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Eleni bets future beyond Ethiopian commodities exchange

By Gemma Ware
Posted on Tuesday, 19 February 2013 14:22

Back in 2008, when Eleni Gabre-Madhin set up the Ethiopia Commodity Exchange (ECX), it was almost impossible to raise private- sector financing for an African agriculture exchange, she says.

“There really was no choice but to go to public-sector institutions.” Which is what the ECX did, raising $24m of development finance from the World Bank, the United Nations Development Programme and the Canadian International Development Agency.

Five years later, the environment is “completely different”, says Gabre-Madhin, who left the ECX in late 2012 and raised $5m of mainly private seed capital to start a new business that would design, build and invest in commodity exchanges in frontier markets.

Investment bank Morgan Stanley is the anchor investor in the eponymous eleni LLC, alongside the International Finance Corporation. She anticipates investment from Bob Geldof’s private equity firm, 8 Miles.

The plan will be to raise between $10m and $20m for individual projects in Africa and beyond, using a private-public partnership model, with eleni LLC taking equity investments in each exchange.

There are already projects starting in a couple of countries, including some in Southeast Asia, though Gabre-Madhin is still keeping tight-lipped on where.

Commodity exchanges are not new in Africa – Nigeria, Zambia and Uganda all have them – but the commercial success of the ECX has transformed investor interest. “By the second year we broke even; by the third year the exchange was profitable,” says Gabre-Madhin.

Rather than focus purely on the exchange, the ECX built up an ecosystem of warehousing, transport and infrastructure for farmers. Before the ECX’s creation, Ethiopian coffee farmers reaped less than 40 percent of the value of their coffee; now it’s nearer 70 percent.

As a result, Gabre-Madhin has become a firm fixture among the band of elite business leaders who flit between international forums.

Between 2010 and 2012, 18 government delegations came to see the ECX, including three from outside Africa.

It was the “brand equity” of her own name, she says matter of factly, that led to calling the company after herself. eleni LLC will have
offices in Nairobi and Dubai.

Born in Addis Ababa, the daughter of an Ethiopian diplomat, Gabre-Madhin moved around a lot, growing up in New York, Rwanda, Togo, Malawi and Kenya.

After working for the UN in Geneva – where she got a Swiss passport – and the World Bank in Washington DC, she returned to Ethiopia to lead the country programme of the International Food Policy Research Institute before setting up the ECX.

The strategic focus of eleni LLC will be on agriculture, but Gabre-Madhin is not against branching out to minerals.

Whatever the commodity, she says, she “wants to bring efficiency and transparency into the price discovery mechanism”.

As Malaysia’s exchange has become the reference price for rubber, India’s for silver and the Dalian exchange in China for soybeans, Gabre-Madhin wants the reference prices for commodities such as cotton, coffee and cocoa to come from Africa rather than New York or London.

“It is time for Africa to take back its own commodities and to price them in its own markets,” she argues.

As for the debate over whether the continent needs one pan-African commodity exchange, Gabre-Madhin prefers alliances between national exchanges.

She says a pan-African market will grow in a much more fluid way if “we link our markets when and how it makes sense by cross-listing products, and by forming alliances around standards for a particular commodity.”

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