Agritech investors are looking to tap massive opportunities in Africa. The continent has vast fertile areas, massive water resources and favourable climates. And now it is beginning to close gaps in infrastructure and logistics and transform itself into a significant agriculture producer and exporter.
Kenya’s startup space is receiving the lion's share of Africa’s agritech investments as the state ratchet up efforts to plug the food deficit not just domestically but in the region.
It comes as a slew of agri-tech innovations have cropped up over the last decade to serve Africa's long-neglected small-scale farmers.
Advances include crop monitoring by satellite, drone use and automated irrigation, with Microsoft projecting the value of Africa’s agriculture sector will eclipse $1 trillion by 2030.
According to Fitch, between 2019 and Q1 2022, Twiga Foods and Apollo Agriculture, Kenya’s pre-eminent agritech startups raked in $80 million and $40 million, respectively.
“Kenya has emerged as a hot spot for agricultural technology investment and product development amid food security challenges and the influence of the agriculture sector on the country's overall economy,” said the U.S financial information services firm.
“In our view, the adoption of technology in Kenya’s agriculture sector will have a transformative effect on the market and help alleviate growing concerns of food insecurity.”
Fitch’s forecast period also shows that Kenya has made a major leap in the agritech space compared to the performance of the segment between 2015 and 2017.
Oxford Business Group figures show that between 2015 and 2017 Kenyan start-ups involved in agricultural technologies and innovations brought in just $13.4 million.
Oxford notes the state’s firm commitment to mobilise considerable public and private resources in support of agriculturalists as a key driver of agri and agri-tech directed funding.
“The strategies in play for meeting these objectives, including subsidising fertiliser, extending irrigation and digitalising land registries, present openings along the entire value chain to intervene in the interest of multiplying efficiency, and entrepreneurs and financiers have stepped eagerly into partnerships that can exploit those openings, it said in a report.
A Microsoft report released in June last year showed that Africa was “fast becoming a global leader in the agritech space, noting that between 2016 and 2019 the agritech sector grew by 44 per cent year-on-year, and the continent has registered the highest number of agritech services in the developing world, reaching over 33 million smallholder farmers to date."
“Agriculture already accounts for 14 per cent of GDP in Africa and for 52 per cent of the continent’s workforce. It’s expected that as the continent’s middle class rapidly grows, they will drive increased demand for fresh produce,” it read in part.
The Microsoft report further said it expects the implementation of the African Continental Free Trade Agreement (AfCFTA) to boost intra-African trade by 49 percent.
Through increased investments in inputs, storage facilities and irrigation infrastructure, Africa is expected to increase its agricultural output by up to three times by 2030.
Mobile connectivity is predicted to reach over 55 per cent by 2030, compared with 45 per cent, meaning that over 85 per cent of smallholder farmers could have access to features or smartphones and mobile solutions.
Microsoft argues this is critical, as many smallholder farmers live in remote areas, are hard to reach, and lack purchasing power on their own.
It further states that agribusinesses provide tech services to these farmers, using digital tools to reach smallholders with extension services.
“Agritech solutions have a direct impact on the farmers they engage with. Twiga Foods links smallholder farmers in rural Kenya to informal retail vendors in cities. With Twiga’s mobile-based business-to-business food supply platform, vendors can order fresh produce from farmers across Kenya at competitive prices,” it said.
Growing investment into Kenya’s agritech segment comes as agriculture remains the engine of economic growth in Kenya and a major income earner for millions.
But despite its central role in job creation, the sector has traditionally been off the radar for financial institutions, even when ample liquidity existed in their balance sheets.
Agriculture is key to Kenya's economy, contributing 26 per cent of the Gross Domestic Product (GDP) and another 27 per cent of GDP indirectly through linkages with other sectors.
It employs more than 40 per cent of the total population and more than 70 per cent of Kenya's rural people.
Food and Agriculture Organisation (FAO) notes that agriculture in Kenya is large and complex, with a multitude of public, parastatal, non-governmental and private sectors.
Farmers, who are used to rain-fed farming systems, are being pushed into the dryer, more marginal areas where they become increasingly vulnerable to drought and the unpredictability of weather patterns resulting from climate change.
But according to UNEP, numerous ICT SMEs and start-ups have emerged in that market in response to the business opportunities offered by the digitalisation of farming.
“Kenya, therefore, provides a relevant case for examining the nature, current status and future opportunities for digital solutions for agricultural value chains, in Kenya and for other parts of Africa,” the agency’s agritech report, released in December 2021, states.
