Transcriber: Denise RQ Reviewer: Mary Kay
What if I told you that I had a big, bold, beautiful idea
to build a commodity exchange
that would transform a billion lives in Africa?
You'd probably ask, what is a commodity exchange?
How would I do it? What would I do to reach a billion people?
What would I do differently, and what would I avoid?
Well, before I tell you, I want to show you a picture of a painting
that hangs in my office in Addis Ababa, Ethiopia.
This painting was given to me
by an Ethiopian-American artist based in New York, called Zig.
And Zig told me that he decided to make this painting
when he heard about the Ethiopia Commodity Exchange
that some colleagues and I had started in 2008
as a way to connect buyers and sellers in a reliable, efficient, organized way.
In a way, that would bring buyers and sellers to trade together
without having to know or be related to the trading partner,
guaranteed of quality, quantity, delivery, and payment.
And so what Zig saw
is that 3,000 years of Ethiopian history, of age-old farming practices
where farmers had been doing the same thing
day after day, year after year, century after century,
not really getting very different results, and living pretty bleak lives,
had changed when this modern, new commodity trading system came to be.
And what he saw was that the hope that that exchange brought
was to him like big, giant, beautiful, orange stocks of grain
reaching up to fill the sky.
I think you'd agree with me
that this is a pretty cool picture of a big, bold, beautiful idea.
Now why was
this Commodity Exchange in Ethiopia big, bold, and beautiful?
Well, first it was big
because it reached in four years, 20 million farmers who're able to use it
to connect into a market that they can now trust.
It was bold because, in a country where the telecom sector is very weak,
where the mobile penetration is very low,
we set out to deliver market prices to the entire market community in real time,
in less than 2 seconds,
using all the technology we could put at our disposal.
And we basically set up electronic price display boards
in a 180 market towns across the country.
We fed prices out on SMS to 800,000 subscribers.
For those who may not have mobiles, who may not be able to read and write,
we set up a call-in free service
which ultimately had 1.2 million calls a month,
largely from rural communities.
We fed prices out on the website,
on the TV nightly news, on radio, print news,
creating an information explosion in Ethiopia.
It was also bold
because, in a country where the national payment system for banking
did not actually have an interbank electronic fund transfer,
we told our market that anybody could sell to anyone in this country,
in any corner of the country,
and be guaranteed payment the next morning.
T+1 clearing and payment;
the only exchange in Africa to be able to make this promise.
We, in fact, went so far, as to tell our market
that we're going to create a zero default market.
Meaning that anybody trading in this market,
would be guaranteed
quality, quantity, payment, and delivery on time.
Well, what makes this market beautiful,
is that five years later, we had traded annually, 1.4 billion a year.
In total, about 5 billion dollars, hundreds of transactions later,
without a single payment or delivery default.
The impact of that was that when farmers came to the market,
armed with the knowledge of the weight of their commodity,
of the quality of their commodity, and the knowledge
of what prices were fetching in international, national markets,
even in their local market,
they started to behave differently.
They started to negotiate better prices, they started to think of themselves
as people that could function with this marketing system.
An that let them to produce more and bring better quality to the market.
Leading, in fact, to a doubling of the share of farmers--
share of the final export price in the case of coffee
for 15 million farmers from 38% to nearly 70%.
It led to the doubling
of the export volumes of sesame and beans going from Ethiopia.
So, this is what we were able to do in Ethiopia.
But the question is what about the rest of Africa?
Is what I've described
as the payment, and delivery, and quality problem
something unique to Ethiopia?
Well, in fact, before I've moved back to Ethiopia, I was a researcher,
and I spent about a decade of my life, doing research,
talking to hundreds, in fact, probably, thousands
of small farmers and traders all over Africa,
discovering that these kind of problems where markets just didn't work
was a pervasive problem across the continent,
and not only, in fact, has it been a problem all over Africa,
but it's historically been a problem faced by every region of the world.
And if you look at a map of commodity exchanges across the world,
you would see that every region of the world,
with the exception of Africa,
is served by modern organized commodity exchanges.
So I think today, now, is Africa's time to build those markets
to serve the needs of the billion farmers and consumers in Africa.
So the question then is: what will it take?
I would build this market for the billion Africans,
making sure that we're using the right technology.
It is not about, necessarily,
taking the technology developed for other regions,
but ensuring that we have a technology
that suits the market conditions and the stage of development
of our own populations.
And I would therefore build a technology in the sky, on the cloud,
so that we can easily and cheaply deploy it.
I would also build this technology
to link and leverage on the mobile revolution
sweeping across Africa today.
So that a billion Africans can connect to their market
in the palm of their hands.
Secondly, I would build it smartly.
Rather than start off with this idea
that we are building one giant, big pan-African exchange
which may seem daunting and unrealistic,
I would build these markets a community and a country at a time,
but be able to link them up intelligently.
My favorite analogy is the Star Alliance model,
which I'm sure, you're all familiar with
where 27 different airlines, all set up to serve their individual markets
and provide value addition to their individual customer base,
formed an alliance when it made sense and where it made sense
to share customers and share routes through code sharing.
I believe that an African exchange will come about
when we intelligently find those commonalities
and we link up our coffee countries in East Africa,
our cocoa countries in West Africa,
our cotton countries in Central and West Africa
our cashew countries both West, South and North Africa
and even across regions,
for example, we can link up our pulses markets
with pulse markets in Asia.
And this is the intelligent smart build that we have in mind.
Finally, markets are not just about technology or systems,
they are about people.
So the most important thing about building
the right market for Africa is to build it with people in mind.
So, I want to close by telling you the story,
and before I do, maybe I should mention
that the new company that we've launched, is actually doing just that:
we've embarked on four projects in both East and West Africa,
in Ghana, Cameroon, Kenya, and Tanzania.
And before I close, I want to share with you
to illustrate the point about people
and the importance of building markets for people,
the story of the farmers in Humera, Northern Ethiopia, who grow sesame.
And this part oh the country, which borders Eritrea and Sudan,
has been war-torn for many, many decades.
And the people in that area are all heavily armed.
This is kind of the Wild West of our country.
And up in Humera, we went up there and told them,
there's a new way, we've built the commodity exchange,
we want you to bring your sesame and trade in this market,
you could bring your sesame
to our warehouse right here in a town of Humera,
and we'll give you a warehouse receipt,
and then you can decide when to sell your sesame
in Addis Ababa, on the trading floor,
it's 1,100 km away,
and the next morning money will be deposited in your bank account
right here in Humera.
The farmers looker at us, they said, "Yeah, right."
AK-47s. They said, "We've been there before.
We've heard every scam. We've don't get paid on time.
We don't trust anybody. Forget it."
So we went back and forth, negotiating.
And we just said, just bring some part of this cooperative that we're talking to
just bring some of your grain to our warehouse,
and you'll see how the system works.
So, they said, "OK. But you'd better watch out!" AK-47...
So they brought 200 bags of sesame to our warehouse.
It was graded, it was weighed, issued the warehouse receipt,
went itto the warehouse.
They decided to trade it,
they called their representative on the trading floor,
they told them what price, they were going to sell it at.
The commodity, the sesame, got sold, just as we told them,
that same day, within seconds,
the price display board in that town displayed the prices, they're watching.
Night passed, next morning, hundreds of the farmers from that cooperative
went to stand outside the door of the one bank branch in the little town.
They were ready if there was going to be trouble.
I was very, very nervous, sitting in my office.
I was hoping that this would not be day when the system would fail somehow.
Well, at exactly 11.00 a.m. - which is the promise we'd given them,
that anywhere in the country,
payments are deposited into the sellers' accounts -
they sent in the Head of their cooperative, Atuwuldu;
walked into the bank branch office.
He went up to the teller and said, "What is our balance?"
The teller looked it up and told him the money was there. Phew!
He said, "Print it out." The teller printed it out.
I will never forget Atuwuldu,
standing in the doorway, of that one bank branch,
holding up that print of what the teller had given him,
the bank balance, and he said, "The money is there!"
And people starting ululating, crying, laughing, clapping.
And that day their lives changed.
And that day they knew they had a market
that they could trust, that they could work with,
that would change their relationship to the market.
So, that's what is all about, ladies and gentlemen.
It's about transforming people's lives, building markets,
that serve people's needs, aspirations, and fears.
Can it be done? Can we build a market for a billion people in Africa?
I believe, so. Stay tuned.
Thank you very much.
(Applause)