Ethiopian exchange boosts production and exports

A BELL rings and the floor of Ethiopia’s commodities exchange (ECX) is flooded with traders dressed in coloured coats, waving hands and shouting bids for coffee, sesame seeds or haricot beans.
Following a feverish shouting match, prices are agreed on and the deal is sealed with a high five between buyer and seller.
Established in 2008, the groundbreaking exchange has boosted exports in Ethiopia, improved conditions for producers and is now inspiring other countries in resource-rich Africa to set up their own exchanges to ensure they are the main beneficiaries of commodity exports.
It has allowed "price discovery" for farmers, exchange CEO Anteneh Assefa says, explaining that previously producers had little knowledge of international market prices and could rely only on middlemen who pocketed hefty profits by selling on heavily marked up goods.
"Most African countries have their economies based on agriculture, so in my opinion, they need to have commodity exchanges to make price discovery (available to producers)," Mr Assefa says.
"Some African countries have visited the Ethiopian commodities exchange and some are trying to emulate this model."
Visitors have included the presidents of Nigeria and Tanzania, as well as delegations from Mozambique and Sudan.
The exchange, one of only seven commodities exchanges in Africa, currently trades three main products: coffee, haricot beans and sesame seeds.
It has 329 registered members — which includes traders and producers — who work with about 12,000 people nationwide, from farmers to warehouse managers.
It is an important organisation in Ethiopia, where agriculture accounts for 40% of gross domestic product and the bulk of the country’s exports, with more than $1.1bn worth of goods traded on the exchange last year, according to official figures.
Coffee is the dominant export commodity, earning the country more than $832m last year.
The exchange — which is government owned, but self-funding with donations from external sources — has helped to boost the quality of products too, Mr Anteneh says.
"The country is now producing more and exporting more," he says, said, speaking from his office overlooking the streets of Addis Ababa, where cafes are crammed with avid coffee drinkers at any given hour of the day.
While not all coffee, beans and sesame produced are traded on the exchange — they are also sold through farming co-operatives or at auction houses — about 90% of these three items move through the commodities exchange.
"The livelihoods of the farmers and the producers have changed for the better," Mr Assefa says, before ringing the exchange’s bell to open trading for the day, adding that farmers were encouraged by greater profits to both produce more and improve the quality of production.
Benefiting farmers and buyers
Previously, about a third of the price of goods sold went to the farmer, but those who sell through the exchange take as much of 80% of the sale price home.
The effect extends to the buyers as well. Like the producers, they are better informed about activity on world markets through the exchange, and since the exchange has introduced rigid quality controls, it is working to ensure the product can be trusted.
The head buyer at Ethiopia’s Tomoca Coffee, Akalu Woube, says better varieties are available at a lower cost due to competitive selling and, conveniently, can be sourced in one place.
"We get a variety of coffees, different tastes ... so we can get whatever amount we need," he says, standing in his bustling cafe established 60 years ago, Addis Ababa’s oldest.
"You don’t spend time searching for coffee from here and there, in one centre we can have everything."
Tomoca mainly purchases coffee for local consumption — about half of all coffee traded at the exchange stays inside Ethiopia — but Mr Woube says the company plans to boost exports to Europe and other African countries.
The exchange could help wider economic development, experts say.
"The experiences coming from the ECX could be useful when Ethiopia is ready to introduce a stock exchange, which could expand investment opportunities and help raise savings," the International Monetary Fund’s head in Ethiopia, Jan Mikkelsen, says.
But challenges remain, with its capacity capped by limited warehouse space to store goods and poor infrastructure, including unreliable telecommunications restricting the exchange’s ability to keep farmers informed, says Mr Assefa. "This is a major impediment for the expansion."
But he says the exchange planned to outsource warehouse management — allowing for the introduction of more commodities such as chickpeas and wheat — as well as introduce an online trading system so trades could also be made on the Internet.
Coffee exporter Gebre Mezgebe says the exchange has meant he is now paid on time, since under the previous system of auctions payment was often delayed, or even never came through.
"When we sell today, you can get your money tomorrow ... this is the main problem solved by ECX."
However, remote selling has also raised the risk of delayed deliveries and spotty quality, Mr Mezgebe says.
Despite the glitches, Mr Assefa wants the exchange to grow further, and looks forward to a time when countries across Africa are connected through national and regional commodities exchanges, boosting economic growth.
"This is my wish, to see the major commodities that Africa produces quoted in an African exchange," he says.
A BELL rings and the floor of Ethiopia’s commodities exchange (ECX) is flooded with traders dressed in coloured coats, waving hands and shouting bids for coffee, sesame seeds or haricot beans.
Following a feverish shouting match, prices are agreed on and the deal is sealed with a high five between buyer and seller.
Established in 2008, the groundbreaking exchange has boosted exports in Ethiopia, improved conditions for producers and is now inspiring other countries in resource-rich Africa to set up their own exchanges to ensure they are the main beneficiaries of commodity exports.
It has allowed "price discovery" for farmers, exchange CEO Anteneh Assefa says, explaining that previously producers had little knowledge of international market prices and could rely only on middlemen who pocketed hefty profits by selling on heavily marked up goods.
"Most African countries have their economies based on agriculture, so in my opinion, they need to have commodity exchanges to make price discovery (available to producers)," Mr Assefa says.
"Some African countries have visited the Ethiopian commodities exchange and some are trying to emulate this model."
Visitors have included the presidents of Nigeria and Tanzania, as well as delegations from Mozambique and Sudan.
The exchange, one of only seven commodities exchanges in Africa, currently trades three main products: coffee, haricot beans and sesame seeds.
It has 329 registered members — which includes traders and producers — who work with about 12,000 people nationwide, from farmers to warehouse managers.
It is an important organisation in Ethiopia, where agriculture accounts for 40% of gross domestic product and the bulk of the country’s exports, with more than $1.1bn worth of goods traded on the exchange last year, according to official figures.
Coffee is the dominant export commodity, earning the country more than $832m last year.
The exchange — which is government owned, but self-funding with donations from external sources — has helped to boost the quality of products too, Mr Anteneh says.
"The country is now producing more and exporting more," he says, said, speaking from his office overlooking the streets of Addis Ababa, where cafes are crammed with avid coffee drinkers at any given hour of the day.
While not all coffee, beans and sesame produced are traded on the exchange — they are also sold through farming co-operatives or at auction houses — about 90% of these three items move through the commodities exchange.
"The livelihoods of the farmers and the producers have changed for the better," Mr Assefa says, before ringing the exchange’s bell to open trading for the day, adding that farmers were encouraged by greater profits to both produce more and improve the quality of production.
Benefiting farmers and buyers
Previously, about a third of the price of goods sold went to the farmer, but those who sell through the exchange take as much of 80% of the sale price home.
The effect extends to the buyers as well. Like the producers, they are better informed about activity on world markets through the exchange, and since the exchange has introduced rigid quality controls, it is working to ensure the product can be trusted.
The head buyer at Ethiopia’s Tomoca Coffee, Akalu Woube, says better varieties are available at a lower cost due to competitive selling and, conveniently, can be sourced in one place.
"We get a variety of coffees, different tastes ... so we can get whatever amount we need," he says, standing in his bustling cafe established 60 years ago, Addis Ababa’s oldest.
"You don’t spend time searching for coffee from here and there, in one centre we can have everything."
Tomoca mainly purchases coffee for local consumption — about half of all coffee traded at the exchange stays inside Ethiopia — but Mr Woube says the company plans to boost exports to Europe and other African countries.
The exchange could help wider economic development, experts say.
"The experiences coming from the ECX could be useful when Ethiopia is ready to introduce a stock exchange, which could expand investment opportunities and help raise savings," the International Monetary Fund’s head in Ethiopia, Jan Mikkelsen, says.
But challenges remain, with its capacity capped by limited warehouse space to store goods and poor infrastructure, including unreliable telecommunications restricting the exchange’s ability to keep farmers informed, says Mr Assefa. "This is a major impediment for the expansion."
But he says the exchange planned to outsource warehouse management — allowing for the introduction of more commodities such as chickpeas and wheat — as well as introduce an online trading system so trades could also be made on the Internet.
Coffee exporter Gebre Mezgebe says the exchange has meant he is now paid on time, since under the previous system of auctions payment was often delayed, or even never came through.
"When we sell today, you can get your money tomorrow ... this is the main problem solved by ECX."
However, remote selling has also raised the risk of delayed deliveries and spotty quality, Mr Mezgebe says.
Despite the glitches, Mr Assefa wants the exchange to grow further, and looks forward to a time when countries across Africa are connected through national and regional commodities exchanges, boosting economic growth.
"This is my wish, to see the major commodities that Africa produces quoted in an African exchange," he says.