Ethiopian Commodity Exchange To Assure Pure Monopoly?
It has been over two years since the ECX missed its target and moved towards a monopoly-like market structure. The first commodity exchange was established in the country in April 2008, with a capital investment of Birr 194 million. At the time of its establishment, many hoped that it would take little time to transform from an era of weak agricultural marketing to one of efficient exchange.
This post is available in: Amharic
Ethiopians now need to find a name for the new market system. Sure, the pure monopoly is getting closer to the Ethiopian agriculture marketing system, but it is indeed true that the market is becoming increasingly skewed to favour the Ethiopian government.
Last Saturday, Prime Minister Meles Zenawi clearly stated that all agricultural products would be traded on the floor of the Ethiopian Commodity Exchange (ECX) in the coming years. He bluntly declared, during discussions with traders and their associations, that because the ECX system is modern and reliable, all agricultural commodities must now be traded based on ECX’s “state- of –the-art”.
It has been over two years since the ECX missed its target and moved towards a monopoly-like market structure. The first commodity exchange was established in the country in April 2008, with a capital investment of Birr 194 million. At the time of its establishment, many hoped that it would take little time to transform from an era of weak agricultural marketing to one of efficient exchange. As Ethiopia’s agriculture is largely characterized by subsistence farming, in which production is intended for both household consumption and market purposes, it was expected that creating efficient market structures would greatly support poor farmers.
Yet it seems that all such dreams about the market are currently evaporating. In December 2008, the ECX began coffee trading without the requisite organizational preparation and thorough study of the coffee market structures. Amazingly, within the first month, the coffee market began to deteriorate; only 23 percent of total coffee supplies were traded. This phenomenon, accompanied by the global economic crisis, significantly affected the country’s foreign earnings. Coffee traders still complain of the structure, capacity and quality of the services provided by the ECX.
As if that were not enough, last October Guna Trading House PLC, owned by Ethiopia’s ruling party, announced its plan to become one of the nation’s biggest coffee exporters. Although Guna only began coffee export operations in April 2009, it is now becoming the dominant market player. This has also raised concerns among coffee traders who fear they may be forced out of the industry as a result of Guna’s political backings. And the anxieties over speciality coffee are still widespread among traders and scholars.
Grievances surrounding the performance of the ECX have not been settled. However, the government has already decided to impose this control mechanism on agricultural trading. It appears that no single commodity will ever remain out of government hands. But this begs a question of ECX Director Eleni Zaude Gabre-Medhin: to where have the market expertise and promises of a competitive market fled? Until an answer is provided, the “status quo” will be maintained.
ECX can not be independent platform for agricultural products trading as as long as it is controlled by the TPLF?EPRDF government. Even if Dr Eleni repeatedly claims it is free from government intervention her argument doesn’t hold water as majority of the board members are politicians appointed by the government.Trying to monopolize the trading of the mojor economic sector products is not workable. That is why we observed a drastic reduction in coffee trading after inception of ECX.If Dr Eleni really believes in markets to interact by themselves, let the producers, traders, exporters etc form their own trading platfrom. The government should limit itself to regulation and oversight.
The ambitious Dr Eleni is being used by TPLF-and Marxist Leninist Tigray to monopolize the economy by few companies and people associated with TPLF. Meles wants to model after China. What makes the Meles policy worse is that while the Chinese national government controls the nations economy for the benefit of the whole nation; in the case of Ethiopia, TPLF and few Tigers control the economy. The long-term vision of Meles is to make the rest of Ethiopians slave for a handful of Tigrians. Dr Eleni seems to be motivated by sheer love of a country. She does not seem yet to be aware of the Meles’s Machiavellian strategy. Meles is using her naivety and motivation to make the parochial TPLF to control the economy as it did with the political power.
If Elleni does not see and understand what is going on under her nose then she must be a fool. Elleni and her party of diasporas who are leading the ECX are nothing more than guns for hire. All they are interested in is advancing their carreer and portfolio. A simple peasant farmer in Ethiopia understands whate TPLF is doing. To say Elleni who is well educated by any standard and has worked at international organization does not understand what a simple peasant does is not credible. Also the business class in Ethiopia which is interested in money and nothing else is getting the hands of TPLF. Interesting
Those of you who thought that Dr. Eleni was working for the good of the country are very innocent. I never trusted that lady from the very beginning. She was just serving her ego and the government. She is trying to get a share of the money being stolen by EPRDF.
No door is open for people who work for the good of their country. No one is given an opportunity that Dr. Eleni is given unless he/she is serving the will of EPRDF.
The late Dr. John Henry Clarke, who was a distinguish historian, once warned Africans about the formation of stock markets and exchange houses. “If you let them do it, well, you might as well kiss your product good-bye.”
I agree with Dr. Clarke. China will be taking over the both the product and its exchange market in a few years. Watch!
I don’t understand where people get this idea of Dr. Eleni being an innocent patriot who wants to help her country. The facts tell us otherwise and the only country she wants to help (if any) is Tigray. I also don’t agree with Zerihun’s conclusion that ECX missed its target. I am sorry to say but this misses the point altogether. Let me make myself clear.
In order to understand the role of ECX in Ethiopian politics we should try and see the big picture i.e. what the motive was behind the creation of ECX. Ever since TPLF came to power it was devising ways of controlling every sector and thereby the country. They started the process with the Ethiopian peasantry as it is the major pillar of their control. The first step towards this was their refusal to privatize land. As Meles told us, ‘this will happen over their dead body’. Next they controlled the agricultural inputs particularly fertilizers (remember how they kicked out Ethio Amalgameted). These two measures essentially enabled them to hold the peasantry hostage. When they finished with the peasantry they shifted their attention to the urban elite. Persecutions of professional associations like ETU and the free press were part of this strategy. Then came the attack on civil society disguised as regulating NGO operations. That left only one major sector-the private business community. The first attempt towards controlling the business community was through the Chamber of Commerce. What TPLF did to dismantle or control the Ethiopian Chamber of Commerce is very well known and documented. But they were only partially successful (they chased its chairpersons Ato Berhane mewa out of the country) but they were not totally satisfied with that. They wanted direct control and that’s where ECX came in. The supposedly innocent Dr. Eleni was in fact handpicked by Meles from the outset to design and establish a system whereby TPLF could firmly control the major export earning commodities as well as the crucial agricultural produce for domestic consumption. This serves a dual purpose. First it would give TPLF full control of the economy and second it would enable it to control the business community and their involvement in politics. This has indeed been achieved very well as we have witnessed when TPLF made a call to the business community to make contribution for the construction of its HQ in Addis Ababa. The business people were literally jostling and competing with each other to affirm their loyalty through their contributions. As to the personal motives of Dr. Eleni I don’t believe money was a factor. She could have made more money if she stayed abroad. We can only suspect that she has stronger attachments and loyalties to the people she serve.
So while Zerihun’s article is a very good analysis of what is going on in ECX it would only be important if we relate it to the bigger agenda.
A very well thoughout and documented response. Thanks debela.
Very well said!
The ECX is not only a market institutions but a market destabilizing tool for the regime.
Dr Eleni is not naïve but a willing hired hand. As a Market expert which she not but a front she is trained as economist. Her first move to encroach on the Ethiopian market was when she sold free market institutions to help the poor to get legitimacy in the donor community and raise fund see http://www.ted.com/talks/lang/eng/elene_gabre_madhin_on_ethiopian_economics.html. Once she has the donors on her side and the fund available she made her next move ended up creating a monopoly.
Her contradiction from one audience to another depending who she is talking shows her true color. There is no mystery about a free market. The first rule is transparency. Her website http://www.ecx.com.et (not the exchange) tells it all. She is the only person who speaks, writes news, see delegates, decide who to see or not. The news section has all foreign media praising her how great she is and how the exchange is a miracle. Not a single independent Ethiopian media cover the true working of the exchange. The entire boards are the regime right hand men including the few non government officials. The so call traders who paid millions to be members know who they are and why the paid. I would not pay a 100 birr to be a member if I do not know what is going on from the inside to make lots of money.
There is more to tell and you should give it a continuous coverage to know how dangerous it is for the people of Ethiopia. To say she does not know is naïve itself. Let discus the real issue of what is going terrible wrong with the women and the exchange she established other than what she said.
The fact of the matter is that there is no such free market where there is no rule of law respected in Ethiopia. currently the tplf tribal reacist and terrorsit junta is above the rule of law where they are not only manipulating and abusing the power but also controlling the entire economical sector and other main elements of the country. There fore unless dr eleni is working with the corruption network of tplf, or unless she is moron who has no clue about free market, there is no such free economy or free market where there is no single rule of law, period! Rether than singing a childish tantrum about non-existance free market, i recommond dr eleni either to be a part of the struggle to bring rule of law above everyeone so that a free market can be established or simply shut up and wait until many other freedom fighters and heros liberate ethiopia from the fre Tigrean Ethino racist groups, tplf.
This is a totally inane article. The last place U can have a monopoly is in a trading system where multiple sellers and buyers come together. No wonder AddisNeger went out of business with this kind of inane scribbles. Good Riddance!
@justin
Judging by your name you are most probably an expatriate. And like most expatriates who spent a few months in the country you must feel that you should either support or oppose the government. Otherwise there is no basis for your half cooked comment about monopoly and trading system. If you are interested in contributing to the discussion you are most welcome to share your views based on sound economic analysis. You are obviously not in a position to evaluate what AN was worth.
ere bakachihu zim bilachihu metechet bicha ……woooo…..at least the ppls doing out there at ECX are doing something for the country that has been appreciated even with the well known media repoters. guys lets be rational….what a media is AN….really sorry for all the negative news you are putting everytime.
ofcourse i am not supporter of the present regim in Ethiopia but m getting fed up with ur style of reporting.