Bloomberg News

Cornell Food Fight Leads Gabre-Madhin to Battle Africa Scarcity

April 24, 2013

Ethiopian Economist Eleni Gabre-Madhin

Ethiopian economist Eleni Gabre-Madhin speaks during an interview at her office in Nairobi. Photographer: Trevor Snapp/Bloomberg

When Eleni Gabre-Madhin climbed onto a cafeteria table as a junior at Cornell University almost 30 years ago and begged students to end the tradition of dinnertime food fights, she was mocked.

No one seemed to share her frustration over wasting excess food when in her native Ethiopia starvation and famine had left at least 1 million people dead from 1984 to 1985.

Seventeen years later, armed with a doctorate in economics from Stanford University, Gabre-Madhin was heard by Ethiopia’s then-prime minister, Meles Zenawi. His government invited her to come back home to help stop the country from alternating between years of food scarcity and overabundance.

Gabre-Madhin, 48, accepted and in 2008 the Ethiopia Commodity Exchange was born. For the first time Ethiopian farmers had a trading floor, instead of signing contracts with private brokers, and access to more transparent pricing. It complemented efforts made before her to boost farming yields.

Now, as chief executive officer of her own company, Eleni LLC, she is trying to transport the idea of building commodity exchanges to other frontier markets. Based in Nairobi, she plans on opening offices in Dubai and Accra, Ghana.

“I decided right there in that Cornell cafeteria what I was going to do for the rest of my life: make sure we never see another famine in Ethiopia,” Gabre-Madhin said in her orange-and-blue decorated office in Kenya’s capital. “At that time people were talking about producing more as a solution to food security. I decided to figure out how to distribute it.”

Meeting Table

Her success in doing that has caught the attention of other world leaders, including President Barack Obama. His administration invited her to participate at the Group of Eight Camp David summit last year on food security. At the meeting table, she sat between U.K. Prime Minister David Cameron and Russian Prime Minister Dmitry Medvedev.

She has also been recognized by the African Green Revolution Forum, backed by former United Nations Secretary General Kofi Annan, which awarded her the 2012 Yara Prize for improving agricultural markets on the continent. She received the award for “visionary and remarkable leadership in managing the transformation process toward an efficiently functioning market,” according to a statement released by the group.

Gabre-Madhin stands apart from other academics for having the gumption to transform her theories into practical solutions, said Chris Barrett, an economics professor focused on agriculture at Ithaca, New York-based Cornell.

‘Real World’

He, Gabre-Madhin and Paul Dorosh co-authored a book chapter showing that technical advances in sub-Saharan African farming can only be successful if growers also have ready markets to sell their products. It was published by the International Food Policy Research Institute, or IFPRI, in Washington in 2002.

“The hallmark of Eleni’s work was her ability to link intuition grounded in theory with complex realities she would see on the ground,” Barrett said in an e-mailed response to questions. “Very few researchers have either the skills or the courage to put their ideas into action in the real world.”

Gabre-Madhin fled Ethiopia along with one of her two sisters and her mother in 1975, a year after the revolution that brought Mengistu Haile Mariam to power.

They joined her father in Rwanda, where he was working as the UN Development Programme representative. Gabre-Madhin began accompanying him on field visits to the countryside and observed that peasant farmers were doing backbreaking labor.

No Tools

“I saw that this small-scale agriculture, with no tools by people who were uneducated and living in grinding poverty, it was clear to me that these farmers were stuck,” she said.

She did her secondary education at a boarding school run by Christian missionaries called Rift Valley Academy in Kijabe, in central Kenya, which opened in the early 1900s.

At only 15 years old, Gabre-Madhin said she had already come to a realization that Africa must lead its own development, after reading “How Europe Underdeveloped Africa” by Walter Rodney. Its theme: how Western economic players gained the upper hand and exploited the continent’s resources.

Literary figures also had influence. They include Kenyan novelist Ngugi wa Thiong’o, who wrote of Africa cutting loose from colonial rule only to confront a new set of injustices by the succeeding autocratic regimes.

“I started to think about how some countries were so poor and other aren’t, and that dependence on the West isn’t a good thing,” she said. “I made a 10-year plan that I was going to get a Ph.D. in agricultural economics and I would be an African intellect who would solve Africa’s problems.”

Michigan, Stanford

An idea that took shape as an economics major on scholarship at Cornell grew as Gabre-Madhin earned her master’s in agricultural economics at Michigan State University in East Lansing and a Ph.D. in applied economics from Stanford in California.

She looked beyond neoclassical economics by studying a perspective known as new institutional economics, which also considers the legal and social environment in which markets operate. The theory, which incorporates factors such as business management, negotiation costs and ideological stances, was spawned by 1991 Nobel prize-winning economist Ronald Coase.

Gabre-Madhin’s thesis on the transaction costs of Ethiopia’s grain market won the outstanding dissertation award from the American Agricultural Economics Association in 1999.

The paper offered a solution to an ages-old issue in African agrarian societies: how to find markets to distribute crops where they’re needed and plan ahead for food shortages during bumper harvests. It proposed stronger buyer-to-seller connections through the efficiencies of a commodity exchange.

Food Deficit

When famine strikes, as was the case in Ethiopia, there’s often no mechanism in place to guarantee food can move from areas of surplus to those in deficit. On the other extreme, bumper harvests can trigger a wave of price decreases, hurting farmers who then often let crops go rotting in their fields.

“While most people see middlemen and brokers as evil and wanted to get rid of them, I wasn’t convinced,” she said. “They were doing the job that commodity exchange brokers do but off the back of a truck.”

After Stanford, she worked as a researcher at IFPRI with a one-year stint as senior economist at the World Bank working on rural development. In 2002, she was asked to speak at a conference in Ethiopia’s capital, Addis Ababa, about bolstering agricultural markets in the Horn of African nation. She caught the attention of then-prime minister Meles from the audience. He asked her questions for almost 45 minutes, she said.

Donor Funds

She answered his call and relocated to Ethiopia with IFPRI to become the leading architect and eventually chief executive officer of the Ethiopia Commodity Exchange, or ECX. It has grown with more than $29 million in pledges from donors over five years including the U.S. aid agency, the European Union, the World Bank and the UN.

The ECX, owned by the government with more than 350 members and 800 staff, handled $1.4 billion trading 640,000 metric tons of coffee, sesame, white pea beans and a small amount of corn in an electronic system last year. It connects to a network of at least 55 storage-warehouses of crops across the country and guarantees traders a next-day payment.

Ethiopia is the world’s fifth-biggest coffee producer, according to the International Coffee Organization. It is also the fourth-largest grower of sesame, according to the UN’s Food and Agriculture Organization.

Human Development

Still, the country remains one of the world’s poorest, ranking 173 out of 187 nations on the UN Human Development Index, which measures indicators including the level of poverty, health and education. The country has made steady gains improving life expectancy, schooling rates and incomes in the past three decades, according to the report.

Gabre-Madhin has an ambition to make custom-fitted exchanges across Africa and other emerging markets.

To do that, she resigned from the ECX last year and created Eleni LLC with $5 million from Morgan Stanley (MS:US) and the World Bank’s International Finance Corp. The company pays her a salary. This week, she was elected to the board of Syngenta AG (SYNN), the world’s largest maker of crop chemicals, based in Basel.

While African commodity exchanges have become a favorite idea among donors, the approach so far in countries including Zambia and Kenya has been impractical and top-down and has failed to address farmer’s basic needs, Peter Robbins, a former commodities trader, said in a phone interview from London.

Pest Control

Smallholder farmers still suffer from poor cultivation practices and lack extension services, pricing information and modern tools including storage facilities, grading and weighing machines or pest control, said Robbins, the author of “Stolen Fruit.” They need to organize into larger groups to increase their bargaining power and earn more money, he said.

“If you just concentrate on the pinnacle, the commodity exchange, then you haven’t done much for the people you want to get to: the small-scale farmers,” he said. “Most of what’s going on is very abstract.”

Gabre-Madhin, the mother of two boys age 12 and 15, minored in comparative literature at Cornell. She continues to nurture her creative side with hobbies that include writing poetry, acting in amateur theater and she’s an avid reader.

``I have sons now about the age I was when I already knew what I wanted to do with my life, and they seem more interested in video games,'' she said, adding that one wants to be a lawyer and the other a scientist.

Gabre-Madhin said she believes being a woman has added to her success even though she’s never been formally taught by a female economist or found a woman mentor in her field.

“We’re talking about changing the power dynamics in a market, transferring power from the most powerful economic actors,” she said. “These are very tough things. And to have a woman who is still feminine, is still gentle, still smiles, presenting those ideas and being very rigorous in the principles and the analysis behind it; I think it is such a contrast that it’s very powerful.”

To contact the reporter on this story: Sarah McGregor in Nairobi at smcgregor5@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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