers, traders, processors, exporters and consumers. How it actually works is by offering membership to clients which can be any of the previous listed stakeholders. This membership allows them once they take the product to the official warehouses to grade it, to certify and weigh it in order to tackle the problem of quality. Secondly it provides a platform for the buying transactions. In fact, at the clearing house the organization arranges for the buyer and seller to “physically or virtually meet” to agree upon trade agreements, where the organization acts as a guarantor which tackles the problem of payments. It is a marketing system that synchronizes more efficiently, links faster and most importantly “protects both sides of the trade.” As a result of this, linked industries in the country have also grown; these include transport, logistics and financial institutions.
The official mission of the Ethiopia Commodity Exchange is to “connect all buyers and sellers in an efficient, reliable, and transparent market by harnessing innovation and technology and based on continuous learning, fairness, and commitment to excellence”. So far they have come a long way in achieving that mission. At the end of their fifth year the snowballing value of all the commodities traded through them has reached USD 5 Billion which is equivalent to 2.65 million metric tonnes.
There is no constructive criticism for this group! However, it will be interesting if they can bring this innovative way of thinking onto the continent.