Eleni’s mission – Interview: Dr Eleni Gabre-Madhin

April 1, 2013 by Eleni Gabre-Madhin

It also runs 55 warehouses all over the country, as well as offering a wide variety of services. Farmers can use warehouse receipts as collateral for loans. The exchange sends out latest prices across the country by SMS and IVR (interactive voice response) to ensure small farmers are up to date with the latest market prices and get better deals from buyers. There are 800,000 mobile subscribers and over 1m call-ins from rural areas. Overall, the farmers’ share of export earnings has climbed over the years, nearly doubling, and this has encouraged more production. In October 2012, Dr Eleni Gabre-Madhin, who designed, built and ran the ECX, handed the institution over to new Ethiopian management, and many wondered what she would do next. The waiting ended in January, when she announced that Morgan Stanley and the International Finance Corporation are investing $5m in equity in a new company she will head, eleni LLC, based in Nairobi, Kenya. The new company will incubate and support the formation of new commodity exchanges across Africa.

‘When we go forward with eleni, we will leverage technology trends: the mobile revolution and cloud computing’

AB: What is the opportunity for Eleni?

Gabre-Madhin: We have taken three lessons from our Ethiopian experience for the new initiative to go across Africa: One: It can be done. You can create a commodity exchange that is world class and that is situated in a developing economy. There was a lot of scepticism that the idea was even possible and that it could be tailored to also include the small actors.

Second: It can be commercially viable. People were not sure when we started whether it was financially sustainable, so the ECX had public-sector backing as there wasn’t any evidence to draw up a business model of a profitable commodity market, although I had argued that we could make earnings in three years. We broke even in the second year and became profitable by the third year, and this has been continuing to the fourth year. We can be attractive to private investors. We are not only doing good for people, but also doing good business.

Third: It is not only about an exchange, but really about setting up an exchange ecosystem. In Africa we need to think holistically, going beyond just the trading floor, to a whole ecosystem approach, ensuring adequate infrastructure in storage, quality management, mechanical commodity handling, transport logistics, packaging, market intelligence and a whole host of other systems.

What we have learned from the Ethiopian experience is that we need to do it differently. We won’t just set up the exchange. Rather the investment will be to build the whole ecosystem, to ensure a viable outcome.

Our technology approach will also be different. In Ethiopia we built an end-to-end technology application. However, when we go forward with eleni there are two technology trends we will leverage. One is the mobile revolution – we will be able to go further than in Ethiopia as the reach of mobile elsewhere in Africa is quite a bit more extensive.

The second is cloud computing. We will be developing technology that is much more present in the cloud and that will enable us to carry out support and technology upgrades in a more seamless and cost-effective manner.

AB: Which countries are you expecting to work in?

Gabre-Madhin: There are many opportunities. Our emphasis will be on developing exchanges and their ecosystems in countries where they do not currently exist at all. It is a little bit easier to start from scratch in some stages. One of the projects we are discussing involves an existing exchange which has not been functional.

Most of the time, the reason these exchanges have not taken off are because of gaps in the ecosystem. We believe we have the capacity to deliver the right model and put the entire ecosystem in place, and, if we garner the commit-ment at the highest level, we can achieve our objective of creating vibrant exchanges across the continent, even in countries where they have not been successful before. We are a knowledge company and we are passionate about what we do. Our edge is to be innovative and think through what will work in each context, how we can push the envelope even further to improve people’s lives, and how to do it better continuously.

AB: How many countries or projects will you tackle?

Gabre-Madhin: We are aiming for two or three in the next 18 months and then engage more projects. Our plan is to have a 12-14-month window per project.

AB: How will the new company work?

Gabre-Madhin: We are forming partnerships with different strategic partners that will bring in both the talent and the finances. The key word is ‘leverage’; we are forming consortia with both investors and like-minded partners. We have learned enough from our experience and from failures in other contexts to have a very good idea how to go forward in a bold, smart and fast way.

We have had a lot of interest from investors, but we were very conscious about choosing investors that would bring in a lot of expertise to enable us to meet our ambitious and aggressive business targets. That is why we have Morgan Stanley, the IFC and other investors, who bring a lot of expertise. It is still too early to list the other entities that we are in process of forming partnerships with.

AB: Who will be your clients?

Gabre-Madhin: Our initial point of engagement is the government. Once we get the policy green light, we will set up and work with a private-investor consortium that becomes the key player in the project. We think that a public-private partnership is the right model for this type of undertaking. We also expect that some governments might take a minority share; we believe that this is good in terms of keeping government interest in the project and maintaining alignment. We are part of that investment consortium. We are not doing consulting projects, we are a design-build-transfer company, we deliver and have a stake in the project. We are the catalyst to bring together an investment consortium. We have the know how, we put together and implement the project and put a management team in place and support the operations for some period. Then we hand it over.

That is similar to what we did in Ethiopia with the management team that I formed and brought into the ECX. However in Ethiopia, instead of supporting the management, I was part of the management, and then handed it over. In the future, as I have done in the past, we will set up the project, find the funding, hire a project team, and implement the project scope and operations, just like in Ethiopia, but in this new model we would do all except the management.

AB: Is this going to be profitable?

Gabre-Madhin: I wouldn’t be setting up investment consortiums if I didn’t think they would be viable.

AB: Where will the revenue come from?

Gabre-Madhin: Exchange revenues depend largely on volumes traded. Transactional fees are the main source of revenue. But in terms of the operational scope, trading is only one out of five business operations for the ECX.

The others are: quality certification (laboratory-certified using standard equipment); inventory management and systems to do this; market data, in real time and at discrete times, and finally clearing and settlement.

If you want to split that further, in addition to inventory management there is a central depository business, and if you want to split the inventory management further, there is also delivery logistics once the funds have been transferred to the buyer through the clearing house.

Further, if you look at the whole ecosystem, outside the exchange itself, there is warehousing infrastructure, transport coordination, market intelligence. Training and certification is yet another business. So there are many parts to the ecosystem and thus many opportunities.

By the way, there is still work to be done in Ethiopia, where ECX operates 17 warehouse delivery sites and each site has multiple warehouses. My company will do a little bit of work helping ECX to devolve the warehouse operations to a third party, which is a much-needed next step, if the exchange is to scale up further.

AB: Will you build warehouses and other infrastructure in every country?

Gabre-Madhin: In some African countries, the private sector is more advanced. For instance, in some countries, we have already seen viable interest from private-sector companies to be the warehouse operator and to put up the infrastructure. There is no question that we should do it all. Our model is to coordinate and bring it all together.

In our view, there is a tremendous amount to be done, and there is room for many players and partners. Potential investors can see what happened in Ethiopia and say “I get it, and I want to be part of this in my country”.


Dr Eleni Z Gabre-Madhin gained her PhD in applied economics at Stanford University, following an MSc in Agricultural Economics from Michigan

State University, and BA in economics from Cornell University.

The American Agricultural Economics Association gave her an ‘outstanding dissertation of the year’ award in 1999 for her work on the Ethiopian grain market. She has worked as Senior Economist at the World Bank and Senior Research Fellow with the International Food Policy Research Institute (IFPRI) in Washington, as well as UNCTAD in Geneva.

She has written numerous publications and articles, including Reforming Agricultural Markets in Africa, has served on the government of Sweden’s

Expert Group on Development Issues, the Stiglitz Task Force on Africa, is a Founding Member of the Ethiopian Academy of Sciences, and serves on the Nike Foundation Advisory Panel on Girls in Rural Economies.

She was named Ethiopian Person of the Year in 2009, nominated Outstanding African Businesswoman in 2010, selected among the 50 Women Shaping Africa by The Africa Report in 2011, and awarded African Banker Icon in 2012.

She recently received the coveted Yara Prize for an Agricultural Transformation in Africa and was among New African magazine’s 100 Most Influential Africans in late 2012. ECX is the first company in Africa to receive the prestigious global CIO 100 Award for IT excellence applied to business in 2011.

African Banker 2nd Quarter 2013- Finance in Africa


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