Addis Ababa
03 March 2008
Ethiopian agriculture is about to take a giant step forward from the age of the donkey cart to the digital age. At least that is the hope of a group of visionaries who are launching a revolution in how Ethiopia's farmers market their crops. VOA's Peter Heinlein in Addis Ababa reports the Ethiopian Commodity Exchange is modeled on the market that shaped American agriculture, but with a few new twists.
Animal-drawn wagons still pull much of Ethiopia's farm produce along dirt roads to local markets. That is the way it has been for centuries. In a nation where agriculture has always been the backbone of the economy, farms of less than one hectare in size produce 95 percent of the total agricultural output.
But only 25 percent of that output reaches the market, which means there is very little opportunity for profit. And when they do take goods to market, farmers are at the mercy of merchants, because they have no information about prevailing prices.
But all that is set to change.
Construction workers in central Addis Ababa are putting the final touches on the trading pit for the ECX, the Ethiopian Commodity Exchange, which founders hope will transform Ethiopia from an economic basket case to a bread basket.
The ECX will be linked to a network of warehouses around the country where farmers can store their crops. Television screens set up in 20 towns will provide farmers with the data they need to make informed decisions about when to sell and at what price.
The force behind this eagerly awaited revolution is Ethiopian-born, American educated economist Eleni Gabre-Madhin. She says she developed the model for an Ethiopian commodity exchange while writing her doctoral thesis. The big break came when the idea won backing from Ethiopia's top leaders.
"About two years ago we kind of had a breakthrough, where the government said 'yes', we really want to consider this idea of a commodity exchange, which I had written up about in my thesis 10 years ago, so that was something I had really been dreaming of doing for more than a decade," she explained.
Her idea won immediate support from donors, who see it as a way to help small Ethiopian farmers get access to market forces that have brought prosperity to farmers in other parts of the world. Ten million dollars in pledges were recieved in two weeks.
Initial reaction in Ethiopia has also been overwhelming. Seats on the exchange went on sale a month ago, and have already surpassed the goal. Gabre-Madhin is hopeful of an overnight revolution in the country's agricultural marketing system.
"I hope the overnight effect will be people will rally to this market," Gabre-Madhin said, "that the early adopters will have a very demonstrable success in terms of reducing their costs and reducing their risks and applauding this new institution as a way to solve their problems in the market, and that leads to a vibrant adopting of this market as the market of choice."
Gabre-Madhin says the overall goal is to dramatically increase farm incomes while lowering consumer prices.
"The long term success for us is to increase the share of marketed surplus out of the total amount of production from a fairly low level of about 25 percent of production reaches the market to a higher rate of commercialization," she said. "We would like to see a doubling of the commercialization create from the current 25 percent for domestic grains to about 50 percent in five years. The other thing we would like to see is a reduction of the marketing margin. That is the difference between what the farmer gets at the farm gate, the farm gate price, and what the consumer pays at the table."
She says the ECX is based on the Chicago exchange that transformed American agriculture 160 years ago, but with an Indian twist. There will be controls to ensure the exchange does not become a club of wealthy brokers who control access to the market.
"We looked at the Chicago model versus the India model, and have seen that the India model is more democratic in terms of leveling the playing field," she said. "Which means unlike the Chicago model, which is the model prevailing in most of the world, where a few players who become very wealthy because everybody uses their services to access the market, we have taken the approach that what is more appropriate for our country from a policy perspective is to start with a few members, but to grow these members aggressively."
The opening of the new exchange has unleashed a torrent of entrepreneurial spirit. Gabre-Madhin says people from all over are contacting her to propose ideas for capitalizing on the opportunities, in the same way American entrepreneur, now New York Mayor Michael Bloomberg got rich with his wire service providing market information.
"This stuff has that effect on people. Every day. Now I have got two guys. Yesterday I was having emails. One guy from Sweden or somewhere saying I am going to be the Bloomberg of Africa with your exchange," she said. "I am going to take your prices and feed them to websites all over Africa. I am going to this, I am setting up a website. Literally it is just incredible how people are just, whoosh, thinking all sorts of things. So it is great.
The revolution is set to begin when the ECX opens its doors later this month.