ethopian case : planting of a seed

8/10/2019 ethopian case : planting of a seed.

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Case Study on TheEthiopia

CommodityExchange

By Group- B

Neenv Raju (122Anusha (1226113Harish (12261131Himaja (12261131Sai Anvesh (1226


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Dr. Eleni Gabre-Madhin, founder and CEO of the Ethiopia Commodity Exchange (ECX).

Elein recalls her market discussion which she had with the farmers, traders and the end

She remembers one of her first meetings with Abdu Awol in Nekempt, a town in the he

Ethiopias fertile maize belt, in 1996.

Eleni was conducting a survey of 12 grain markets across Ethiopia for her doctoral thes

on a sack in a corner of Abdus stall and watched him haggling with the farmers who we

few bags of grain and with the rural traders.

Six years later, Eleni was again in Nekempt but as a researcher from the International Fo

Research Institute (Washington, DC), which was conducting a national grain and coffee

45 markets and hundreds of traders.

Introduction


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She asked Abdu the same question of :

How do he know about prices in far-off markets and where does he sell

the grain which he gets from the farmers?

His reply was that he had no good way of learning about prices and only

knew traders in Addis Ababa, where all the wholesale traders fromNekempt sold their grain.

The she wanted to know the reason for not selling their grains where the

price is high and there is a requirement of it.

He then told her about his bad experience he faced in the process of

selling his grains in Mekele, a town in the North.

Listening to this she was shocked and she travelled around the country and

followed the grain from its production to the end where its is sold.

The risk that products would not be delivered in the right quantity and/or

quality was high.


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Eleni found that 67 percent of traders regularly suffered contract

breaches and only four percent had recourse to legal measures to

resolve these disputes.

At the end of 2002, 14 million people in Ethiopia were again facing

starvation.

Eleni was invited to talk at a conference that would address this crisis

and would be attended by the then Prime Minister Meles Zenawi andother senior officials.

She took this opportunity to share the facts and stories of Ethiopias

markets.

Eleni spoke about the need for formalized trust in the market and an

infrastructure that went beyond the building of roads.

Eleni therefore presented the idea she had had in mind since herdoctoral days for the first time: A commodity exchange as a holistic

platform that would integrate all of these elements.

The exchange that Eleni envisioned would not exclude those with less

education or less capital. It would also strive to balance the interests of

all relevant actors across the public and private sectors


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FRAME WORK

Appointed a task force to prepare to launch a commodity exchange

Task force members had explored the best practices in emerging countries

such as china , India and south America.

Eleni, the chair person of task force organized a study tour to visit two rapidly

growing national commodity exchanges in Mumbai, India.

Study tour helped them in understanding the real life exchange in an emerging market

With many challenges

They have also learnt that technology plays important role in accessinginformation and markets.

Public and private sector actors to interact openly in terms of common agenda

Physical trading floor

Spot trading


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TAKING THE BEST FOR ETHIOPIA EXCHANGE MARKETS

Problem with fully member owned exchange

Problem with investment.

The hybrid model

Non profit based exchange

In mid 2006, task force submitted a report of complete model

There are five financing partners for Ethiopia exchange markets

By 2010 the total funding reached to usd 29 million.


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Question raised who would operate and manage the exchange?

Eleni weighted the opportunity to go beyond designing and build an operatio

Eleni developed a new concept for the future management of exchange.

Concept based on earlier management contracts awarded to outside compani

awareness of Ethiopians working in senior positions around the world.

She believed that the Ethopianization strategy and transition from the internacould then be achieved within three to five years.

Skills & Corporate Culture -Creating the foundationfor success


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Continued


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Lawyers, warehouse and quality experts, IT developers, finance expert

professionals, trainers, and communications experts collaborated very enthus

For 18 months, a team of 17 people drafted, negotiated, and passed twestablish the exchange and its regulator; designed and implementedcontrol and warehouse operations, an electronic warehouse receipts central depository, a financial clearinghouse, an electronic market da

quality standards, and standard trading contracts; recruited and trained memregulators; and developed the rules of the exchange and a market surveillanc

In addition, they decided to develop an in-house suite of IT applicationelements and to integrate the IT network infrastructure with all warehoupartner banks.


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Their objective to include smallholder farmers and small traders, member particularly important.

On the one hand, they strove for a world-class performance level, which impliestandards, standard lot sizes and trading parameters, formal rules and processesoperations.

On the other hand, they needed to serve a diverse set of actors, manyof whom had noschool, had never used a computer, were not comfortable working in English, and had ain the informal economy.

On October 10, 2007, in a television broadcast that reached up to 25 million people antask force, President Girma Wolde Giorgis announced the establishment of a commodhelp resolve the marketsdeep-rooted problems and particularly those of farmers.

Elenis team launched a nationwide advocacy campaign. With the Grow with Urecruitment campaign, they promised to involve small actors and help grow their busine


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By February 2008, they had recruited 67 of the target 100 founding memexchange, who had each bought a membership seat for the equivalent of USD 5,0

The board then assigned Eleni the position of Chief Executive Officer. Minister commented: Eleni was committed to the idea of development in Ethiopia ato the development of the rural areas. And, second, she was absolutely convinced that thexchange would play a central role in this development. She had the commitment, the viskills to deliver.


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In 2008 domestic grain prices spiked by 200% which accele

pressure to introduce new commodity with more liquidity

New law replaced Ethiopia coffee legislation and introduced

in July 2008

Established standards and classification for coffee


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ECX was set up as a public private partnership to balance th

its promoters , government of Ethiopia and private traders

Rumours against ECX transparency

Competition between cooperatives and private traders incre

paid to producers.


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Required maintaining a reliable technology system.

Required people to give up century old traditions.

Transparency of the market enabled ECX price to be used as reference price

Use of market intelligence.

Increase quality and raised standards of products delivered.


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Had become a financially sound company with minimal fees of about 2% pe

Started designing a system of futures trading to enable price risk manageme

Create opportunities for regional coffee index giving East African countries International Markets.

Helped various other African countries launch their exchanges.

Task of finding ware house operators and managing human resources huge


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Can the management team succeed in the daily battle to bala

and public interests, maintain a reliable technology, and makprogress towards ECXS Aim to involve smallholder farme


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ethopian case : planting of a seed

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