The Africa Report: What has the Ethiopia Commodity Exchange (ECX) brought to farmers since its 2008 opening?
Ermias Eshetu: The real innovation of the past five years is that farmers have been able to get up-to-date market information. It used to be that a small buyer would drive into a farm or community on an Isuzu truck, and he would dictate the prices. For the farmer, there was no other option. Now, with the commodity exchange and flow of information to the farmer, they are getting a much fairer cut of the value – at least 60% more, we have calculated. Over the past five years, we have handled over 105bn birr ($5.2bn) in transactions, which speaks for itself.
Our objective is that someone sipping a coffee in New York can scan and trace its origin
Where are the weaknesses? What needs to change?
The key to making it succeed is infrastructure – logistics and ware- housing but also our surveillance capability, the ability to confirm or validate any discrepancies and track products – so a huge techno- logy infrastructure has to be built. The cross-country rail that is being built is going to bring down the cost of transport, so we at ECX need to align our strategy with the state strategy for logistics too.
Some coffee buyers complain of blending with inferior grades. How do you fight this?
One of our major projects right now is traceability. Our objective is that the buyer or even beyond the buyer, someone sitting in New York and taking a sip of coffee, can actually scan that product and find where it came from.
So will you confront these brokers who are blending?
Rather than confronting, [the exchange] will enhance those who are in a genuine international trade relationship. They will be able to ask a premium price because of the reputation they will gain through that process. So the market will gain in transparency, which should help clean up things.
Will you be including new commodities on the exchange?
Certainly, given the growth of the economy and the population, there are lots more we could include. All these people consume sugar. We use a lot of chili pepper. With something like teff, which is not on the exchange, we have to be careful as it is the bread and butter of our society. It’s about the survival of the individual household. So if the infrastructure is not built right, if conditions are not right and the market tries to control that, then it can create unnecessary dynamics [teff scarcity] for the situation on the ground. So teff will come on board, but only when everything is right.
How about the payment side? Are you using mobile money?
Right now the farmer gets paid cash, then the supplier collects that commodity and brings it to our warehouse on behalf of an owner’X.’ Once it is in the warehouse, Mr X will agree to accept the certification. Then they will wait to trade that [lot] on the exchange. And when the market is made, the settlement takes place immediately, so we have a mechanism between banks in real time.
So how can we extend that?
For example, what if a farmer wants to sell a commodity and doesn’t want [it to wait in] our warehouse? We are in the process of creating an application similar to mobile banking, where the farmer can have full access to the market, meteorological data, advice on inputs, fertiliser, etc. You need a smartphone, which is becoming so affordable. A farmer will be able to stick his label on the sack, scan it and submit ahead of time that a load of his product [is arriving at] the warehouse. We will be able to track this, helping us with trace- ability, and also plan the logistics in real time. ●
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