The woman behind the biggest dream

‘... We've also developed very extensive rules of the exchange which go with the trading system; the delivery, warehousing, settlement, conduct of business, arbitration in case of disputes and we've setup a huge notification and market information dissemination platform....’

Eleni G.Medhin, left her job as a World Bank senior economist in Washington D.C. in part because she was disturbed by the 2002 famine which wracked Ethiopia. Her proposed solution was to establish a commodities exchange, inspired by the Chicago Mercantile Exchange. It seems her dream is turning into reality as currently, she is introducing to the country the Ethiopian Commodity Exchange / ECX.
Capital's Abiy Demilew conducted an exclusive interview with the dynamic economist. Excerpts:

Capital: The commodity exchange market has moved to a new level this week, are you excited?
Eleni G.Medhin: It's very exciting and also challenging. What's really exciting is to see how people are responding from all corners of the country and society. We get enthusiastic responses from the farming community, business and academic communities, from banking and transport sectors. What I've realized is that setting up a market as we are trying to do, is really about touching everybody's lives. And as we get more into it, we have noted all the different implications.

Capital: On the realization of the ECX, is there something you had never thought of?
Eleni G.Medhin: Yes. When we set up the system, a new generation of financial analysts will be needed for the country, people who track the market and who will create an information business around the market trends by informing the market participants and the media. In the west, the media is now playing a key role in commodity exchange market where you have industry and market experts specialized in following the market. This is one of the off-shoots of setting up a formal marketing system.
The other one is the academic community. All of a sudden now we have realized talking to the business schools that finance and business management programs are going to start diploma and degree programs in commodity marketing, in derivative markets and so on because a new generation of business analysts of industrial experts has to emerge to respond to the need of the system we are creating.
So this goes beyond where we started and now we have realized that we have many more areas to explore, like the transport and logistics because at the end of the day these commodities are physical. They have to be stored, shipped and handled.
So all of these are exciting trends as they represent a growth avenue for Ethiopia.

Capital: Isn't it too ambitious? What are the foundations of the system?
Eleni G.Medhin: Well, Rome was not built in a day and we will go step by step. So we've been very systematic in our approach to developing this commodity market. We started with a solid foundation of research and analysis on how the market is structured, who the actors are, what the marketing margins are, what the financial courses of the business are and also on the constraints. So what we are doing now is based on a very rich foundation of understanding of how the commodity market in Ethiopia works.
Yes. We think that we're too ambitious. But we always have to dream big as we are poor country trying to achieve middle income status shortly. And that is a very noble, ambitious and deserved objective.
Each of us whatever arena we are in, have to think big on how to have impact on millions of lives and bring rapid change based on solid foundations.
For us, this is an achievable dream.

Capital: How realistic could it be in the Ethiopian context?
Eleni G.Medhin: For the last ten years, my organization was engaged in extensive research on how the marketing system works in this country including identifying and casting different approaches of addressing some of the problems.
So when we start to design the commodity exchange as a system, we started from what we knew of the market. We are not trying to introduce an imported style here. This idea was born in very rural areas of Ethiopia by talking to farmers and traders and not in Chicago, or China. So what we are doing is reinforcing what people have been using to address their problems and giving them new options, better values for their investment in the market. This is the basis for everything we do now.

Capital: Are you moving rapidly?
Eleni G.Medhin: Yes, we're going very fast. I think we are fortunate to have a combination of the research we already had, a private sector looking for solutions and a government that is willing to listen to a research and ideas. I think these three things are driving us quickly to our objective.
When you combine knowledge, needs and political will; this is a very powerful mixture.

Capital: What is the basic idea behind Commodity Exchange?
Eleni G.Medhin: The basic idea is to create a system that works for the benefit all, of particularly to ensure a way to address market risks. I think setting up a commodity market exchange system that serves all, to bring security, integrity and efficiency to all players in the market is important and this is the basic idea of people who set up this system in all organized markets elsewhere.
There's huge growth in emerging market commodity exchanges. Exchanges in India have seen 270% annual growth. There's tremendous potential for an exchange in Ethiopia, which is the largest grain producer in Africa, producing 30% more grain than South Africa. The exchange - EXEC (Ethiopian Commodity Exchange), launching soon, integrates numerous facets of the agricultural market, simultaneously creating arbitration boards, market information systems, trading systems, rural access through VSAT-empowered data centers, warehouses, certification centers and exchange banks.
The goal is to give farmers information on what's most needed, as well as increased income… and ultimately, increased choice over their lives.

Capital: How do you localize this philosophy?
Eleni G.Medhin: In 2002 we had a situation where prices were crashing dramatically. And in 2007/8 we are having the opposite of that where prices escalated dramatically. This volatility, measured at 50Pc, is one of the highest in the world. And we are expecting our farmers to thrive, modernize and change in a very higher market risk. If we don't address these issues, we can't simply expect farmers to function and increase productivity.
So establishing this system in this country helps people to manage price volatility risks, when changes in the demand and supply happen suddenly and price effects elevate dramatically, both buyers and sellers will be affected.
So this is a system that enables us to lock in the prices to ensure we have reliable supply and reliable trading partners, with a huge efficiency gain in our businesses. This enables consumers to get what they want when they need it.
It's very important to have more efficient industrial production, more efficient and profitable export performance and incentives for agricultural production.

Capital: How far are you in your planning?
Eleni G.Medhin: We started with building a legal framework and passed some laws governing the market. At the same time we've developed warehousing and warehouse receipt operation, we've partnered with banks to develop an internal clearing house; we've developed industry standards, market accepted quality standards for all our products and a certification system.
At the same time, our system development team has created a very appropriate and targeted software application to help us track the transaction.
We've also developed very extensive rules of the exchange which go with the trading system; the delivery, warehousing, settlement, conduct of business, arbitration in case of disputes and we've setup a huge notification and market information dissemination platform.

Capital: Information is the basic factor in modern market systems. In the Ethiopian context of infrastructural and settlement realities, how are farmers reached in terms of updates of market information in your system?
Eleni G.Medhin: This is the center point of the system we're introducing. The actors of the market from buyers to sellers and all commodity exchange activities are really based on the information dissemination which we're addressing aggressively.
Radio is the most traditional and aggressive tool to reach the broader target audience for the market information update as we are basing our projects on the already existing mechanisms. Mobile technologies, V-SAT communications, Electronic boards, Info centers etc are included in our strategy of information dissemination.

Capital: You have started membership registration. How is the response so far?
Eleni G.Medhin: We are delighted with the response we have received so far, with a flood of people coming to our office.

Capital: The Ethiopian economy is being mentioned as one of the fastest growing economies in Africa and the world. Do you agree?
Eleni G.Medhin: Yes Ethiopia's economy is casting positive projections in a growing scale in the last four years. This is I think, the result of efforts and investments deployed for years and now delivering their outcomes. The economic activity is becoming very dynamic and visible impacts have been observed.