Prior to the establishment of the Ethiopian Commodity Exchange (ECX), country’s agricultural market system was largely problematic in terms of exporting quality agricultural outputs with the desired quantity and benefiting farmers. The establishment of Exhaust, has helped to modernized Ethiopia’s agricultural trading system thereby increase amount of outputs and quality of major exportable commodities including coffee.
ECX is one of the fastest growing agricultural commodities trading platforms and has benefited many stakeholders and trade participants both in the grain and coffee sectors and has made significant improvements to country’s coffee export trading system. Since December 2017, coffee trading has been transformed into transparent, traceable and identity preserved trading model. The new electronic coffee trading system was designed and developed by the Exchange’s Information Technology professionals and known as E-Auction Electronic Trading. The ability to switch the former electronic trading system to e-auction by internal staffs showcased the Exchange’s capabilities to manage such advanced technological undertakings.
In the e-auction platform, coffee consisted of 62 and 42 percent of the total agricultural commodities traded in EXC’s floor during the first six months of the 2017/18 fiscal year. In the current fiscal year, over 133,000 tons of coffee was traded with the sum value of nine billion Birr and while the traded value surpassed the plan and last year performance by 28 and 24 percent, the traded volume also exceeded the plan and the performance by 17 and 22 percent respectively. In the reported period, export coffee had 82 percent share from the total amount of commodity being traded in the ECX.
According to ECX Corporate Communication Manager, Netsanet Tesfaye the Exchange has been implementing the modern trading platform in the view to create efficient and convenient trading system that enables all bidders and sellers to have equal opportunity in the market. E-auction has also been serving as a tool to transform Ethiopia’s traditional agricultural trading system to a modern one.
E- auction has changed the pattern in which bidders acquire the products. Users can participate in the online auction from anywhere at any time flexibly through the internet. Just with a terminal and internet connection, the user can buy products online at cheaper rates by participating in online auction. The products do not need any physical location in case of online auction and the inventory can be managed electronically and upon sale the product would be shipped physically.
Speaking the difference between e-auction and open outcry, Netsanet said that the old system was not that much traceable and prone to market frauds. But e-auction allows bidders access to information not only about the place but also the producer or supplying company and the bidding) would be held on that standard. As bidders participate via online, the results are also instantly flashed on the website without any time delay. The bid amount or price is updated when the bidding is placed, and the results are showed on the site immediately when a bidder wins the product.
E-auction has been benefiting bidders by removing the human factor from price negotiation that led to higher cost reduction. The system has increased efficiency and price transparency and addressed the shortcomings of previous platforms in enabling participants in the transactions perform activities in couple of weeks which had been taking them months. E-auction has provided ample information about each auction product and bidders can peruse all the documents related to the products before participating in the sale off and there is no confusion to get information at fingertips.
The system is also essential for coffee suppliers since it is a fair and competitive bidding environment everyone has an equal chance of winning. The platform would increase suppliers’ business opportunities and build their marketing image. Even if they lose, suppliers still get good information and could see what the market is bidding and find out why they did not win and what they need to do to potentially beat the business in the future.
Netsanet noted that e-auction has an immense role increasing the quality and volume of coffee being traded in the Exchange’s floor through ensuring high marketing flexibility. According to him, the Exchange put in place stiff physical and chemical tests in coffee samples in bid to label the samples in various grades that would determine the items’ market value.
“E-auction provides every information about the origin and supplier of a particular type of coffee in the view to make suppliers provide quality product to the market that could keep their business trust. Our meticulous inspection mechanism has also significant contribution in ensuring quality.” Apart from assuring coffee’s quality, the system has also paved ways for non-ECX member traders taking part in the coffee trade thereby augmenting the volume of the commodity being traded in the Exchange’s trading floor.
E-auction would also be effective in preventing trading transaction insecurity and fill the gap that could be encountered on the audit trail process. This identity preserved coffee trading model provides the full, pre-trade information for bidders about the details of the specific item in the bid to enable them to make an informed decision and deter market mischievous.
ECX Marketing Surveillance Manager, Bereket Meseret stated on his part that the system enables both bidders and sellers to transact electronically and address human errors and violations of trading acts that was witnessed in open outcry trading platform since it is manual approach. Due to the dynamic change the e-auction has been bringing, market fraud and illegal acts in the trading process have been largely averted.
The Exchange has given theoretical and practical trainings to the trading participants to enhance customers’ utilization of the system and to use in a smart way and easy-to-use devices. After taking the practical trainings, all trading participants had taken an exam to be certified on it.
Currently the e-auction electronic trading is available only in Addis Ababa’s ECX’s headquarters. According to Netsanet, there is a plan to set up 10 centers across major coffee growing areas to provide farmers and suppliers an opportunity to trade electronically and bring the service closer to them.
In this regard, the Nekempte and Humera electronic trading centers are in various levels of construction and the Hawassa center, which is planned to primarily engage in coffee trading, expected to commence service in couple of months’ time.
The establishments are expected to play an essential role in saving the time and money of coffee suppliers and avert the expenses to travel to Addis Ababa’s auction center. Upon completions, the new centers would also have big contributions in modernizing Ethiopia’s agricultural trading system thereby supporting country’s vision of exporting quality commodities with the desired quantity comes true.