Exploiting agtech opportunities in Africa

by MMC
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The Hello Tractor mobile platform connects tractor owners and operators with farmers in need of tractor services.

The rise of agricultural technology (agtech) solutions in Africa has opened significant pathways to transform food systems and overcome long-standing barriers to improving the productivity of smallholder farmers, he writes. Aubry Hruby And Fatima Ezzahra Mengoub in a new Atlantic Council report titled “Unlocking Africa’s agricultural potential: scaling agtech to improve productivity‘. Below is an excerpt.

Agtech is defined as the use of digital technologies to overcome market barriers and improve agricultural productivity and sustainability. This is achieved by improving access to financial servicesinputs (such as seeds, fertilizers and agrochemicals), markets, information and shared assets.

While traditional agricultural technologies – such as fertilizers, mechanization, seed hybrids, infrastructure development and cold room – have led to green revolutions in agricultural regions around the world, but African countries have yet to fully reap the benefits due to regional fragmentation and prolonged underinvestment in infrastructure. Progress in improving productivity through agtech does not necessarily require complex technological innovation; rather, it requires the use of digital solutions to connect farmers to credit, inputs, markets and information.

Across 18 African countries, agtech companies are starting to break down barriers for smallholder farmers. These businesses enable farmers to improve their yield and profitability by facilitating better market access, shortening the value chain, increasing the availability of insurance, and fostering a shared economy for mechanized equipment. Even though the number of African tech startups receiving financial support increased rapidly between 2015 and 2020, investment in agtech remains limited. Startup growth on the continent presents challenges, and the agtech ecosystem is still in its infancy, capturing less than 1% of global venture capital.

However, between 2021 and 2023, the agriculture and food sector in Africa saw significant investment growth, with 193 transactions involving a minimum investment of $100,000. Although some of these transactions involved food delivery services, catering services, aquaculture, and niche food preparation, most investments have been directed towards agricultural technology companies that use digital platforms to improve farmers’ access to markets, inputs, information, equipment and credit. The gradual increase in investments, increased focus on food security by development finance institutions and the pioneering success of several agtech companies in African markets highlight the growing maturity of the agtech sub-sector within the ecosystem African startups. The Food and Agriculture Organization (FAO) predicts that the agricultural market in Africa will grow from $200 million in 2015 to $1 trillion by 2030, and agricultural technology companies have been identified as the backbone of this expansion.

Agtech business models

The proliferation of mobile phones and the increasing availability of connectivity in emerging markets – spanning countries such as Cambodia, Colombia, India and Indonesia – have enabled companies to use cost-effective means to reach smallholder farmers. agricultural. These developments have allowed businesses to offer credit to the unbanked population through non-traditional credit scoring methods.

Smallholder farmers often lack access to essential financial services that would otherwise provide them with credit to purchase seeds and fertilizer, as well as insurance to safeguard their livelihoods. These same farmers often lack direct market access, information related to weather events, advice and crop monitoring, as well as mechanized agricultural equipment. Given the plethora of needs, most emerging market agtech companies offer multiple products to farmers, with credit being the most transformative and “sticky.” While most agtech companies are evolving to provide credit in one form or another, four main business models characterize the subsector: access to finance and inputs; market access; access to information; and access to shared assets. African agtech fits into this same typology.

Access to finance and inputs

  • Credits, seed and fertilizer loans: Less than 4% of total commercial bank loans are devoted to agricultural sector, with financial institutions often citing lack of collateral, high transaction costs, lag between investment and return on income, poor infrastructure, and high risk resulting from rainfall variability and price spikes. Kenyan company Apollo Agriculture helps smallholder farmers maximize their profitability, using satellite coordinates of fields to build credit profiles for farmers, which then guide their loans in the form of seeds and fertilizer, which the farmer reimburses via mobile payment after harvest. In the same way, Nigeria ThriveAgric calculates and provides loans to smallholder farmers in the form of improved seeds, fertilizers and crop protection products, based on farm mapping data and their creditworthiness. The digital platform also provides farmers with information and access to local and global markets to sell their products.
  • Insurance: The overall insurance penetration in African agriculture is 2.78%. Kenyan company Pula is pioneering a solution that uses remote sensing to offer yield index-based insurance products to protect farmers against crop and livestock losses due to drought, excessive rainfall , pests and diseases, and other perils that negatively affect agricultural yields.

Market access

  • Markets: Smallholder farmers often lack access to value-added markets, limiting the profitability of their products. The amount of value added per worker in sub-Saharan Africa is less than half the global average. Company based in Kenya Twig offers a range of services via mobile and web platforms to operate an efficient supply chain, connecting farmers, suppliers, sellers and customers in a digital marketplace. The platform allows farmers to communicate directly with sellers looking for products, offers last-mile distribution to deliver products to sellers, and offers loans to sellers to pay for products over time.

Access to information

  • Weather report: More than 95% of African agriculture is rainfed. Providing farmers with accurate and timely weather forecasts increases efficient use of inputs and reduces vulnerability to climate change risks. Esoko, an agricultural marketing and messaging company based in Ghana, sends weather forecasts and early warnings to its users via short message service (SMS). The Esoko application also informs farmers of the risks of pest infestation and offers them advice on preventive measures to adopt.
  • Crop monitoring: In markets with more commercial agriculture, such as South AfricaAerobotics uses artificial intelligence, drones and other technologies to inform farmers about the health of their crops, track pests and diseases and provide analytics to inform yields.

Access to shared assets

  • Equipment rentals: Agriculture in African markets is characterized by a lack of mechanization. African farmers have fewer than two tractors per thousand hectares of cultivated land, compared to ten tractors per thousand hectares in South Asia and Latin America. The mobile platform Hello Tractor connects tractor owners and operators with farmers in need of tractor services, to make tractor ownership more profitable and tractor operation more affordable, thereby advancing productivity-enhancing mechanization.

The integration of artificial intelligence (AI) and big data technologies will influence, and potentially create, new agtech business models. For example, Atmo, a US technology company that uses AI in weather forecasting, has partnered with the Common Market for Eastern and Southern Africa to offer meteorology and supercomputing technologies to governments to help them take informed decisions based on accurate weather forecasts.

This aims to improve access to crop insurance at the national level, optimize input allocation and strengthen preparedness for natural disasters. OCP, a global phosphate and fertilizer giant, has partnered with Microsoft to leverage AI for OCP’s digital agriculture platform in Africa. This partnership uses OCP’s soil mapping data, soil samples and demonstration trials to customize fertilizer solutions to provide farmers with decision support data. Similarly, the Google AI Center in Ghana partnered with InstaDeep and the FAO to develop a predictive model to anticipate locust infestations.

Globally, coordination and innovation efforts in AI and Big Data are emerging to help aggregate agricultural data for the public good. CGIAR, a global partnership for food security, has created the Platform for Big Data in Agriculture. This platform adheres to the principles of open access and open data, bringing together data from CGIAR research stations in Kenya, Benin, Nigeria and elsewhere to increase the development impact of agricultural research. When AI is applied to this vast dataset, new opportunities arise for entrepreneurs to unlock the untapped potential of African agriculture.

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