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ECX founders targeting pan-African success

February 1, 2013

THE pioneer behind an Ethiopian agricultural commodity exchange has set up a new company to spread the model across Africa and beyond, having already received $7.5m of backing from investors.

Eleni Gabre-Madhin, who founded and transformed the start up Ethiopia Commodity Exchange (ECX) to a $1.2bn market in three years, has set up Eleni Exchanges, which has got the backing from Morgan Stanley and the International Finance Corporation.

They are tipped to be joined by the African Development Bank and Bob Geldofs private equity group, 8 Mile Fund

Speaking to The Public Ledger from Kenya, where headquarters are being set up, Dr Gabre-Madhin said: ‘The model we have is a hub and spoke
one, where we have a core team out of Nairobi, but then country project teams are set up to focus on national or even regional entities. They will need to form mtional or regional private investor consortia. This should allow us to scale up steadily” She said the hub would allow the company to benefit from cloud computing services and the mobile revolution
that is unfolding in Africa.

“Several” projects are due to be launched in 2013. The scale of interest shown by governments is represented by the 18 delegations sent to a pan-African meeting last year, which include three heads of state. “Our interest is really spread out across the continent. In terms of the big commodities, cocoa will obviously be of interest. Coffee is clearly another one. Some time down the road we’d like to look at West African cotton In terms of domestic flows, maize is definitely one we will focus on in coming years as itis Africa’s food crop. It’d be very exciting to connect the various countries that are interested there.”

Dr Gabre-Madhin said the firm’s mamgement, which includes ECX co-fomders Keith Thomas and JawadAli, were “very excited about doing things a little bit differently to what we did in Ethiopia”.

Building an ‘ecosystem’
One lesson from ramping up the ECX was that “commodity exchange ecosystems” need to be built, reflecting the fact that in “frontier markets all of the pieces are not nicely laid out in advance”. This means engaging companies that can provide everything from warehouse and logistical infrastructure, through technology, to market data and intelligence. “I think that’s been one of the attractions to our very senior and credible investors- the fact our model unfolds to add value in a number of levels across this ecosystem.”

A constraint in Ethiopia was an underdeveloped telecornmliDications industry and while Dr GabreMadhin felt “we were smart about it and did the best we could’’, there is a relief to be unshackled from a focus on bricks and mortar and be “more aggressive” in this area where comtries’ telecoms sectors are more advanced.

There will also be an innovation lab in Nairobi which will rmtner with groups such as Google, MIT andNewYorkUniversityCentre for Technology and Development to ensure a cutting-edge for innovation and the ability to attract global experts to pioneer new developments.

Because of a long history of market intervention in Ethiopia, the government role in ECX was often scrutinised. Likewise, the involvement of private operators, especially from overseas, in Africa agricultural sometimes gives rise to concern. Dr GabreMadhin said there needed to be a balance. “Our public-private partnership approach addresses this,”
she said, noting governments would be minority partners. “On the one hand things should be done on a commercial basis to make it sustainable, scaleable and away from subsidising market structures. But the other is that there are things like capacity building, attracting smallholders into the markets that need public input. One thing we showed conclusively in Ethiopia is that one can do good and do good business. I don’t think there’s sense in setting up heavy, bureaucratic, administratively top heavy structures that would collapse at some stage … If for social welfare needs we still needed some iJ1iection of support to do some extra public good that’s where the public sector comes in.”

There are similar projects happening in Africa, notably the Indian-backed Bourse Africa, but Dr Gabre-Madhin is drawing on her past experiences for credibility. “At this point we’re the only proven model on the continent for this particular type of exchange (i.e. not including traditional derivatives exchange like South Africa’s SAFE X) – those in frontier markets like in Ethiopia with small traders and farmers,” she said, but added it was reassuring that other people were looking at investing in the space. “But we also have the experience to be flexible and adjust the model to new contexts, having the demonstrated ability to conceive of appropriate solutions and roll them out quickly and effectively”

By: Ian Hart

http://www.public-ledger.com

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Morgan Stanley and IFC invest in eleni LLC

January 22, 2013 | NEW YORK & WASHINGTON & ADDIS ABABA, Ethiopia

eleni LLC, a newly formed company led by CEO Dr. Eleni Gabre-Madhin, announced today that Morgan Stanley and IFC (International Finance Corporation) have both agreed to make an equity investment in the Nairobi, Kenya-based company which will incubate and support the formation of commodity exchanges across Africa, helping to promote food security.

Building on the success of the highly acclaimed Ethiopia Commodity Exchange (ECX), which she founded and managed from 2008 to late 2012, Gabre-Madhin and co-founders Mr. Keith Thomas and Mr. Jawad Ali have recently launched eleni, which is positioned to be the industry leader in designing, building, and supporting the operations of commodity exchange eco-systems in frontier markets. The Company’s business model is based on delivering turnkey projects on a Public-Private Partnership (“PPP”) basis, combining private investment with the best of know-how, technology and management, to support exchange projects. The Company expects to launch several such projects in 2013.

Dr. Eleni Gabre-Madhin commented:

“I cannot think of a better time to develop this business in Africa. Africa is the world’s last frontier for agriculture, with only one quarter of its yield potential achieved and seventy percent of its farmland as yet unused. Our company represents passion, excellence, integrity and innovation. Our aim is to build vibrant exchanges across frontier economies, going beyond Africa and beyond agriculture, to transform not only commodity markets but also the livelihoods of millions of producers.”

Funding of $5 million for eleni LLC has been raised by investments from Morgan Stanley, which has invested in a number of exchanges and market centers around the world, and IFC, part of the World Bank Group, the largest global development institution focused exclusively on the private sector, which will invest up to $2.5 million. Beyond the initial funding, each country or regional exchange project will involve the formation of a private investor consortium. eleni aims to rollout exchanges progressively across Africa and elsewhere in the coming years.

Mr. Gary Offner, Managing Director of Morgan Stanley, said:

“Morgan Stanley is pleased to join with IFC in supporting eleni and its vision of improving transparency and liquidity in agricultural markets in the developing world, where food security is often a pressing concern. Morgan Stanley is committed to leveraging its financial expertise in support of business models that help address society’s greatest challenges and as an early strategic investor in successful market structure companies. We look forward to bringing our expertise to help eleni achieve positive social and economic impact.”

Georgina Baker, Director Trade and Supply Chain, IFC, noted:

“Africa is a strategic priority for IFC, and, by improving the functioning of commodity markets, this project will enhance productivity and risk management. It will also make finance more accessible for farmers, helping them to increase their share of the final price and get paid more quickly.”

It is also anticipated that a third investor, the 8 Miles Fund, an Africa-focused private equity fund, will join the investment round within a month, together with envisaged support from the African Development Bank.

http://www.businesswire.com/news/home/20130122006167/en/Morgan-Stanley-IFC-Invest-eleni-LLC

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Viewpoint

November 8, 2008

‘We spend most of our lives cutting down our ambitions because the world has told us to think small. Dreams express what your soul is telling you, so as crazy as your dream might seem – even to you – I don’t care: you have to let that out.’

– Eleni Gabre-Madhin, Oprah’s O Magazine-November 2008

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