Mobile platform Hello Tractor connects tractor owners and operators with farmers in need of tractor services.
The rise of agriculture technology (agtech) solutions in Africa has opened significant avenues to transform food systems and tackle long-standing obstacles to enhance smallholder productivity, write 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 utilisation of digital technologies to overcome market barriers and enhance agricultural productivity and sustainability. This is achieved by improving access to financial services, inputs (such as seeds, fertilisers, and agrochemicals), markets, information, and shared assets.
While traditional agricultural technologies – such as fertilisers, mechanisation, seed hybrids, infrastructure development, and cold storage – have led to green revolutions in farming regions globally, African nations 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 intricate tech innovation; rather, it requires the utilisation of digital solutions to connect farmers to credit, inputs, markets, and information.
Across 18 African countries, agtech companies are beginning to break down barriers for smallholder farmers. These companies enable farmers to enhance yield and profitability by facilitating better market access, shortening the value chain, increasing insurance availability, and fostering a shared economy for mechanised equipment. While the number of African tech startups receiving financial backing grew rapidly between 2015–2020, investment in agtech remains limited. Scaling startups on the continent presents challenges, and the agtech ecosystem is still in its nascent stages, capturing less than 1% of global venture capital.
However, between 2021–2023, the agricultural and food sector in Africa experienced significant growth in investment, with 193 deals involving a minimum investment of $100,000. While some of these deals were in food-delivery services, restaurant services, fish farming, and niche-food preparation, most of the investment flowed into agtech companies that utilise digital platforms to enhance farmers’ access to markets, inputs, information, equipment, and credit. The gradual increase in investment, greater attention to food security by development finance institutions, and pioneering success of several agtech companies in African markets underscore the growing maturity of the agtech subsector within the African startup ecosystem. The Food and Agriculture Organisation (FAO) predicts that the agricultural market in Africa will grow from $200 million in 2015 to $1 trillion by 2030, and agtech companies have been identified as the backbone of the expansion.
Agtech business models
The proliferation of mobile phones and the growing availability of connectivity across emerging markets – spanning countries like Cambodia, Colombia, India, and Indonesia – have facilitated cost-effective means for companies to reach smallholder farmers. These developments have enabled companies to offer credit to the unbanked population through non-traditional credit-assessment methods.
Smallholder farmers often lack access to essential financial services that would otherwise provide them with credit to purchase seeds and fertilisers, 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 mechanised farming equipment. Given the plethora of needs, most agtech companies in emerging markets offer multiple products to farmers, with credit being the most transformative and “sticky”. While most agtech firms evolve to provide credit in some form, four main business models characterise the subsector: access to finance and inputs; access to market; access to information; and access to shared assets. African agtech fits into this same typology.
Access to finance and inputs
- Credit, seed, and fertiliser loans: Less than 4% of total commercial bank lending goes into the agricultural sector, with financial institutions often citing the lack of collateral, high transaction costs, lag between investment and return on revenue, poor infrastructure, and high risk as a result of variable rainfall and price spikes. The Kenyan firm Apollo Agriculture helps smallholder farmers maximise profitability, using satellite coordinates of fields to build credit profiles for farmers, which then guide their lending in the form of seeds and fertiliser, which the farmer pays back via a mobile payment after harvest. Similarly, Nigeria’s ThriveAgric calculates and disburses loans to smallholder farmers in the form of improved seeds, fertiliser, and crop-protection products, based on farm-mapping data and creditworthiness. The digital platform also provides the farmers with information and access to local and global markets to sell their commodities.
- Insurance: Overall insurance penetration in African farming is 2.78%. The Kenyan company Pula is pioneering a solution that uses remote sensing to offer yield-index insurance products to protect farmers from crop and livestock losses due to drought, excessive rainfall, pests and diseases, and other perils that affect agricultural yields negatively.
Access to market
- Marketplaces: 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. Kenyan-based company Twiga delivers a range of services via mobile and web platforms to operate an efficient supply chain, connecting farmers, suppliers, vendors, and customers in a digital marketplace. The platform allows farmers to communicate directly with vendors seeking products, offers last-mile distribution to deliver commodities to vendors, and offers loans to vendors to pay for products over time.
Access to information
- Weather: More than 95% of African agriculture is rain fed. Providing farmers with timely and precise weather forecasts increases the efficient use of inputs, and reduces the vulnerability to climate change-related 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 app also informs farmers of pest-infestation risks and offers advice on how to take preventative action.
- Crop monitoring: In markets with more commercial farming, such as South Africa, Aerobotics 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: Farming in African markets is characterised by a lack of mechanisation. African farmers have fewer than two tractors per thousand hectares of cropland, 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 use more affordable, thereby advancing productivity-enhancing mechanisation.
The integration of artificial intelligence (AI) and big-data technologies will influence, and potentially create, new agtech business models. For example, Atmo, a US tech company employing AI in weather forecasting, partnered with the Common Market for Eastern and Southern Africa to offer governments meteorology and supercomputing technologies to help make informed decisions based on accurate weather prediction.
This aims to enhance access to country-level crop insurance, optimise input allocation, and bolster preparedness for natural disasters. OCP, a global phosphate and fertiliser giant, partnered with Microsoft to leverage AI for OCP’s digital agriculture platform in Africa. This partnership uses OCP’s data on soil mapping, soil samples, and demonstration trials to customise fertiliser solutions to equip farmers with decision-informing data. Similarly, the Google AI Centre in Ghana joined forces with InstaDeep and FAO to develop a predictive model for anticipating locust infestations.
Globally, efforts to coordinate and innovate in AI and big data are emerging to help aggregate agricultural data for the public good. CGIAR, a global partnership for food security, established the Platform for Big Data in Agriculture. This platform adheres to open-access and open-data principles, aggregating data from CGIAR’s research stations in Kenya, Benin, Nigeria, and elsewhere to increase the impact of agricultural research for development. When AI is applied to this extensive dataset, new opportunities arise for entrepreneurs to unlock untapped potential in African agriculture.