One can hardly avoid this topic. 2019 was the year for climate change, despite its sceptics, and the agribusiness is front and centre to the debate.
The global population is projected to reach 10 billion people by 2050. This increases demand on a sector challenged for its resources consumption (e.g. 70% of freshwater withdrawals), and land degradation (i.e. 30% of global arable land), among other issues. In the ’60s, Norman Borlaug initiated the Green Revolution which is credited with saving over a billion people from starvation. However, over 33 million people still practise subsistence agriculture in Sub-Sahara Africa. And the consequences of the Green Revolution on the environment are decried today.
This begs the question. How can we disrupt once again the Agriculture sector to sustainably feed the world?
Spurring innovation: AgTech and its strong potential to disrupt the Agribusiness
AgTech is broadly defined as the application of technology (hardware and software) to assist or transform the activities along the agribusiness value chain. In the below illustration, we identified a series of examples in different fields of application.
At BeyondSoil, we believe AgTech will be particularly instrumental in four significant areas:
- Reducing the environmental impact: by optimizing the application of inputs (e.g. fertilizers) and the resources utilization (e.g. water), and developing new products (e.g. vegetable-protein based ‘meat’);
- Increasing productivity: by customizing seeds and inputs to fit each agro-ecological condition, and developing new, analytically driven farming methods (e.g. vertical or precision farming);
- Reducing waste: by leveraging data to predict yield, facilitate and accelerate transactions along the supply chain, and better inform consumers;
- Increasing the value creation: by bringing processing and manufacturing closer to farming, developing new products, and connecting producers to consumers.
While in its infancy compared to other disrupting sectors such as e-commerce, AgTech is picking up. Investors start recognizing its potential, and in 2017, over 1.5bn$ venture capital was invested over more than 160 deals.
Upskilling African farmers: producing at commercial scale and adding value locally
“This does sound fantastic in developed markets”, you are probably telling yourself. “But what about Africa where needs are dire, for even simple technical training?”. Africa is no stranger to innovation and leapfrogging certain development curves. Think mobile money and the wide adoption of M-Pesa in Kenya. However, we believe the approach and focus of AgTech should be slightly different on the continent.
Agriculture is a large purveyor of jobs, in South Africa and the region at large. At first, AgTech should not be a driver of employment reduction by automating tasks. Instead it should facilitate the transition of farmers to the commercial sector and increase the value of local produce. We have identified three key areas of value creation for South African farmers and agribusinesses:
- Access better inputs and farming technologies – growing productivity while reducing the environmental impact – e.g. data-enabled precision agriculture, or precision irrigation;
- Increase value addition of produce locally – capturing larger margins for producers and communities – e.g. local production coupled with processing into final product, such as South Africa’s Urban Fresh
- Develop new sales and marketing channels – connecting farmers to sellers – e.g. online marketplace such as Kenya’s Twiga.
Acting on the opportunity: mobilizing public and private resources, as well as local talent
As for the rest of the sector development, investment is key. Investments, both public (e.g. grant) and private (e.g. venture capital), should be accelerated. But beyond investments, these new seeds ought to be cared for and nurtured to blossom into sustainable AgTech businesses. What can you bring to the table to enable the emergence of a robust AgTech sector in South Africa and the broader region?
Sources: BeyondSoil research; TechCrunch.com; ODI; BCG; McKinsey; AFGRI; UN