ECX and its Effect on the Coffee Sector - Part I

For Part II, click HERE
For Part II, click HERE

In the past few weeks, too many readers asked me to share my views on the Ethiopian Commodity Exchange (ECX) and wanted to know what I think about its effects on the Ethiopian coffee sector in general, and the Specialty coffee industry in particular. I was also asked similar questions by producers of the PBS Wide Angle program that released this documentary program featuring Eleni Gebre-Medhin, founder of the ECX.

While I continue to respond to as many of your emails as I can, I also thought it might be useful to post my comments here on the blog for everyone else to see. So, in the coming couple of days, I will post my views on the most frequently asked questions: What's your view on the ECX in general; What do you think are the effect of trading through the ECX on specialty coffee exporters and buyers; Is ECX good for coffee growers?

Today, I share my views on the ECX in general as an introduction and to clarify my stance before I raise issues that may easily confuse readers although, to my knowledge, none of the problems I will discuss here are related to or the makings of ECX or Eleni - the person that I admire most and is being celebrated by the PBS documentary on July 22, 2009.

Part I - My views on the ECX in general

July 20, 2009

I think the establishment of the ECX is significant and of a historic proportion.

As I jokingly tell friends, in Ethiopia, major development breakthroughs happen on a periodic cycle of time spanning either 20 or 100 years on average. For example, I listed below a non-exhaustive timeline for Ethiopia's introduction of the major communication technologies and platforms:

1894 - Postal service started on March 9, 1984 (In 1908, Ethiopia became member of the Universal Postal Union and the first Ethiopian stamps were also printed and sold around this time; in 1936, the General Post Office and two branch offices were established in Addis Ababa as well as thirty-six post offices throughout the country.)

1917 - The first train services from the coast to the capital were inaugurated only in 1917 (A concession for the construction of a railway from the Ethiopian capital to the French Somali port of Djibouti was granted by Menelik as early as March 1894)

1984 - The first extensive open-wire line telecommunication system laid out linking the capital with all the important administrative cities of the country (the Imperial Telecommunications Board of Ethiopia was established by Proclamation 131/53 in 1953)

2008 - The first commodity exchange market established. The person credited for this triumph, Eleni Gebre-Medhin, is featured on this documentary film.

Based on this snapshot of historic timeline, some historians may be tempted to draw conclusions that the establishment of the ECX was overdue by about 4 years because the latest major breakthrough was recorded in 1984 - 24 years prior to the ECX' formation. I lean towards supporting the argument that it was overdue by over a hundred years.

So, it is my belief and hope that Ethiopians will be grateful for and appreciative of the work done by Eleni and her colleagues for the next many years.

The ECX can play important roles in elevating the agricultural sector's efficiency, the country's competitiveness in the global market, and thereby helping the people dig themselves out of the vicious circle of poverty that we are shamefully plagued in.

A transparent and efficient exchange market system nurtures competition and benefits everyone in the value chain. The ECX can help Ethiopia by:

• modernizing the way people do business and improving the marketing channels,
• disseminating market and price information, and
• providing a marketplace where buyers and sellers can come together to trade and be assured of quality, delivery, and payment.

These will have a ripple effect of benefiting everyone in the value chain. Obviously, this cannot be achieved overnight. Transforming a century old gloomy trading system takes time.

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Next posting: Part II - The Effect of Trading Through the ECX on Specialty Coffee Exporters and Buyers To read, click here

Part III - Is ECX Good for Coffee Growers? To read, click here

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