Ethiopian Commodity Exchange

8/8/2019 Ethiopian Commodity Exchange

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The Ethiopia CommodityExchange (ECEX)

...Making the Market Work for All

Eleni Gabre-Madhin

September 3, 2007


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ECEXAn idea whose time

has come As Ethiopia is poised to transform its agrarian

economy, so too must Ethiopias marketing systemtake the country into the new Millennium.

It is time to enter the modern age of globallyconnected trading systems, relying on technologyand know how, while tailored to Ethiopias realitiesand conditions.

It is time to forge a new partnership between the

private and the public in the new arena created bymarket liberalization.


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The Vision

The vision driving the Ethiopia CommodityExchange (ECEX) is to revolutionizeEthiopian agriculture through a dynamic,efficient, and orderly marketing system thatserves all.


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Current grain market structure

SMALLHLDR (SS) STATE FARM (SF) COMMERCIAL (CF)

CONSUMERS: DOMESTIC

RETAILERS

WHOLESALERS (DEFICIT)

BROKERS

WHOLESALERS (SURPLUS)

RURAL

ASSEMBLERS

COOPS EGTE

EXPORTERS

PROCESSORS

FOOD AID AGENCIES


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Structure with Exchange

SMALLHOLDERS 95% STATE FARM COMMERCIAL (CF):

CONSUMERS: DOMESTIC

RETAILERS

WHOLESALERS (DEFICIT)

COMMODITY EXCHANGE WITH MEMBER-BROKERS

WHOLESALERS (SURPLUS)

ASSEMBLERS COOPS

EXPORTERS PROCESSORS FOOD AID AGENCIES

EGTE

8%


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Why Ethiopia gains Commercialization of smallholder agriculture is corepillar of poverty reduction strategy (currently 28%

marketed out of production)

Need to capitalize on gains of recent rapid economicgrowth (9% in past 3 years)

Large domestic market: Population 70 million 2006 Prodn: 17 million tons (25% higher than SA)

2

nd

largest maize producer in Africa

Rapid export growth in key commodities A better functioning domestic market is key to

sustaining and scaling up growth


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Impact on smallholder

livelihoods? Power and participation: Farmers are better able

to negotiate prices given market transparency

Quality: Farmers are able to get market premiumfor value added to the product (post-harvesthandling)

Market access: Farmers are not restricted orcaptive to local market, can access national market

Risk management: Farmers can lock in prices

through forward contracting Planning: Farmers can use futures prices for

planting decisions


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The What:

Substance


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ECEXAn Ethiopian

Exchange for Ethiopia

A marketplace for all

Integrity (product, transaction, actors) Efficiency

Transparency

Risk management


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A Hybrid Model: Public-Private

Demutualized structure with separation ofownership, membership, management

State owned (initially) physical entity

Member owned permanent trading seats

Joint Owner-Member Board

National Exchange Actors Association

Independent professional management

Strong regulatory body reporting to PM


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Integrated Design of ECEX

A national multi-commodity exchange based in AddisAbaba

Operation of a trading platform using combination ofopen outcry (floor) and electronic trading platform

A network of 10 ECEX warehouses in surplus areas

A network of 20 ECEX remote access terminalcenters in major markets

200 Market Information Points (Rural ElectronicPrice Tickers) at district level

Internal clearing and settlement system with 3partner Settlement Banks

6 target commodities: maize, wheat, teff, pea bean,sesame, coffee ($1 billion in physical trade)

Spot and futures contracts (on select commodities)


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COMMODITY EXCHANGE AUTHORITY

Laws and Regulations

Market Information

Remote Access

Arbitration Tribunal

Trading System

Data center

Exchange Warehouses

Gradecertification

Warehousereceipt

Exchange Clearing Banks

Clearing andSettlement

NationalExchange ActorsAssociation

EXCHANGEMEMBERS

The ECEX Edge Integratio


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Beyond agriculture: From a sack

of grain to a sack of money

Finance Information

Technology

Legal Infrastructure

Warehouses=Banks Power the system

Self-regulatory

Electronic trade

PRODUCT


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Pushing the frontiers on many

fronts: The Firsts First time push of 3rd party grade certification

in extensive way into the rural arena

First time reach of market information into therural arena

First time recognition of intermediation

- the brokers

First time recognition of self-regulation- the national association and the exchange

o First time major push on financial system:clearing house function

o First time push of ICT into the market:electronic trading


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Creating new opportunities:spillover impacts for economy

More technology, better designed

means improved access to the market

mobile telephony

satellite radio other technologies

Banking: New financial products tailored tosmall market players

Services: Transport, logistics, certification,insurance, academic

Role of self-regulation by trade associations


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Trajectory from here on: weare moving fast!

ECEX site

Trading system development inprogress

Contract design in progress

Proclamations to establish ECEXand Exchange Authority passedin early July 2007

Active training and

communications campaign Membership drive to start

Starting Bell by MillenniumHarvest 2000 (December 2007)


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The Winds of Change areHere - Can Ethiopia Do It?

Necessary political will

Commitment by all actors

Catalyst for change

A winning value proposition to.

Empower farmers choices, grow ouragriculture, and transform Ethiopia


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The future awaits

YICHALAL !!

Ethiopian Commodity Exchange

Documents

Transcript of Ethiopian Commodity Exchange