Market approach recasts often-hungry Ethiopia as potential bread basket
The African nation produces more maize than neighbors Kenya, Uganda, and Tanzania combined.
from the February 23, 2007 edition
Page 2 of 2
Page 1 | 2
Similarly, traders in Addis Ababa would never buy product unless they saw the quality themselves. This is understandable. Some farmers have a nasty habit of adding dust and stones to their grain to increase the weight – and, thus, the value – of each sack sold. Under Gabre-Madhin's plan, each warehouse would have an independent neutral party that would test and grade the farmer's harvest, allowing traders in Addis Ababa, and potentially outside Ethiopia, to place bids on food, sight unseen.
Convincing farmers and traders to abandon the only system they've ever known will not be easy, of course. But by making the process of buying and selling food more transparent and predictable, everyone should benefit.
"As an investor, I need stability, and only a commodity market can offer that," says Guruprasad Rao, an agricultural commodities broker from Dubai, on a recent trip to Addis Ababa to buy sesame seed. "Whenever you have a lack of information, nobody knows the size of the crop. If everyone knows the size of the crop, they can predict prices better, and they can make better decisions."
Already, he sees farmers switching from their traditional crops to more profitable export crops. Over the past three years, sesame-seed production has risen nearly 200 percent, from 199,000 tons in 2001 to 380,000 in 2005, says Mr. Rao, even though sesame seeds are not used in local Ethiopian cuisine. All of it is destined for the Middle East. A commodities exchange will only accelerate this trend, he adds.
While most academics applaud Ethiopia's embrace of the free market, some say that there are no easy fixes for a landlocked country that lacks good roads, reliable electricity, and where there is little investment in irrigation for those years when the rain clouds don't provide.
"Ethiopia suffers routine market failures, so possibly this will help," says Ross Herbert, an economic analyst at the South African Institute for International Affairs in Johannesburg. "But the bigger problem is that there is too much peasant agriculture, and too few systems to overcome the vagaries of the weather, such as irrigation and better roads, adequate supplies of fertilizer, and so on."
Rod Gravelet-Blondin, the head of the agricultural-products division at the Johannesburg Stock Exchange, cautions that a commodities market will only work if it is actually used by the majority of the farmers and traders. "It will take time, but ... a market-based economy is a good place to start," he says. "I think Ethiopia looked at Asia and said, 'Those guys got it right, they managed to turn their economy on its head through developing their agriculture.' "
For her part, Gabre-Madhin says she considers her project "a calling."
"Can we pull this off? I believe we can," she says. "This is not just a couple of years of my life. It's a mission."
1 | Page 2
 |
||
|
RSS feed
