By Diane Bennett and Laura Freschi We had really intended this would be a feel-good story of success:
This month, while the G8 continued their vague pledges of billions in food aid, Eleni Gabre-Madhin was busy bringing a market-based solution to the problem of food security in Ethiopia, as the CEO of the Ethiopia Commodities Exchange (ECX). After years of studying Ethiopia’s agricultural markets, Gabre-Madhin hit upon a central commodities market as a way to end the country’s deadly boom and bust cycle, which has seen overproduction and low food prices one year and famine the next.
The ECX has been running for a little over a year now, and lists five commodities traded on its website—coffee, sesame, beans, maize and grains. With a central trading pit in Addis Ababa, eight warehouses throughout the country, and market data being transmitted through a network of electronic display tickers, text messages, TV, internet and radio, the ECX is designed to reduce the burden of high transaction costs and excessive risk on farmers and traders, and increase access to information for small-scale farmers in remote areas.
In 2008 when the ECX was launched, the Economist called it a “bold experiment to improve the efficiency of agricultural marketing,” and Eleni Gabre-Madhin herself has been lauded as a visionary and a pioneer. (Gabre-Madhin is being profiled tonight on the PBS program Wide Angle in an episode called “The Market Maker"—watch the preview here.)
Unfortunately, it’s not quite that simple.
From the start, the FT alluded to the potential difficulties of a market-based solution in Meles Zenawi’s aid-dependent Ethiopia, “one of Africa’s most state-dominated economies.” The Economist noted that 6 out of the 11 seats on the ECX board would be filled by government officials, which is a massive PR problem in a place where there is precious little trust in the government.
A quick trip down the rabbit hole of the Ethiopian (English-language) blogosphere unearths plenty of cynicism from bloggers distrustful of what they have come to see as a government scheme to get their hands into the farmers’ pockets. The government did little to quell these fears when they accused 6 major coffee exporters of “hoarding,” revoked their licenses, and grabbed 170,000 tons of coffee to sell off at auction to boost Ethiopia’s lagging forex supplies.
The ECX seemed like a great idea. But in the real world of complex politics and conflicting viewpoints, we really are at a loss to say whether ECX has already been a success, or whether it will succeed in the future. Unfortunately, there are a lot more development case studies that are in this category than in the well-trod “inspirational success” or “illustrious failure” genres.
Update: This post has been changed to correct a mistake in the second paragraph: "high food prices" was changed to "low food prices."