News & views.

Ecobank and eleni join forces to strengthen Africa’s agricultural financing capabilities

May 22, 2014

Ecobank Transnational Incorporated (‘Ecobank’ or ‘the Group’) has signed a memorandum of understanding (‘MOU’) with eleni LLC (‘eleni’), the leading proponent and developer of commodity exchanges in Africa, with a view to establishing a cooperative framework to promote and accelerate the development of Africa’s agriculture. Mr. Albert Essien, Ecobank’s Group Chief Executive, and Dr. Eleni Gabre-Madhin, chief executive officer of eleni, signed the MOU at an official ceremony held during the AfDB’s Annual General Meeting in Kigali today.

Dr. Gabre-Madhin, a globally recognized thought leader in Africa’s development, is the former founder and CEO of the acclaimed Ethiopia Commodity Exchange (ECX), which has garnered various international awards and plaudits, including the Africa Investor Agriculture Initiative of the Year in 2011 and, a first in Africa, the CIO award for IT excellence in business. eleni, established with co-founders Keith Thomas and Jawad Ali, is the only proven pioneer building commodity exchanges for frontier markets in Africa, with a demonstrated impact on the livelihoods of millions of smallholder farmers in Ethiopia.

The partnership between Ecobank and eleni aims to realize a shared vision of transforming Africa’s competitiveness in global commodity markets, enhancing value addition and processing in the domestic economy and enhancing food security. The partnership builds on the synergies between Ecobank’s unrivalled pan-African presence and its commitment to financial inclusion and eleni’s successful track record of creating and operating commodity exchanges in Africa, with projects in Ghana, Cameroon, Mozambique, and Nigeria. Ecobank recently announced that it was a keystone investor in the establishment of the

Ghana Commodity Exchange (GCX), eleni’s first major foray in West Africa.

“As well as increasing market transparency and reducing transaction costs, commodity exchanges play a crucial role in the monitoring and assessment of risk,” commented Albert Essien, Ecobank’s Group CEO. “Instruments such as warehouse receipts reduce uncertainty and improve access to finance across the value chain. We look forward to collaborating further with eleni to enhance Africa’s agricultural financing capabilities.”

“We are very excited to be working with one of Africa’s leading financial institutions, with a solid pan-African focus, as this opens up a tremendous opportunity to establish the leading platform for commodity-related payments and transactions across the continent,” concluded Dr. Eleni Gabre-Madhin.

Read more Read less

The Cameroon Commodities Exchange: a potential hub for the CEMAC zone

April 11, 2014

(Business in Cameroon) – According to Eleni Gabre-Madhine (photo), CEO of the Eleni firm, which has been conducting a feasibility study on the creation of an agricultural raw materials exchange in Cameroon, this future business hot spot for buyers and sellers of commodities sees the potential for it “to quickly become the CEMAC zone’s trading hub.”

On April 9, 2014 in Yaoundé, results of the first on-site investigations by the firm in four regions (Centre, West, North-West and South-West) have been encouraging. During their first seven weeks of work, the Eleni firm’s teams were able to see on Cameroonian markets, including the most distant, the increased presence of Nigerians, Gabonese and Chadians to replenish their stock in Cameroon. A trading platform like CCX should help to modernise and boost the commercial collaboration between Cameroon and neighbouring countries.

(Business in Cameroon) – According to Eleni Gabre-Madhine (photo), CEO of the Eleni firm, which has been conducting a feasibility study on the creation of an agricultural raw materials exchange in Cameroon, this future business hot spot for buyers and sellers of commodities sees the potential for it to quickly become the CEMAC zone’s trading hub.”

On April 9, 2014 in Yaoundé, results of the first on-site investigations by the firm in four regions (Centre, West, North-West and South-West) have been encouraging. During their first seven weeks of work, the Eleni firm’s teams were able to see on Cameroonian markets, including the most distant, the increased presence of Nigerians, Gabonese and Chadians to replenish their stock in Cameroon. A trading platform like CCX should help to modernise and boost the commercial collaboration between Cameroon and neighbouring countries.

The products the Eleni firm have already been eyeing for the CCX are rice, corn, sorghum, beans, cassava, palm oil, cocoa and coffee. Even if their production is low, as noted by Eleni Gabre-Madhine and her team, the volumes currently being sold (excluding consumption needs) are promising as they vary between 85% (cocoa/coffee) and 35% (corn, beans, sorghum, etc.).

 

A CCX launch in 12 months? It’s possible!

The sale of these products on CCX seems all the more questionable, though, as the preliminary study presented in government reveals that the current path is fraught with hurdles. These mainly include the poor state of the roads in production zones, which increases transportation costs and makes market access difficult, mutual distrust between vendors and buyers, the total absence of price information on the market and warehouses, sales options restrictions which oblige producers to sell to the first buyer to cross their path.

But, despite the constraints raised concerning the sale of commodities, to which must be added Cameroon’s structural limitations in terms of the absence of cutting-edge technology, the Eleni firm is adamant that the CCX project is feasible. […] With more constraints than what one finds in Cameroon, we were able to launch a commodities exchange in Ethiopia. I can say that there are lenders who had a good laugh when they found out that Ethiopia was planning to create an agricultural exchange. We believed in our project and we got there,”explained Eleni Gabre-Madhine.

She goes on to indicate that the Cameroon Commodities Exchange can be operational within a year after the completion of the feasibility study. “In Ethiopia, we did it in 18 months. With the experience we already have, we think that we can set-up the Cameroon Commodities Exchange in 12 months,” maintains the Eleni firm’s CEO.

Read more Read less

Ghana commodities-exchange plan revealed

April 3, 2014

The founder of the budding Ghana Commodities Exchange, having established the successful Ethiopian platform, reveals the commodity-rich west African country’s grand ambitions and the benefits of a consortium-led model for the new exchange, which is set to launch in 2015.

Ghana is the latest African country to start developing a national commodities exchange and will adopt the help of a private commodity exchange promoter, Nairobi-based eleni LLC. The Ghana Commodities Exchange will start with spot trading and phase in futures and other derivatives contracts within a five-year timeframe, and will primarily trade agricultural commodities, including maize, soybeans, paddy rice, palm oil and groundnuts.

Other key agricultural and non-agricultural commodities will be introduced as the exchange develops.

However, as opposed to the Ethiopia Commodities Exchange (ECX) – a successful government-backed model in Africa – its Ghanaian equivalent will be owned by a group of public and private partners from inception, says Eleni Gabre-Madhin, eleni’s CEO.

The founder of the budding Ghana Commodities Exchange, having established the successful Ethiopian platform, reveals the commodity-rich west African country’s grand ambitions and the benefits of a consortium-led model for the new exchange, which is set to launch in 2015.

Ghana is the latest African country to start developing a national commodities exchange and will adopt the help of a private commodity exchange promoter, Nairobi-based eleni LLC. The Ghana Commodities Exchange will start with spot trading and phase in futures and other derivatives contracts within a five-year timeframe, and will primarily trade agricultural commodities, including maize, soybeans, paddy rice, palm oil and groundnuts.

Other key agricultural and non-agricultural commodities will be introduced as the exchange develops.

However, as opposed to the Ethiopia Commodities Exchange (ECX) – a successful government-backed model in Africa – its Ghanaian equivalent will be owned by a group of public and private partners from inception, says Eleni Gabre-Madhin, eleni’s CEO.

“Recent global best practices show that a commodities exchange is best served by a consortium where no single investor has a majority or controlling stake,” she says. “This type of structure is important to the governance of the exchange in that it makes it a lot more transparent and credible.

“A balanced ownership structure is the right way to put up an exchange, and will bring integrity to the market place.”

The change is an interesting step for Gabre-Madhin, founder and ex-manager of the ECX between 2008 and 2012, who left to start eleni LLC.

Some experts say she is due to become the industry leader in designing, building and supporting the complete development of commodity exchanges in frontier markets. In that regard, in January, Morgan Stanley and the World Bank’s International Finance Corporation invested $5 million in eleni.

Investment partners for the local exchange include local financial institutions, such as Databank Agrifund Manager, Ecobank Ghana and UT Bank Ghana. The government of Ghana will also have a minority stake in the exchange.

The aim of the consortium is to complete the investment process by April. The exchange will take around 12 months to develop, plans to launch in early 2015 and is expected to turn a profit by its third year of trading.

As Gabre-Madhin explains, Ghana’s exchange will be designed to be inclusive of all the current actors in the commodity market – from individual farmers and farmer associations to domestic traders, brokers, processors and exporters.

Trading is expected to be driven by proprietary agents – those directly involved in the day-to-day selling or buying commodities – and, possibly to a greater extent, financial players.

“We don’t see the need for any particular policy reforms for this to happen,” says Gabre-Madhin. “However, we will spend considerable effort on training and certification of broking members to ensure that the intermediation happens according to the rules of the exchange.”

Indeed, for eleni, Ghana offers the ideal setting to start a commodities exchange: a sophisticated policy environment; developed private sector; well-functioning legislature and regulatory environment; and overall supportive infrastructure.

“Ghana already has a regulator and a clearing system for the existing stock exchange, so we may merge into that instead of building from scratch,” says Gabre-Madhin. “This wasn’t possible in Ethiopia.”

In the case of Ethiopia, the exchange took 18 months to complete from inception in 2006, six months faster than the allocated two years, despite the fact nearly all infrastructure to support the exchange – including warehouses, clearing houses, quality-control measures and more – needed to be built from scratch.

“We thought that as the exchange [in Ethiopia] started moving, private companies would start to follow the industry’s needs and build these things themselves,” says Gabre-Madhin. “It just wasn’t the case.”

Some 100% government support and the accelerated implementation of rules and regulations sped up the process somewhat.

“With the Ethiopian example, the government made the decision early on to have full ownership, because when we started the project, there were no models in Africa of a financially secure and sustainable exchange to indicate that achieving commercial returns for private investors would be possible.

“In 2006, there simply were no private investors willing to invest in a commodity exchange in Ethiopia,” says Gabre-Madhin. “Without the government kick-starting the process, as an enabler, the exchange wouldn’t have gotten off the ground.”

The ECX has proven to be a successful model. In over five years of operation, and hundreds of thousands of transactions, there have been no payment defaults, trading order errors, or system failures, while 15 million coffee farmers have increased their share of the final price from 38% to 65%.

Off the back of the ECX’s success, governments from around the continent have approached Gabre-Madhin and her team to help set up shop elsewhere. Cameroon and Mozambique are in talks with eleni to create a commodities exchange, and the Abuja Securities and Commodities Exchange in Nigeria has turned to eleni for advice to clean up and privatize their failing bourse.

“We have the capacity to implement two projects at a time,” says Gabre-Madhin. “Each project is on a 12- to 18-month turnkey basis.”

The Ethiopian model has provided extremely valuable lessons, she says, adding: “First, and most important, it taught us that a commodities exchange in Africa can be built and become commercially viable. This is key to attracting private investors in other contexts.

“Other lessons are the importance of tailoring the exchange model, such as the gradual approach in starting with spot trading.”

And with the presence of an exchange, a farmer goes to market knowing about quality and quantity of the product they are planning to sell, explains Gabre-Madhin.

“A commodity exchange gives access to the national market, and even the global market, rather than just the local market where, typically, local merchants are likely to take advantage of farmers with limited information and bargaining power and who routinely don’t get paid on time and bear all the risks of price volatility,” she says.

“With an exchange, farmers begin to see their local transactions in reference to the wider market. Even if they don’t trade directly in the exchange, they are more aware of national and global prices and fluctuations, as they have access via mobile phones to the latest commodity prices.”

The ECX has traded more than 250,000 tons of coffee every year, which is three times the export of coffee from Kenya, Tanzania and Rwanda. Ethiopia has surpassed the size of a regional exchange.

While the establishment of national commodity exchanges could be a stepping stone to creating a regional exchange, this is unlikely in the near- to medium-term, says Gabre-Madhin.

“In both stock and commodities exchanges, there are opportunities for them to exploit cross-listing or other types of alliances, but aligning the policy and regulatory conditions to make this possible is not that simple,” she says.

“The lack of liquidity is not only a function of the economy’s size, but also due to the potential barriers to participating in some of these markets.”

From the ECX’s inception, there was an understanding that when the Ethiopian exchange became financially sustainable, the government would start to devolve its ownership interest. This, however, has not yet been the case.

“The lesson on the ground is that it is always very difficult to undo something, as we are seeing now in Ethiopia,” says Gabre-Madhin. “Although I hope the process of privatization will start soon.”

Full article: http://www.euromoney.com/Article/3324185/Ghana-commodities-exchange-plan-revealed.html?p=2&copyrightInfo=true

Read more Read less

How to Build an African Commodity Exchange

March 26, 2014

12345...MoreLast »

Media enquiries.

For media enquiries, please send an email to Media enquiries.

none