Sunday, June 8, 2014

From ICT4D innovation to real solutions to Africa's problems

ICT4D (Information and Communication Technologies for Development) refers to the use of Information and Communication Technologies in the fields of socioeconomic development, international development and human rights (Wikipedia). The enthusiasm generated around ICT4D is real and it is clear that economic development can be accelerated and reinforced by access to information resource. However ICT4D has also generated some controversy. In this blog, I addressed some of those concerns in the following postings: The Unbearable Lightness of ICT4Development and Is ICT4D going to change Africa? or is it ICT4B .

In discussions about "how can ICT4D help Africa?", by far the most used example is the one of the African farmer who can now access the prices he can get for his crops on the market through ICT4D innovations using Internet. In fact the farmer could simply call friends in the city where the market is and get the prices. This simplistic approach is ignoring the major problem, and that is how can the farmer get his products to the market and get a fair and best price? Farmers loose one third of their crops between harvest and sales due to bad warehousing and transportation conditions.

A new organization the East Africa Exchange (EAX) established here in Rwanda is addressing that problem. (The following description is mostly taken from EAX's website and press releases.)

EAX is a subsidiary of Africa Exchange Holdings, Ltd. (AFEX). AFEX’s vision is to create lasting institutions that will capitalize on Africa’s agricultural potential, support African farmers, achieve food security, provide energy security and improve Africa’s overall global trade and capital market competitiveness. AFEX’s goals are to transform agriculture by creating more bargaining power for smallholders, including access to information, storage, and finance; increase Africa’s global trade competitiveness by building economies of scale; and deepen Africa’s capital markets by creating greater liquidity.

EAX offers the following services: Warehouse Operations, Trading, Warehouse Receipt Financing, Clearing and Settlement, and Risk Management and Compliance. 

EAX is providing professional warehouse storage and inventory management, including moisture testing, drying, cleaning and weighing of stock prior to storage to reduce storage losses. It’s expected that good storage management will translate into better revenues for farmers.

EAX recently signed a cooperative agreement and  memorandum of understanding with the Rwanda Ministry of Agriculture and Animal Resources (MINAGRI) to work together to provide grain storage and warehouse management services in support of farmer cooperative groups across Rwanda. Part of the agreement includes the Exchange managing thirteen (13) warehouses which have been set up by the Government of Rwanda around strategic production areas under land consolidation.  

EAX and the MINAGRI will participate in the development of agricultural value chains, particularly farmers, ensuring that farmers have access to more diversified markets beyond just the ‘’farm gate‘’ to improve their chances of securing a better income and reward for their toils. The partners also seek to transform small holder farmers from rural agriculture to commercialization.

The Exchange will provide electronic warehouse receipts, so that farmers could trade their grains through EAX world class trading platform with the help of EAX brokers. EAX operates a fully automated trading platform where participants can buy and sell products from the convenience of their location of choice, or trade from trading terminals provided by the Exchange. The trading platform is powered by NASDAQ OMX and can facilitate auctions, reverse auctions, spot trading, forwards trading, and futures trading. 

The farmers could also use their electronic warehouse receipts for loans from the Exchange’s partner banks.

An ICT4D internet portal providing access to market prices in the city for farmers is nice. But it only scratches the surface of the problem and may look "unbearably light". The EAX approach is much more comprehensive and involves more complex problems to solve, including the building of quality warehouses, the use of the NASDAQ trading platform, the delivery of electronic warehouse receipts to farmers than are accepted by banks as collateral for loans, etc. But that is the price to pay if we want to really solve the problem instead of creating false hope.

In addition to real solutions another requirement for success is leadership. Paul Kukubo, the CEO of EAX has a history of success as the the founding Chief Executive Officer of the Kenya Information and Communication Technology (ICT) Board. Paul has led the team that developed the Kenya National ICT Masterplan 2017, and was a leading member of the Konza Technology City Master-planning team. His leadership is another guarantee for the success of EAX.

Seeya later alligator...