Impact through Investment in African Agritech
Homegrown agritech solutions with incredible potential are fuelling investor confidence in the future of African agriculture. Investment in Africa agritech has grown from US$19 million between 2016-2018 to almost US$60 million in 2020 and a whopping US$95 million in 2021. Although this is not an indication of the on-the-ground implementation of agritech as of yet, it is certainly an indication of where things are going.
Pitch AgriHack contestants with impressive business models have consistently shown that great innovations will be rewarded with investment. Rural Farmers Hub, a 2021 winner of Pitch AgriHack, has received capital investment and competition winnings from a long list of accelerators, incubators, grant funders, contests, and investors, including the Africa Startup Initiative, *seedstars, and the Africa AgTech and Inclusive Insurance Challenge, along with cash grants as an Impact Award winner in the GoGettaz Agripreneur Prize. Similarly, J-Palm Liberia has been the recipient of funding from USAID and the elea Center for Ethics in Globalization, with many award wins including the African Entrepreneurship Award and the Africa Business Heroes Awards.
What makes some businesses more likely to receive attention from investors?
The answer is impact.
Of the twelve previous Pitch AgriHack finalists, every business has a direct positive impact on farming communities.
SayeTech reduces the time it takes to thresh one acre of cereal crops from two weeks to two hours with a with their multi-crop thresher. MyFugo improves cow health and dairy production with data from smart cow collars that informs their financial investment choices. Ngwala Inventions make biopesticides and fertilizers available to isolated rural farmers with an automated dispensing system linked to USSD mobile money payments.
Ventures like Farm Kiosk and GiGs by The Golazo Project are focussed using web platforms to link youth to opportunities. Farm Kiosk connects young people to available land and the agri-value chain actors they will need to be successful farmers, while Golazo’s platform links farmers searching for workers with youth looking for jobs.
Previous Pitch AgriHack winners, like GrowAgric and FarmCrowdy, are focussed on providing finance and insurance to small and medium scale farmers. They protect their investments and get long-term results by using agronomic data and modern best practises to train their farmers. Ensuring success, they also provide the inputs farmers require and find buyers for their produce.
For businesses that show the potential for real impact that improves the lives of people in local communities, investment channels are likely to increase in the future. This is especially true for agritech ventures that help farmers to build climate resilience and improve local food security.
Long-term improvements through investment
Agricultural technologies, better data, and far more sustainable farming practices are unlocking the potential of the African food system. With local communities and local entrepreneurs taking initiative, the pervasive problems of hunger, malnutrition, and poverty are slowly being addressed.
In March 2022, Nigerian agritech company ThriveAgric and Kenyan Apollo Agriculture raised almost $100 million in financing to grow their businesses. Importantly, like GrowAgric and FarmCrowdy, these two companies in turn provide financing solutions to Africa’s numerous smallholder farmers.
As AgFunder reports, with almost “60% of the continent’s population” working as smallholder farmers, agricultural technology companies focussed on provision of finance, insurance, agronomic support services, and training for smallholders are at the forefront of the battle against poverty and hunger. Conversely, investing in these agritech companies have a far greater positive and sustainable impact than short-term solutions like food aid.
Although food aid has saved the lives of countless millions of people across Africa, it has also been used to keep wars going while never putting in place the basic infrastructures for local production.
Without robust local production, people on the continent are harshly affected by global events. The current war in the Ukraine, for instance, is interrupting food aid to Somalia and South Sudan, placing hundreds of thousands of people at risk of starvation.
Although food aid is still a desperately necessary and immediate solution, many international development funds are choosing to invest in agritech companies that, in turn, invest in the people they serve. It is not an overnight fix to the problems of hunger, poverty, and malnutrition, but it represents the best chance for long-term, permanent results.
For investors, positive impact has become as important as profit potential. Ventures that improve the lives of rural communities, draw investor attention. This is especially true for companies that upskill farmers with valuable training, provide running finance and access to time-saving technologies, and supply built-in markets for their produce.
Tech Investment in Africa is Increasing
As Business Insider Africa reports, Kenya is currently the “top destination for agritech investments in Africa”, driven by its agriculture-centric economy and, specifically, a need to solve their food security problem once and for all. Agritech and its ability to reach smallholders plays such an important role in Kenya’s strategy to achieve food security that the Central Bank of Kenya launched MobiGrow in 2018. With the express purpose of reaching smallholder famers, it uses a backwards-compatible USSD system to give farmers access to mobile-based bank accounts.
Investment in the agriculture space is not just up to governments and venture capitalists. Timbuktoo, a new tech innovation financing facility by the United Nations Development Programme (UNDP), is set to be built in Rwanda. The announcement is stirring excitement for a technology boom on the continent. “The initiative aims to invest millions of dollars in catalytic and commercial capital over the next 10 years in order to build a distributed innovation network of eight pan-African hubs located in key ecosystems,” according to The New Times.
With specific hubs focussing on specific industry verticals, including fintech, agritech, and logistics, agrifood innovators across the continent will soon get access to more critical early-stage finance than ever before.
African solutions to first-world problems
Africa can learn from the mistakes made elsewhere. We now have better long-term data and accurate climate research, and the results are conclusive. Of the nine planetary boundaries we have crossed SIX. Agriculture and the food system has been a major contributor to all six, with climate change, a loss of biosphere/biodiversity integrity, land-systems change, the phosphorous and nitrogen cycle in the biogeochemical flow, freshwater use, and “novel entities” or chemical pollution from synthetic sources, all heavily impacted by the agrifood industry.
The decimation that occurred in the US and EU as a result of unfettered overuse of pesticides, fertilizer, and repeated monoculture has seriously undermined the health of their soil, their pollinating insects, and biodiversity as a whole. On top of that, as FoodTank reports, the European farming system is only alive because the EU “spends roughly 60 billion Euros every year keeping its farmers in business. This massive annual subsidy is three times as much as Europe spends annually on development aid to all of Africa.”
Building on the wealth of knowledge from the mistakes of others, agripreneurs in Africa have a chance to do it better. And that is where agricultural technology companies come in.
With locally focussed business models that address knowledge gaps and provide farmers with better training and support, agritech entrepreneurs are empowering smallholder farmers and their families.
Going into the future all the business choices and technological strides we make must be sustainable, nature-positive, higher-yielding with far less resources, and resilient to climate catastrophes.
In short… agritech entrepreneurs in Africa have a monumental task. If they can design solutions that empower the people on continent, eliminating poverty and hunger while advancing the health of our natural environment, it will be a model to the rest of the planet.