Agtech innovation will be key to Kenya’s Covid-19 economic recovery

Kenya has emerged as a hotspot for agtech innovation in sub-Saharan Africa, with more than 100 solutions in the market driving growth, productivity, and sustainability in the agrifood value chain.

Companies like Twiga Foods, Apollo Agriculture, iProcure, Safaricom‘s DigiFarm, and Farmers Pride are igniting a digital revolution in agriculture with services like procurement, last-mile distribution, access to finance and quality inputs, weather monitoring, and yield predictions. Such technologies have the potential to drive the country’s economic rebound from Covid-19, according to a new report from Gatsby, Msingi and Kenya Markets Trust.

“The expanding footprint of Kenya’s tech firms and the country’s emergence as a tech gateway to East Africa represent a major opportunity for the region,” states the ‘Horizon Kenya’ report.

The explosion of new ag technologies in East Africa’s biggest economy has attracted the attention of global investors, who are focusing on impact-centric companies addressing rural poverty, food security, economic growth, and environmental protection. Last-mile logistics company Twiga Foods last month raised a $50 million Series C round, backed by Creadev, TLcom Capital, Endeavor Catalyst, IFC Venture Capital Group, Finnfund, and others. Agribusiness marketplace Apollo Agriculture closed its $6 million Series A round in May 2020 and is now raising its Series B.

“There are signs that Kenya’s agtech sector is graduating from its startup phase to a growth phase,” the report’s authors write.

Agtech impact

Agriculture employs two-thirds of Kenyans but only accounts for 25% of the country’s GDP. Agtech’s promise is in unlocking greater efficiency and productivity in the sector: only 42% of Kenya’s registered farmers and pastoralists currently use digital solutions. Most of the early adopters are young farmers.

‘Horizon Kenya’ predicts that as adoption of agtech innovations increases, it will drive better income opportunities in farming, encouraging young people to stay in the sector. Also, as value chains become more productive and efficient, small and medium agri-enterprises will have new opportunities to expand into regional and global export markets. And finally, digitalization will drive business formalization, positively impacting formal revenue generation from the sector and boosting Kenya’s finances.

Investor Q&A: Kenya Climate Ventures’ Victor Ndiege urges rethink of agtech’s role in African climate resilience – read more here

These impacts are in the medium- to long-term future, however; most Kenyan agtech innovations are nascent, and are about where fintech was a decade ago. But “a few technology-driven agribusinesses appear set to disrupt the status quo, reducing the number of intermediaries in value chains and empowering producers and consumers alike,” ‘Horizon Kenya’ states.

Also, “agtech services are becoming more diverse,” the report continues, “and firms are reaching commercial sustainability, as they meet market demands regarding linkages, access to finance, supply chain management, and farming insights.”

Critical gaps

In spite of the disruptive potential of Kenya’s agtech sector, farmers face other challenges that technology alone cannot fix. Better roads, access to quality seeds, extension services, and effective logistics and transportation services are crucial to improving the agriculture sector’s performance.

A case in point is in the tea sub-sector, a $1 billion industry in 2020, according to the Kenyan government’s Tea Directorate. Digital payments and loans are unlocking much needed capital for Kenya’s tea farmers, but other essential infrastructure is critical to driving growth in one of the country’s biggest agricultural commodities.

“Technological innovation is primarily an enabler [but] will not solve the challenge of raising agricultural productivity in Kenya on its own,” says ‘Horizon Kenya’. “To do this, it requires concerted effort on the part of government, the private sector, and development partners with emphasis placed on improving diminishing soil fertility, making strategic investments in agro-processing, as well as developing more effective systems to provide advice and relevant inputs to farmers.”