Eleni Gabremadhin (Dr.) may have recently vacated her position as Chief Executive Officer (CEO) of the phenomenally successful Ethiopia Commodity Exchange (ECX) she formed and steered effectively for almost five years. However, she’s not about to completely disappear from the scene and is back with fresh ideas: this time with a new firm named Eleni LLC. Capital’s Muluken Yewondossen conversed with Eleni about the purpose of the firm, the reason for its founding, her future contribution to ECX as well as the film project in the works, revolving around her life.
Capital: You just announced your new venture Eleni LLC. Tell us about it, what it does, why you set it up?
Eleni G/Madhin (Dr): Essentially, the new company is about capturing the momentum that has been created on the African continent through the experience and model of the Ethiopia Commodity Exchange (ECX). I think, before ECX started, there were few things we didn’t know for sure of which we are now certain. One of them is, whether it was possible to do commodity exchange at a world class level of excellence in terms of operational performance but at the same time tailored to a frontier market condition, meaning in a not so sophisticated infrastructural context where market actors aren’t also very sophisticated. So I think the first thing that ECX has proven is that it’s possible to modify and innovate the traditional or conventional commodity exchange level; that it’s possible to adapt it to the conditions of a developing economy which is at its earliest stage, such as is the case with Ethiopia, but also elsewhere in Africa. That’s the first lesson that enables us to now go forth in Africa and try to build on this experience.
The second lesson was that such a commodity exchange could adapt to a weak but fast developing infrastructure and still be commercially viable as well as financially self-sustainable. When we started with this particular model in Ethiopia [we didn’t have a model we could take as an example prior to it], we didn’t know if this structure or mechanism we have set up would ever aid in generating money or if it would attract investors from the private sector. Now, with the experience garnered and the success registered from ECX, we can see that it can be set up in such a way as to be commercially and financially sustainable, which indicates that it doesn’t have to be financed just by the public sector, but can be financed by the private sector as well.
The third lesson ECX has taught us and that we will now take forward is that you just don’t talk about building or setting up a commodity exchange; you have to think about the commodity exchange as an eco system. The function of quality certification, warehousing, market information and trading and payment clearing are the umbrella of activities you find under the exchange we built, but beyond these, there are other aspects of infrastructures and services that are very important to the success of an exchange, which in fact were the challenges when setting up the ECX in Ethiopia.
As we go forward we would also build and improve them and do things very differently than the way we did in Ethiopia. This is why it is like an eco system; we discussed about investing in warehouse infrastructure while at the same time we were building the commodity exchange system; we also debated about potentially investing in transport logistics and freight management systems which also strengthens the commodity exchange, the core system we built. The integration of all these and many other things inside as well as outside the exchange is what makes it like an eco system. So we proceed with the ecosystem paradigm or mindset rather than simply building exchanges. The other things I want to add to this are market intelligence and training and certification. This is because the exchange might give you market data but how to interpret the data so that it actually provides meaningful analysis is something else. All these are encompassed within ECX eco system.
These are basically the three lessons that we’ve learned from setting up the ECX in Ethiopia; firstly, that it can be done; secondly, that it can be done with a private investment perspective and thirdly, that we have to think beyond the exchange. That is precisely why we have decided to push forward with setting up Eleni LLC as a company that would deliver exchange ecosystems on a turnkey basis, which means that the core advantage of the company is to provide know-how, technology and management support for every project, either at country level or regional level. It is a knowledge-based company, with experience and demonstrated capacity in Ethiopia, which will come up with new ways of doing things that nobody had done before, which we now intend to use and not just do the same thing in Ethiopia, but continue to be the innovators leading the industry in Africa as well.
Capital : Could you elaborate on the innovative ideas you would like to introduce?
Eleni: We plan to pay a lot of attention to finding new innovations and solutions, the ones that we haven’t implemented in Ethiopia, and that will be more effective as we go forward. Innovations will keep you on edge, sharp and focused, so we’re not just replicating the same thing. We’re building on what we’ve done already and aim to continue to do even better everywhere else, and for that matter, here in Ethiopia too.
There are a couple of important knowledge trends that we’re going to take advantage of. One of those is the mobile telephone revolution that’s exploding all over Africa, so increasingly our technology will focus on mobile telephones rather than other forms of electronic media, because we believe that every farmer will potentially be holding a computer in their hand if he has a mobile phone. The second trend we will focus on is something that will fundamentally change the nature of the business using cloud computing services rather than building systems on the ground. Therefore, these will be the things that we will be expanding on and explain as we progress. This is an important principle of how we build the technology because we want to be in the business of building innovative, elegant, value adding technology solutions which will build on these key trends, being mobile and cloud computing.
Apart from that, our perspective is that we would want to do projects on a Public Private Partnership (PPP) basis, because we think even though there is private investment interest in most of the projects we will want to do, at the same time there’s also a need for coordination and enabling by governments of the countries in the areas we want to work in. So to include the government as a minority shareholder, I believe is something that we will continue to push, because that gives the government an alignment of interest with private groups like investors, who would be putting their finances into the ecosystem I have described earlier. This is essentially the model of Eleni LLC that would build exchange ecosystems as turnkey projects. What we did in Ethiopia is these aforementioned tasks.
Capital: What would be the difference with what you did in Ethiopia?
Eleni: The difference between what we did in Ethiopia and elsewhere is that we would support the operation, but will not likely be an operator, so I would likely never be a head of one single exchange again. The fact that I was head of ECX in Ethiopia is very important, because it has given me a much deeper understanding and insight of the operation so we went from designing to operating and ultimately transferring in Ethiopia and that has given us I think a unique experience that nobody else in Africa has experienced in this particular domain.
Capital: Why do your HQ based in Nairobi?
Eleni: we would start by having our headquarters in Nairobi, Kenya, but we would also like to open an office in Dubai, UAE within the coming year and potentially another office in West Africa. We would also like to become involved in projects outside of Africa. There has actually been some interest in South Asia and we’ve been talking to some people from that region, but primarily our focus will be Africa. We wanted our company’s HQ in Kenya because we’re quite excited with the technology trends emerging there, particularly with the establishment of what’s now being called ‘Silicon Savannah’, a kind of new silicon valley like the one in California, USA, which has a lot of high tech industries set up and operated from there. There is a huge concentration of software developers and a lot of support is being given to the technology development industry in Kenya. This is one of the reasons we were attracted by Nairobi, where we think there’s a critical mass of people we can do such work with in developing technological innovations. The other main reason is that we feel that we’re close to Ethiopia but at the same time also close to countries with which we are likely to do business.
Capital: Where will your first project be?
Eleni: It’s a bit early for me to disclose where we will be starting the project, but we aim to have two to three projects in the works this year, and we’re discussing with countries all over Africa. As you know, there were eighteen countries that follow the ECX model during the last two and half years, and that interest has continued. Some countries have made big policy commitments at senior government levels to proceed with the setting up of their own commodity exchanges. So we are at a very exciting juncture and would be announcing the beginning of some projects in the near future.
Capital: How is your relationship with the World Bank and other financial institutions?
Eleni: I should mention that the lead investor financing our company is Morgan Stanley, which is one of the top global financial institutions and has been investing in exchanges, both stock and commodity exchanges, all over the world. They have extensive experience in exchange development and they do not normally finance startup companies, because they are a giant corporation and work with established companies to provide financing. But they were very interested in financing this new company directly, because they really are excited by the potential to do good business and also to have a positive impact on millions of African lives. So I think they have social interests as well as commercial interests at heart and are a key player in our profile of investors.
The second investor is the International Financial Corporation (IFC) which, again as general policy, do not finance startup companies, but usually make larger investments in much more established companies. In our case they have made an exception. We wanted to partner with IFC because we felt that IFC has unique strengths, which are complementary to Morgan Stanley, and have done lots of work with financial institutions in the developing world; by supporting banks, warehousing receipt financing and the warehousing industry in general etc. Therefore, while Morgan Stanley’s expertise on the market side is almost unrivaled, IFC’s expertise in the financial markets and warehousing side is legendary. We started initially, in early 2012, by sitting down with Morgan Stanley officials, then continued and held talks with 8 Miles fund, a private equity firm based in London, UK with a special focus on Africa ; our third investor, which will be closing a deal with us very soon. In all these three cases, they made an exception to finance us, and having them onboard has given us credibility and a lot of expertise that we can draw on.
One of the really exciting things about IFC is that, because they’re part of the World Bank group, some of the things we feel should perhaps be public sector investment, such as capacity building of farmers, providing equipment to farmers and cooperatives etc., can become add-on projects in addition to the core investment that will be done by IFC and Morgan Stanley. So, that to us, is the additional advantage of bringing the IFC into the mix. On the flipside, getting the financing from an institution like IFC is a very challenging and extremely difficult thing. Because IFC has a lot of credibility they also have high standards; and as a company which has investments from IFC, we will be a company that will be held to the highest standards on environment and social governance. So there will be quite a lot of checks and balances in the way that Eleni LLC will be doing business in Africa or elsewhere, in terms of compliance with labor standards, environmental and sustainability standards and with extensive audit standards. This means we’re not only going to be a good business, but we’re going to be a very well-run company, because of the standards and principles that are part of the requirement of receiving financing from IFC.
Capital: How much is the financing and have you already received the funds?
Eleni: We have now received start up financing from these investors, but each of the projects that we will setup as an exchange ecosystem project, will itself require a USD 20 million or more in finance. So one of the things we’re currently considering is whether we should set up a fund like a financing mechanism, around USD 200 million, to be employed on the various projects, or whether we do financing for each project with our investors on a case-by-case basis. The startup capital we requested was quite small, USD 5 million, but to realize the big picture will require financing of USD 200 million or more for exchange development.
Capital: I believe there is another financial institution involved…
Eleni: Yes, that’s right. The other institution is the African Development Bank (AfDB). Apart from the three aforementioned financial institutions, AfDB will also be part of this venture.
Capital: What about your personal relationship with ECX in the future? Will your new company be doing business with ECX?
Eleni: Well, I must say ECX is in my blood and so, first of all, I’m pleased that the exchange is on solid ground and functioning smoothly, maintaining its good name. I keep in touch with the management and also the board and there is really a sense of stability and continuity, which is absolutely great. Secondly, there are two things I would like to support the ECX in; primarily, that the exchange should devolve the warehouse operation to third party operators. I believe this is a project that’s just now starting up and to some extent I would like to support the new campaign. The other thing is that the principle of having, within 3 to 5 years, a commercially viable and sustainable institution that will be subjected to devolved ownership. This is because it’s not something set up forever to be 100 percent government-owned but envisages the kind of role a government will play, starting as an enabler and playing a developmental role. I think the next thing we should start looking at is how ECX can also have a common public and private sector-chaired ownership structure. These are the two things ECX will make progress on in the coming year. And then in terms of my company’s involvement with ECX, what I think is that we’re really scratching the surface in Ethiopia of what’s possible to trade with the exchanges, including commodities, outside of agriculture. At this moment, we’re making a lot of discoveries; of minerals, gas and potentially oil, and for that matter power. So I’m excited by the future work that we will be potentially doing in Ethiopia.
Capital: What are the future plans of Eleni LLC? You are strongly attached with ECX…
Eleni: Let’s just say we’re keeping our eyes on what’s happening in Ethiopia. Well, living in Ethiopia is bittersweet because I think in a way what I’m doing with my company is so closely tied with what I did in Ethiopia. It’s almost like Ethiopia’s gift to the rest of Africa. It was interesting, because it really became more and more clear that this is something that Ethiopia is now kind of showing the rest of the continent and should be proud of; this is the sweet side. The bitter side is that this is my home of eight years; when I came I didn’t know my country very well and what it was all about. Now this is my home, so it makes me a bit sad.
Capital: I understand there’s a Hollywood film about you in the works? And a book?
Eleni: Yes, it’s in the works. The next step along that line is to write the screen play, because that’s the basis of the film. Currently, the project is on hold, but in the next few months I expect a screen writer will arrive to develop the story. I’m also working on a book that will contribute to the screen play. I’m going to actually take some time off, around May, to finish the book and have it published, hopefully, by the end of 2013. These are the two plans which really kind of tie the knot to both the film idea and the book, with both focusing on my experience in and of Ethiopia.