News / Africa

Africans Debate Private vs. State-Run Commodity Markets

Ethiopian traders work on the floor of the Ethiopian Commodity Exchange (ECX) in the capital Addis Ababa. (File Photo)
Ethiopian traders work on the floor of the Ethiopian Commodity Exchange (ECX) in the capital Addis Ababa. (File Photo)

A conference on African commodity exchanges has revealed a sharp difference of opinion on the role of government in establishing and regulating markets. Many African countries are choosing to leave commodities markets to the private sector, while others are keeping the lead role for the State.

Ethiopia's state-owned commodity exchange, the ECX is being held up as a model this week as hundreds of bankers, businessmen and government officials discuss bringing prosperity to Africa's farmers. But many other African countries disagree with the concept of states controlling the market.

At a panel discussion examining the state's role in market creation, Ghana's deputy minister of trade and industry Joseph Annan says his government follows a hands-off policy.

"We discovered in Ghana long ago that government has no business doing business," said Annan.

Ethiopia's top government economist, however, says every country is different when it comes to economic policy. In Ethiopia, where farmers are among the poorest in Africa, economist Newai Gebre Ab says the success of the ECX is the result of careful state planning.

"ECX is not an accident, it is the outcome of a long-term development strategy which is known as Agricultural Development-led Industrialization," said Newai Gebre Ab. "It is a strategy that the government follows, and it's meant to extend over decades."  

Newai, the chief economic adviser to Prime Minister Meles Zenawi, says state ownership of the exchange prevents inefficiencies common in private sector markets.

"ECX is meant to provide an efficient market system that delivers price incentives to the producers, and a price mechanism that is transparent, and would also efficiently provide goods and products to the consumers," added Newai.

The concept of a state-controlled commodity exchange rankled free market advocates in the audience, who say the private sector could do a better job of maximizing farmers' profits. Maurice Ewing, chief risk officer at Kenya's Equity Bank, stood up to argue that government control is like a cage built to capture the elusive bird that is economic prosperity.

"If you build the cage before you have the bird, how are you going to go anywhere? Where will you see it fly? How can you even test? Give incentives! To me, all I hear is language that says, we want to get it to a point so we can tax it," said Ewing. "So we can have revenue, so somehow we can plan to distribute it to the poor."

Newai Gebre Ab countered that Ethiopia's state plan envisions strong  private sector involvement.

"There will be plenty of opportunities for the private sector to come in, to contribute, to lead and to get engaged," said Newai. "There is no cage here. The bird can fly in and fly out anytime it wishes to."

Panel moderator Tumi Makgabo of South Africa summed up the discussion saying, "The bottom line is, government should stick to government's business, and let business do business". It is a conclusion with which many in the hall would take issue.

The conference wraps up Wednesday with a look at the future, as Africa's traditionally poor farmers seek the wonders of modern technology to help them achieve the promise of prosperity.

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