Top 6 challenges for Agri-techs to overcome in Africa
In the vast stretches of Sub-Saharan Africa lies something valuable seeking to be discovered: the agrarian frontier. While the rest of the world struggles to feed a growing population, Africa stands poised at the brink of transformation. At the core of this change lies agri-tech, where the confluence of innovation and agriculture is breathing new life into age-old processes.
In recent years, Sub-Saharan Africa has seen an increase in the use of cutting-edge technologies aimed at transforming agricultural techniques. Despite obstacles such as limited access to capital, fragmented markets, and climate variability, agri-tech businesses have emerged as catalysts for pushing agricultural transformation throughout the region. This article explores how agri-tech firms in Sub-Saharan Africa can overcome their challenges and scale operations.
The rise of agri-tech businesses in Sub-Saharan Africa
Agri-tech firms leverage cutting-edge technology like remote sensing, data analytics, and blockchain to solve fundamental problems in the agricultural value chain. These entrepreneurs are altering the African agricultural sector by improving farm production, efficiency, market access, and supply chain management.
The expanding agri-tech ecosystem in Sub-Saharan Africa has experienced extraordinary growth in recent years. In 2020, Kenya, Nigeria, and Ghana represented over 60% of active[1] start-ups in Africa, with major solutions being provided including digital procurement, smart farming, digital finance, agricultural e-commerce, weather/climate services, and information services. African agri-tech businesses have received early funding from donors, angels, innovation hubs, and NGOs. However, as technology companies continue to scale, the funding landscape is becoming more complex[2].
Some barriers we see to accessing capital and scaling businesses are high-risk perception, long gestation periods, regulatory hurdles, limited market validation, and fragmented value chains. Nevertheless, this industry continues to pique investors’ interest, indicating a robust and growing landscape. Notably, fundraising efforts by African agri-tech firms were at $482.3 million in 2021, a 250% increase over the previous year. Since 2017, African agri-tech firms received more than $1 billion in investments, with $482.3 million raised in 2021 alone, demonstrating the sub-sectors growing importance[3].
Overcoming the barriers: strategies for agri-techs
While agri-tech firms play a crucial role in fostering the advancement of the agricultural sector, it is evident that they encounter various barriers when accessing capital and scaling operations.
- Articulation of business case: Agri-tech firms in Sub-Saharan Africa often struggle to secure sufficient funding for research, development, and scaling operations, due to a lack of proper documentation and investment readiness. This challenge can be resolved by developing robust investment documents like pitch decks, financial models, business plans, etc., fostering strategic relationships, and creating awareness of the uniqueness of their solutions.
- High-risk perception: Most agri-tech projects are often perceived as high-risk investments thus making investors shy away from these projects. This can be resolved by implementing pilot projects and developing proof of concept studies to showcase the effectiveness and scalability of the agri-tech solutions in real-world settings.
- Long gestation periods: Sometimes it takes a lot of time to research, develop, and commercialize agri-tech innovations which may not be too attractive for investors seeking speedy returns. Agri-tech firms can focus on attracting investors with a long-term impact focus.
- Regulatory barriers: Government regulations can create uncertainties and unusual delays, which invariably impact investor’s ability to commit capital to projects. This can be addressed by engaging with regulatory authorities and industry associations to familiarize themselves with current regulations and advocate for project-friendly policies.
- Limited market validation: Sometimes it may be difficult for agr-tech firms to prove if there is market demand and scaling opportunities for their product especially in regions with low adoption rates for products. Before designing a product, it is necessary to conduct deep market research to understand the target market needs, assess competition, and validate demand for the product. This will provide data to support the potential of a market to investors.
- Fragmented value chains: Complex and fragmented value chains are usually difficult to understand and evaluate, which makes it hard for investors to gauge return potentials. This can be addressed by analyzing comprehensively the value chain and developing a detailed value chain map, also, forming strategic partnerships with major stakeholders can enhance integration along the value chain, integrating with current value chain players allows agri-tech enterprises to simplify operations, boost efficiency, and generate more value for investors.
Conclusion
The rise of agri-tech firms in Sub-Saharan Africa signifies a transformative shift in the agricultural sector, driven by innovative technologies and entrepreneurial spirit. Despite facing significant challenges such as high-risk perception, and fragmented value chains, these firms continue to thrive and attract increasing investor interest.
To overcome these barriers, agri-tech firms can implement strategies such as developing robust investment documents, conducting pilot projects, fostering long-term investor relationships, engaging with regulatory authorities, and forming strategic partnerships along the value chain. By addressing these challenges head-on and capitalizing on emerging opportunities, agri-tech firms can contribute to the sustainable development of Africa’s agricultural sector while delivering tangible returns for investors.
Agri Frontier supports agri-tech businesses to address these challenges in the sector. Get in touch with us if you want more information on how we can support your business at info@agrifrontier.com
[1] https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2020/04/AgriTech_in_Nigeria_Investment_Opportunities_and_Challenges1.pdf
[2] https://www.gsma.com/mobilefordevelopment/wp- content/uploads/2020/04/AgriTech_in_Nigeria_Investment_Opportunities_and_Challenges1.pdf
[3] https://agfundernews.com/the-largest-funding-rounds-of-the-decade-for-africa-agrifoodtech
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