By Eleanor Whitehead

When it comes to commodity exchanges, African countries are hoping it’s second time lucky. The continent’s first forays into the arena – mostly in the 1990s – weren’t much of a triumph. But several countries are now trying to fare better as they work to establish or revive their marketplaces.

The driving force behind renewed interest? The unexpected – and fairly significant – success of the Ethiopia Commodity Exchange.
The ECX has been credited with giving farmers access to real time pricing information, improving profits and productivity, reducing market segmentation and boosting export quality. The stabilisation of domestic supply chains is also supporting agro-processors and exporters, diminishing concerns about once rampant contract default. All since its launch in 2008.

Tanzania is one country hoping to replicate those successes. Jakaya Kikwete, the country’s president, told beyondbrics an opening was on the cards: “We have the traditional markets where traders go and buy; now it is time to do it properly in a more organised manner.”

His hope is that an exchange could help protect small farmers from traders who buy at below-market prices.

“We have been thinking setting up a commodity exchange in Dar es Salaam… Now that I’ve seen it here, I believe that it can be done – and we want it completed at the earliest possible time,” he said from the ECX’s Addis Ababa quarters, where he and a 20-strong delegation were learning about its workings.

The ECX has signed MoUs with the governments of Mozambique, Rwanda, Nigeria, and – in draft – Ghana, to collaborate as they set up exchanges.

According to Eleni Gabre-Madhin, the exchange’s CEO: “Governments have realised that this is a model that could work for any African country… though tailored to their needs and country conditions.”

Hopes for greater success this time around are higher because – unlike before – countries are learning from an African success rather than trying to transplant exchange models wholesale from more sophisticated Western economies.

“If more African countries build commodity markets we can start to cross-list and create regional indices: an African coffee index, a West African cocoa index, an East African coffee index, a cotton market – and develop an African presence in global markets,” Gabre-Madhin argues.

But not everyone is satisfied with the results. One smart London coffee spot flags up a concern with its Ethiopian offering:

“As this coffee was bought and sold through the ECX, its traceability is limited… and full credit for the growing and preparation of the coffee cannot be given,” its blurb reads. “We hope that at some stage in the future the Ethiopian coffee board will reconsider its current strategy and permit all coffees in Ethiopia to be traded directly”.

They haven’t won ‘em all.