Tuesday, June 26, 2012

Wholesale Turn - The unexpected replacement of ECX chief Elleni Gabre-Madhin

At the beginning of last week, there were only a few officials from government institutions who had been informed of the news that Eleni Z. Gabre-Madhin (PhD), founding CEO of the Ethiopia Commodity Exchange (ECX), would be replaced by Anteneh Assefa, vice president of the Bank of Abyssinia (BoA), through a letter signed by Addisu Legesse, board chairman.
Three days later, Eleni and the other expatriate management team members held a press conference on Thursday, June 21, 2012.
It is all part of a succession plan set in motion about two years ago, where finding a successful and promising successor took almost eight months, according to her.
“Many keep asking me ‘Why now?’ and think that something must have happened to make me to leave the ECX,” Eleni told Fortune. “I keep trying to explain that the management’s exit has been part of a plan set down at the very beginning.”
Indeed, the government had created a headhunting team chaired by Debretsion G. Mikael, minister of Science & Technology, comprising of members such as Beyene G. Meskel, director general of the Ethiopian Privatisation & Public Enterprises Supervising Agency; Abdella Bagerish, a private coffee exporter; and Eleni. It was a committee aided by a local employment company, Talent Search, which shortlisted nine applicants.
Four were finally selected to take five sets of screening instruments, including making an unusual presentation to the management of the ECX, which they were supposed to command when appointed, sources disclosed. At the end, the board of directors reached a “unanimous decision” to pick Anteneh, a banker whose operational skills are well recognised within the banking industry.
“I have known him for years,” said a businessman in the coffee export business. “I do not know much about his place in exchange of commodities, but he is a very talented young, up-and-coming operational person.”
Anteneh, father of two daughters, began his career as a graduate trainee with the state-owned Commercial Bank of Ethiopia (CBE), after he graduated in management from Addis Abeba University (AAU). He later on pursued his postgraduate studies in corporate management and finance at the University of Paris (Sorbonne).
Almost 10 years younger than his predecessor, Anteneh has 12 years of experience in the banking industry, eight of these with the CBE. A little over four years ago, he joined Bank of Abyssinia as secretary of the board, where he was promptly promoted to vice president. Nonetheless, his bid to claim the topmost position at Zemen Bank, a year ago, had been rejected by the central bank, for lack of experience in credit management.

“I thought the responsibility would be an interesting one to take,” he told Fortune of his decision to accept the appointment at the ECX.
He was seen as a surprise candidate to be appointed by the federal government to manage the ECX, a highly publicised venture that is tasked with managing warehouses, conducting trade of agricultural produce, and undertaking settlements. It was born out of the nation’s effort to overcome the effects recurrent droughts that often leave people in certain parts of the country in famine while surpluses are found in another part of the country.
Such was the case in 2003, when the nation saw its worst drought in decades, leaving close to 15 million people at risk of famine. At the same time, there was a surplus of maize in the south-western parts of the country that convinced people like Eleni that the heart of such crises was an imperfect grain market.
The federal government had started looking for solutions and ways to explore why price fluctuations were occurring. Right about that time, Eleni had been advocating for establishing a Commodity Exchange while working at the World Bank. Working for the International Food Policy Research Institute (IFPRI), she came up with the design for the creation of a new market.
“The ECX was the result of an idea that met with genuine interest, on the part of the government, in finding a viable solution for [such] problems,” Eleni told Fortune. “Most of the people, who were brought in to design the advisory board, were later a part of the management team.”
Most of the nine senior managers, such as Ahadu Wobishet, chief operations officer; Solomon Edossa, chief IT officer; Bemnet Aschenaki, chief strategy officer; and Sirak Solomon, chief compliance officer, were members of the Ethiopian Diaspora “who had the educational background to help set up the ECX.”
The terms of the contract that the management team had with the ECX were similar to the way that US-based Trans World Airlines (TWA) had been contracted by Ethiopian Airlines six decades ago, as well as the Swiss with the Ethiopian Telecommunications Corporation (ETC - now ethio telecom), according to Eleni.
But Eleni, 47, is much more than an outsider who was invited to take part in the ECX is formation and operations. A mother of two and a Stanford-trained economist, she came up with the whole idea and lobbied for it from the very beginning. The idea of a Commodity Exchange was, thus, approved in 2005, and a taskforce that she led was subsequently formed.
Today, the ECX is the only commodity exchange in Africa to have a payment transfer procedure from its clearinghouse to its partner commercial banks the next day after trade. Over 20 million dollars-worth of agricultural produce is traded in the ECX pit a day. This is a value 10 times larger than Ghana’s Stock Exchange, which came into existence 10 years ago.
The ECX, with close to 1,200 staff and 55 warehouses in 17 regional locations spread out across the country, traded a little over half a million tonnes of maize, wheat, coffee, sesame, oilseeds, and pulses worth 1.1 billion dollars in 2010/11. Offering an unprecedented and new marketing opportunity for close to 2.4 million smallholder farmers, through their cooperatives, the ECX has since become a symbol of what can go right on a continent once dubbed by The Economist as “hopeless.”
The ECX brought name and global recognition to Eleni, who was one of the two CEOs from Africa to be invited by President Barack Obama to Camp David, and was named African Bankers’ Icon of the Year for 2012, in Arusha, Tanzania, both in May 2012.
“She is not your average manager,” said a businessman who was one of the first to trade coffee on the ECX floor on Chad Street. “She never gets tired, and she is a hardworking person with profound knowledge.”
However, there was an understanding all along that Eleni and her management team would be phased out and replaced by a local team after three to five years, when it built capacity and transferred knowledge.
“I took the timeline of the project very seriously and was preparing meticulously for it,” Eleni told the press conference last week. “Even though it is human nature to keep prolonging an institution, it is better if it can continue even after somebody leaves.”
Two years ago, the positions of the officers began to be deputised and were slowly handed over. Although her inevitable departure has always been there, the circumstances in which the replacement was announced early last week left many observers of the ECX with lots of questions rather than answers.
Despite claims that Anteneh was being prepped for the position, he was rather informed about his appointment last Monday, along with other officials from government institutions who had received the letter, according to sources close to the administration.
The board of directors at the ECX was actually considering keeping Eleni on for a few more years before they changed their mind at the last minute, sources at the Ministry of Trade (MoT) disclosed.
“It had earlier been decided to keep Eleni for a couple of years because her input was still required at the Exchange,” a high-level official at the Ministry, who demanded anonymity, told Fortune.
The decision not to extend her contract came about because UNDP support would continue no longer, and the government could not afford to pay her salary, said another source at the Ethiopia Commodity Exchange Authority (ECEA), a regulatory body chaired by Addisalen Balema (PhD) in charge of supervising the ECX.
Eleni, nevertheless, insists that she was meant to leave now, as part of the succession plan.
“What succession is to me is to groom and enable someone with the potential from the rank and file,” said a businessman. “Headhunting for someone from the outside and installing him with no prior experience in running the show only shows the hastiness of the decision.”
It is because she constantly butts heads with government officials over the direction of the ECX that she was let go, others claim. The Exchange has been especially at odds with senior officials at the Ministry of Trade (MoT), Ministry of Agriculture (MoA), and the ECEA when the MoT started banning members for refusing to have their warehouses checked by auditors. Eleni had strongly objected that the Ministry had started acting out of mandate.
She has also had sharp differences with authorities over the nature of the Exchange, which was designed to be partly private and partly public, with the board meant to reflect this. Winning the concession to outsource the ownership and management of warehouses was another area where she would leave without accomplishing.
“Our warehousing is traditional, and because it did not get much attention, a lot of people have been inconvenienced,” she admitted to Fortune.
Whatever the terms of her exit are, however, there is no question that she has been the face of the Exchange and has earned it international renown.
“The proudest moment of my career at the ECX was when coffee suppliers (akrabis) threw a dinner party to recognise my efforts and say, ‘Thank you,’ at the end of 2009.” Eleni told Fortune. “That day, we moved on from being an institution that was viewed with scepticism to being appreciated, respected, and maybe even loved.”
Indeed, coffee suppliers had been resistant to her attempt to trade coffee at the beginning, when the commodity had entered the Exchange. Even this year, many coffee exporters trade blame with the ECX for poor performance in exports during this fiscal year, claiming that it jacked prices higher than what the international market was offering. Equally, she had met strong opposition from sesame farmers and exporters when she decided to trade the commodity at the Exchange.
 She steered clear of mentioning failed plans to introduce futures trading, a plan she was eager to implement but could not because of resistance from government officials.