Morgan Stanley, IFC invest $7.5m in commodities exchange start-up

Saturday February 2 2013

By STEVE MBOGO Special Correspondent

A new start-up that will invest in commodity exchanges across Africa has attracted $7.5 million funding from Morgan Stanley and the International Finance Corporation.

Morgan Stanley will invest $5 million while the IFC will invest $2 million in the Nairobi-based Eleni LLC.

Gary Offner, the managing director of Morgan Stanley, said the new initiative will improve transparency and liquidity in agricultural markets in the developing world, where food security is often a pressing concern.

“Morgan Stanley is committed to leveraging its financial expertise in support of business models that help address society’s greatest challenges,” he said in statement.

Georgina Baker, the director of trade and supply chain at the IFC, said commodity exchanges help to improve productivity and risk management.

“They also make finance more accessible to farmers, helping the latter increase their share of the final price and get paid faster.” said Mr Baker.

Eleni LLC was started by Eleni Gabre-Madhin, an Ethiopian businesswoman who founded the Ethiopia Commodities Exchange, which institutions like the World Bank and International Fund for Agricultural Development cite as a model exchange for Africa.

Eleni LLC will co-ordinate the development of exchanges across the continent modelled on Ethiopia’s success story on a public-private partnership (PPP) basis.

“We expect to roll out a number of such projects in 2013,” said Ms Gabre-Madhin.

The exchanges are expected to boost food marketing structures, help farmers discover better prices for their grains, improve storage systems and formalise marketing.

The move comes at a time when African countries are increasing food yields but not reaping maximum benefits due to unstructured marketing systems.

“I cannot think of a better time to develop this business in Africa. Africa is the world’s last frontier for agriculture, but it achieves only one quarter of its potential yield, while 70 per cent of its farmland is unused,” said Ms Gabre-Madhin.

EAC countries have been planning to start commodity exchanges without success, with Rwanda expected to launch the region’s first through its Trade Ministry mid this year. In Kenya, a warehousing receipt system was launched recently.