African agriculture has the potential to be a breadbasket for the world, addressing food insecurity both on the continent and overseas, but is chronically underpowered. Agri-tech ventures on the continent, however, are employing innovative solutions to try and get the industry moving.
Disrupt Africa recently partnered South African company IQ Logistica to release a three-part podcast series – “Feed the world – empowering African agriculture through tech entrepreneurship” – on the African agri-tech space, how it works, what its dynamics are, and what is happening in the sector.
IQ Logistica has launched Farmers Friend, a new companion farming operations mobile application. The tool is for farmers to use in-field to manage their full farming operations straight from their phones or tablets, and offers a new way for farmers to easily view, manage and access all of their operational data to mitigate risks, successfully implement lucrative stakeholder relationships and optimise their yield opportunities.
Clearly, farmers are in need of some help if African agriculture is to fulfil its potential. More than half of employed people on the continent are active in agriculture, which accounts for about 35 per cent of Africa’s GDP. Meanwhile, around 45 per cent of the world’s area suitable for sustainable agriculture production expansion is located in Africa. Yet the continent also has the lowest agriculture productivity per worker rates in the world.
These are the dichotomies that make up Africa’s agricultural sector – huge impact, rich potential, yet chronically under-powered. And that is a crying shame. Even before the invasion of Ukraine by Russia, which brought to light the fragility of global agricultural value chains and the reliance on so-called “breadbaskets” for food imports, Africa had been spoken of as a potential breadbasket of the world. Now, as other breadbaskets suffer, its potential is even more clear.
Yet African agriculture, far from feeding the world, can’t even currently feed Africa. Across the continent, the number of people experiencing food insecurity at a moderate or severe level increased from 512 million in 2014 to 794.7 million people in 2021 – nearly 60 per cent of the continent’s population.
“The continent has the ability to feed not only itself, but to feed the world. How do you uplift and empower farmers of all walks of life to be able to really negotiate a better spot in the supply chain, with more bargaining power?”
That’s David Jeromin, director of business development at IQ Logistica. He says one of the main impediments that you find in African agriculture is that farmers are sitting in isolation.
“Nobody knows where the farmer is, nobody knows what the farmer is doing. So when you actually have line of sight, of a GIS map location of the farmer, then you’re able to produce what we consider a digital twin. It is exciting in the sense that you can provide a tonne of tools and analytics to be able to help farmers,” he said.
This is what IQ Logistica is attempting to do, in a variety of ways. Jeromin says there is a moral imperative to ignite agriculture in Africa, though those trying to do so face some roadblocks.
“You can look at it from bottom-up as well as top down. As a company we tend to focus more on the bottom up – what is the pain point of the farmer? It is access to finance, and then access to product, meaning seed chemical fertiliser and those kinds of products. Typically that is because of a lack of access to finance,” he said.
The importance of finance – and access to it – when building successful farms and agribusiness would explain why so many of the first wave of agri-tech businesses in Africa, your Farmcrowdys and FarmDrives, and many more, sought to address this issue. Wade Breytenbach, IQ Logistica product manager, says tech is allowing farmers to build up a digital track record and access more finance to help their businesses grow.
“It is a multi-billion dollar business. When you look at banks when you look at co-ops, the guys giving money to these farmers – they wanted oversight. Where’s our money going and what are my chances or my probability of getting that money back?” he said.
Yet access to finance, and therefore product, are not the only issue for farmers. There are also policy challenges, and different farmers experience different problems in different places.
“There’s policy distortion. What makes the sector as a whole so interesting and so challenging at the same time is that everybody likes to think of this pattern recognition. The pain points that a farmer is going to suffer from in Kenya are not necessarily the same sort of pain points that a farmer is going to face in South Africa, or Ghana, and so on,” said Jeromin.
In an ecosystem that is still so nascent, it is always likely that lots of companies are doing lots of overlapping things at the same time. This means the market is disjointed, and fragmented, with many players, playing in isolation. This means execution can suffer, said Jeromin.
“When money starts coming in and flowing into a given sector, it’s going to be kind of scattershot, and you’ve seen the same thing on the continent over the past five. There’s been approximately 600 deals that have been done, you’re tipping out in the aggregate almost a billion dollars in funding. This isn’t like you know some sort of app or some sort of service that’s going to go viral and just be able to spread like wildfire like an Instagram or a TikTok or something like that,” he said.
That being said, entrepreneurship is still the best solution to Africa’s agricultural challenges.
“Agriculture has so much complexity around it that you literally need maniac entrepreneurs who wake up thinking about this problem; they go to sleep thinking about this problem; they live it,” said Jeromin.
And if entrepreneurs can come up with the right solutions, and perhaps work more closely together, there are huge untapped opportunities.
“In the EU or North America you probably wouldn’t see the opportunity to collaborate on the scale that you can here. It’s such an untapped market, such a massive TAM. Our initial foray into the small farmer market is demonstrating that there’s roughly about 20 per cent smartphone uptake in that group, so you know you’re looking at a possible TAM of 160 million farmers on the continent, that you could potentially reach using a cloud-based platform strategy. That gives a tremendous amount of opportunity,” said Jeromin.
We are also entering into an era where governments and DFIs are much more open to working with African agri-tech ventures, he said,
“There’s this huge sea change of behaviour when people actually get to see, this is where the tech is. And it’s an exciting opportunity. What we’ve seen is that governments from a policy standpoint are certainly much more open to having discussions with other government divisions or NGOs or farmer associations to be able to subsidise some of the software costs, because they know that you’re going to end up reducing their customer acquisition cost or their input costs or their finance costs by orders of magnitude. So the cost-benefit is there,” he said.
Breytenbach says where governments, NGOs and startups can get aligned and find a way to work together effectively, they can have significant impact.
“Having that backing supports your purpose, having that support from a grant, or any big NGO, or the government, getting that support reaffirms what you’re doing. You’re on the right path,” he said.
Bad news, however, is that the agri-tech space is as affected by others by the global capital shortage. The likes of Twiga, Apollo, and in fact IQ Logistica, have raised decent-sized rounds over the last few years. But now, African agri-tech, like everything else, is embarking on the era of the reset. Generally, however, there is strong investor interest in the agri-tech space that isn’t going to go away given the size of the opportunity and the need for investment.
“The need for investment in agriculture is huge, and I think PEs and VCs see that. I think everyone wants to dip their toe in agriculture,” he said.
Different people mean different things when they talk about “farmers”. They come in different shapes and sizes, says David.
“You have your smallholder farmer, that is going to have anywhere from half a hectare to four or five hectares, then you have a medium farmer who has been able to have a certain amount of upscaling. And then obviously you have your commercial farmers, where we’ve developed Farmer’s Friend around specifically for them,” he said.
Given that different farmers have different needs, scaling an agri-focused solution across the whole of Africa can pose a challenge.
“I think that the biggest thing is identifying the needs and the problems of each farmer,” says Breytenbach. “Every single farmer around the country has similar, but very specific problems and needs. There’s alignings and similarities between those needs, and I think that the biggest thing in terms of scalability and trying to scale pan-African is trying to align those needs.”
One challenge is the willingness of farmers to use tech within their businesses. Breytenbach says some farmers are more likely to adopt technological solutions than others, with it often taking a lot of persuasion and education to encourage uptake.
“You’ve got the younger generation that are fully invested in tech and have an understanding. Especially on the commercial side, the commercial farms do have quite a big understanding and are very ready. Then you do have the other 50 per cent that are very hesitant,” he said.
The cost of adoption also has to be kept in mind.
“The biggest thing that it comes down to is that tech has to couple with hardware, and I think hardware is expensive. I think you need that coupled with the technology before adoption happens, because access to hardware is the first hurdle we have to play catch up with. Even with the older guys they do see the need for it,” Breytenbach said.
Tech is pivotal, a gamechanger, actually, when it comes to the development of Africa’s agricultural sector, says Jeromin.
“Tech is everything. When I think about tech and I think about the journey already… I was around during the early days of Safaricom and M-Pesa, and to go and look at the imprint that companies like these and partnerships like these have been able to produce, these massive effects because they’ve literally developed something that is very relevant for the space and the demographic that you know they’re they’re operating with, it’s a game changer,” he said.
