Every sector of African economy has suffered grave consequences thanks to the raging pandemic. One of such sectors is agribusiness.
All forms of businesses are moving online in a bid to temper the impact of Covid-19. Agribusinesses are no exception, according to a new report by KPMG (tax and advisory firm services) and Alliance for a Green Revolution in Africa (AGRA).
The survey, Agribusiness in Unprecedented Times, shows that 52 percent of agriculture enterprises now see technology as a critical tool in the fight against the challenges posed by the pandemic.
These farming enterprises have their work cut out as majority of them are still operating under the old model of doing things. Caught off-guard by the pandemic, the report says, agribusinesses are now playing catch-up as customers and suppliers shift online thanks to the restrictions imposed to curb the spread of coronavirus.
Despite getting late into the online party, African agribusinesses are now realising the power of the internet and digital transactions to power their ventures. Those already in the cyber space are reaping dividends, key of which are reduced costs, and vastly improved efficiencies.
The use of technology, the report notes, has reduced the cost of delivering extension services and “several of the companies we interviewed said they were unlikely to go back to their labour-intensive pre-Covid-19 business model.”
Some firms adjusted quickly to the new normal brought by pandemic. For example, Zimbabwean seed producer, SeedCo, said it is now delivering agronomic advice digitally to smallholders via channels such as Whatsapp. For larger and more sophisticated farmers, Zoom is now the preferred channel of choice
Agribusinesses, the study says, are also beginning to adopt precision farming, which seeks to increase food production, cut production costs and step up efficiency.
Precision technology is also central to reducing potential environmental risks and sustainable agriculture.
The respondents indicated that they use or would like to use soil analytic technologies, drones to move seeds and inspect fields, and predictive analytics to forecast weather patterns.
Precision agriculture is going to be more important to larger commercial operations and will eventually trickle down to the smallholder farmer but this will take time,” says the KPMG study, which was conducted in Kenya, Ghana, Ivory Coasts, Nigeria, Rwanda, Tanzania and Mozambique, involved 137 agribusinesses.
The KPMG report, released two weeks ago, points to a future of widespread digitisation of farming and agribusinesses, noting that the stage has already been set by the progress so far made. This echoes sentiments by another report released last year by Disrupt-Africa, which says since 2016, more than $19 million has been invested in Africa’s agritech scene, with the number of startups operating in the market increasing by 110 percent during the same period.
Kenya, Nigeria, and Ghana are leaders in the agritech market, taking up more than 60 percent of active startups in this domain.
In its Digitalisation of African Agriculture Report 2018-2019, CTA found that in 2018 the market for the digitalisation of agricultural services netted an estimated $143 million — out of a total addressable market of $2.6 billion.
The report says with 60 percent of the world’s unused arable land found in Africa and 54 percent of the region’s population working in the sector, the continent has immense agricultural prospects.
The continent is making admirable progress towards reaching its potential. Various firms, KPMG report says, have been collecting large farmers’ data on geospatial, demographic, production, marketing and payments. This information helps in diverse ways including monitoring trends, enabling traceability of produce and customer assessment.
The reports reveals there is an opportunity for the region to embrace new farming techniques that allow farmers to engage in production without soil in innovative farming practices such as hydroponics, aquaponics and vertical farming.
Respondents said they would like to see promotion of partnerships for R&D with industry, universities and research stations, to support innovation in agribusiness as one of the top priorities. Those interviewed also pointed out that innovations need to be adapted for Africa, especially in terms of affordability.
A number of companies are already charting the way forward. Kenya’s Twiga Foods is deploying farmers’ data to track changes in trends, empowering them to arrive are make key decisions.
Twiga uses such data to monitor daily supplies to their urban vendors, and through this information, it is able to see in real time which vendors are struggling due to lack of capital and hence come up with ways to help them get funding.
The report says companies are also using digital platforms for on-boarding farmers, managing sales, sharing information, providing payments and virtual training to farmers, monitoring stock levels and payments to suppliers among others.
In Ghana, CowTribe provides an on-demand mobile (USSD-based) subscription service, linking livestock farmers with veterinarians. It also helps in delivering animal vaccines and other livestock healthcare services to farmers.
Through CowTribe, farmers also receive vitamins and other supplements for the animals. When the time for vaccines comes, CowTribe sends out a notification to the farmers informing them when the veterinarian will visit them. The platform now has about 800 farmers.
The report also underscores the importance of digital financial services to agribusiness as they adopt new innovations. Digital financial services, it says, provides financial solutions to farmers where traditional financial services are constrained due to infrastructure and economies of scale challenges.
However, for small agribusinesses to benefit fully from digital financial services, barriers have to be eliminated.
“One way to reduce barriers to effective usage of digital financial services could be reducing the cost of digital transactions and reach of mobile money,” it says, adding that this can be attained through enactment of favourable government policies.
The report adds that e-commerce is an emerging channel for agricultural companies, and this is an opportunity they can cash in on to increase their profitability.
“This has currently not been exploited to its full potential but this channel is predicted to grow in relevance over the coming years,” it says.
Didas Mzirai, founder of Mucho Mangoes, says Agritech offers an opportunity for younger people to utilise their tech-savviness to create solutions in the food value chains. Mucho Mangoes is a tech startup supporting farmers through provision of key information as well as marketing and adding value to produce.
“We have seen many of Africa’s young people create technology-based solutions to address agricultural challenges,” Mr Mzirai says.
“There is opportunity therefore to nurture youth entrepreneurs to develop much needed Agri-tech solutions for the sector, across the entire value chain and in enabling sectors such as financial services.”
The company, which is based in Taita Taveta County in Kenya, markets and adds value to mangoes.
Nairobi-based Apollo Agriculture uses machine learning and automated operations to help farmers access what they need to increase their profitability – from financing and insurance, to farming products and optimised advice.
The Apollo team brings together technology and operations experience from The Climate Corporation, Tesla, and One Acre Fund. The investment allows Apollo to continue rapidly scaling by partnering with more farmers, expanding its product offerings, and growing its team. The firm has already partnered with close to 25,000 farmers.
The KPMG survey identified challenges that hinder adoption and effective use of technology. Poor network connectivity and lack of capital are two of the most prominent hurdles.
Technology, the report says, does not work all the time as there are issues with mobile network, Wi-Fi, LAN, connectivity etc.
Lack of capital is another “real challenge”. Yes, the technologies exist but small farmers do not have finance to purchase them.
Awareness is another challenge: “Companies reported having to conduct customer and farmer training and sensitisation which increases their operational costs,” the report says, noting that firms also face difficulties in getting skilled affordable labour.
Withholding tax, the research says, is applicable to most technologies making them very expensive to acquire.
Policy issues are also a hindrance: “For something such as crop insurance, interventions in agricultural capital markets can help bring in more digitisation and reduce costs.”
Poor digital literacy and unwavering respect for traditional ways of working still persist, the report says adding that Africa is “in the very early days on the continent of understanding what funding models are going to work in Agritech in Africa”.
Affordability and accessibility were also flagged as a hindrance, with
Respondents calling for simpler technologies. For example, more innovation around simple feature phones as opposed to smart phone and apps that not everyone can afford or access.
The report says there is need for policy regulations on online digital platforms, digital trainings, tax rebates and holidays for investors that have shown impact with their interventions.
“Incentives are required for companies that are investing in technology to improve agriculture,” the report says.