Helen Clark visits Ethiopia's first commodity exchange

17 Jun 2009

Upon hearing the starting bell opening the markets at the Ethiopian Commodity Exchange, Ethiopian traders in green jackets flooded the floor, shouting and pushing.  UNDP Administrator Helen Clark, who had done the ringing, smiled.

“This is very, very exciting,” Clark said.  “This Exchange gives farmers, small and large, a chance to get a fair price which is informed by world markets.  When one thinks about it, a very significant part of the export revenue of Ethiopia is going through this Exchange. I think it can have a catalytic effect.”

Opened in April 2008, the Ethiopia Commodity Exchange (ECX) is the first commodity exchange in Ethiopia and serves as a market place where buyers and sellers come together to freely trade products like coffee and grains, assured of quality, delivery and payment. Working with the Ethiopian government, UNDP supported the initial start-up of the Exchange through financial support, training and technical advice.

“I think there will be a lot of interest in other developing countries in this kind of exchange,” Clark continued. “It gives a lot of transparency to the small farmer about what they are going to get. It also helps set standards for what they need to produce in order to command the best price.

In a country where agriculture is the backbone of the economy, the Exchange aims to transform Ethiopia’s obsolete agricultural marketing system, known for high costs and high risks of transaction. In the traditional Ethiopian agricultural system, where only one third of output reaches the market, commodity buyers and sellers tend to trade only with those they know, to avoid the risk of being cheated. Trade is done on the basis of visual inspection because there is no assurance of product quality or quantity, which drives up marketing costs and leads to high consumer prices. For their part, small-scale farmers, who produce 95 per cent of Ethiopia’s output, come to the market with little information and are at the mercy of merchants in the nearest and only market they know, unable to negotiate better prices or reduce their market risk.