Daily Archives: July 23, 2009

Comment on Ethiopia’s First Commodities Exchange and Dr. Eleni Gabre-Madhin

Wide Angle, a news feature on PBS hosted by Aaron Brown, aired a show called The Market Maker on Thursday, July 22: http://www.pbs.org/wnet/wideangle/episodes/the-market-maker/introduction/5000/

Shlomo Bachrach, the Founder and Editor of eastafricaforum.net, is an Ethiopia watcher. He saw the show, and comments as follows:

“Wide Angle’s The Market Maker features Dr. Eleni Gabre-Madhin, a Stanford economics PhD who left her World Bank position and returned to Ethiopia in 2004 to put her faith in markets into practice.  She persuaded the government to launch the Ethiopian Commodities Exchange, ECX, to establish transparent and reliable markets for the benefit of farmers, traders and exporters.

Persuading the government to support the concept took time. Building the infrastructure, including daily real-time price information from world commodities markets delivered to market towns in rural Ethiopia (where most residents lack electricity and running water), was a challenge.  Setting up the exchange in Addis Ababa, the capital, with warehouses, a trading floor, and a system operated by trained staff was another challenge.

Trading began in late 2008 in several grains, and was expanded to include coffee in the spring of 2009 because of a troubled coffee market.  Since coffee has long been Ethiopia’s biggest export, the government intervened to force ECX to accelerate its entry into coffee trading.

The ECX is not yet a success, and faces big hurdles.  One is the widespread lack of trust among farmers who, based on bitter experience, fear that they will continue to be cheated by merchants who have better information about prices as well as other leverage.  This makes them reluctant to entrust a completely unknown entity like the ECX with their means of survival.  The second and bigger obstacle is the opposition of the traders who have always controlled and manipulated the market, and who will lose their dominance, and their excess profits, if the ECX can establish trading based on transparent pricing, and a system of reliable storage, delivery and payment.

Dr. Eleni, the star of the show, is a brilliant and fascinating woman who gave her time generously as an advisor to a coffee project I worked on some years ago. Success is still distant and is not guaranteed.  But with 60 million people in Ethiopia living off the land, improving farm incomes even a little will have widespread effects.

A lesson that can be learned from this program, which barely scratches the surface of the topic, is the huge gap between the unrealistic and often self serving projects conceived by ‘development experts’ and the reality on-the-ground.

Viewers who have no on-the-ground experience in the field will not grasp much of what they see.  Even those who have gotten their hands dirty – more than attending a few meetings or a conference and a field trip for a few days – will be in the position of the blind man touching an elephant and trying to describe it.  Ideally, viewers will come away from a program like this humbled by the realization of how little they know about what is going on ‘out there’.  In practice, ‘experts’ will continue to be less useful than they think, and local people will be less forthright about their real objectives.  Then there are a few Dr. Elenis, imperfect and overwhelmed by the difficulties of the task, who will slowly make a difference.”

If you want to hear more from Dr. Eleni Gabre-Madhin then you can also visit the TED talks site and watch her talk there.