Digital farmer platforms
Digital farmer platforms
Business Model Description
Develop and operate mobile platforms to establish links between smallholder farmers and markets.
Expected Impact
Provide market opportunities for farmers with better conditions, and reduce food waste.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Kenya: Rift Valley
- Kenya: Eastern
- Kenya: North Eastern
Sector Classification
Food and Beverage
Development need
According to the Sustainable Development Report, SDG 2 - Zero Hunger is a major challenge in Kenya and the overall score for this goal is stagnating. The COVID-19 crisis contributes to price fluctuations, food insecurity and supply chains disruptions. Food inflation in Kenya reached 10.6% in March 2020, compared with 2.8% in the same month in the previous year.(1)
Policy priority
Policy documents and initiatives such as the Third Medium Term Plan, the Kenyan Vision 2030 and the Agricultural Sector Growth and Transformation Strategy highlight the potential of agriculture for national development. Achieving food security is among Kenya's top four policy priorities according to its 'Big Four Agenda'.
Gender inequalities and marginalization issues
Women constitute almost 80% of agricultural workers in Kenya. Yet, they often do not have any ownership of farming lands or production equipment. They also suffer from an unequal access to relevant agricultural loans.(27)
Investment opportunities introduction
Accounting for 34% of Kenyan gross domestic product (GDP)(2), agriculture is the main employer of the Kenyan population. Total sales in agriculture reached USD 26.5 billion in 2019 and are expected to grow at an average rate of 1.52% in 2020-2025.(3)
Key bottlenecks introduction
Some critical bottlenecks include poor education and management skills among farmers, business atomization, supply chain deficiencies, limited access to capital and inputs, lack of storage and poor handling practices, low access to information and ICT (information and communications technology) services, as well as the aging farming population.
Food and Beverage Retail
Development need
An obstacle to achieving food security in Kenya is post-harvest losses. An estimated 5% - 50% of agricultural produce is wasted at various stages of the supply chain. The handling and storage stage accounts for 37% of all losses.(4) It is essential to establish efficient cold chains, registry, distribution and retail structures to prevent food waste.
Policy priority
Food security is one of the main goals of the 'Big Four Agenda' in the Kenyan Vision 2030. Post-harvest management is essential for achieving this objective. The Agricultural Sector Transformation and Growth Strategy states the government's aim to raise the incomes of smallholder farmers by providing storage facilities, improving post-harvest best practice and scaling-up market access. These measures will increase the growth and competitiveness of the agriculture sector.
Gender inequalities and marginalization issues
marginalization issues: Women play a key role in Kenya's agricultural sector, often the only ones in rural households harvesting and selling crops. Despite this, they usually work in informal settings and receive lower sales revenues.(5) They need additional tools to connect them with potential buyers and the market.
Investment opportunities introduction
The government is open to public-private partnership (PPP) projects in post-harvest handling and food registry technologies, as outlined in the Third Medium Term Plan. Companies in Export Processing Zones have some geographical incentives. Benchmark examples and estimates suggest investments in market connectivity and cold storage chains generate market rate returns.
Key bottlenecks introduction
A key bottleneck in this sector and subsector is the cost of logistics. Currently, transport costs account for approximately 28% of the final market price of agricultural goods in Kenya, compared with 13% in other emerging markets.(6)
Food Retailers and Distributors
Pipeline Opportunity
Digital farmer platforms
Develop and operate mobile platforms to establish links between smallholder farmers and markets.
Business Case
Market Size and Environment
73.2% of smallholder farms with an output of USD 4.31 billion.
In 2019, 73.2% of Kenya farms were classified as small. They generated total output valued at USD 4.31 billion (KES 466 billion).(11)
Post-harvest losses can range between 39% and 52%, as illustrated by the mango industry in Kenya. Limited off-take leads to loss from pests and poor storage practices. These losses could be avoided with better market access.(12)
The market is not saturated, with only 53% smartphone penetration among farmers and 47% feature phone penetration with basic access to the internet.(13)
Indicative Return
20% - 25%
Investing in market connectivity can generate return on equity of 20% - 30%, based on the example of Farmers Market Kenya.(14)
Resolving the logistics bottlenecks in agriculture can save up to USD 1.6 billion. Currently, transport costs account for around 28% of final market price, compared with 13% in other emerging markets.(15)
Investment Timeframe
Short Term (0–5 years)
e-GRANARY is a company providing market connections between farmers, markets and input dealers. They expect to break even in fewer than 5 years (between 2017 and 2021).(15)
Taimba, a company connecting farmers and markets around Nairobi, expect to achieve scale in 2 years.(14)
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Market - High Level of Competition
Business - Supply Chain Constraints
Impact Case
Sustainable Development Need
The Sustainable Development Report 2020 indicates Kenya's performance in achieving SDG 2 - Zero Hunger by 2030 is stagnating. Major challenges are crop yield and prevalence of undernourishment.(2)
Driving agricultural transformation in Kenya requires significant improvement in competitiveness, e.g. by supporting farmer aggregation models that promote smallholder links to off-takers. This in turn can improve access to good farming practices and new technology.(17)
However, the COVID-19 crisis will slow the transformation. Price fluctuations, uncertainty and supply chains disruption may endanger food security, as indicated by the recent 10.6% inflation of food prices, compared with2.8% in the previous year.(18)
Gender & Marginalisation
Women play a key role in Kenya's agricultural sector, often the only ones in rural households harvesting and selling crops. Despite this, they usually work in informal settings and receive lower sales revenues.(5) They need additional tools to connect them with potential buyers and the market.
Expected Development Outcome
Increased transition to formal agriculture, lower food prices and less food waste
Increased flow of sustainable produce to the population
Reduced logistics bottlenecks
Gender & Marginalisation
Increased access of female farmers to the markets
Primary SDGs addressed
2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)
2.3.2 Average income of small-scale food producers, by sex and indigenous status
2.c.1 Indicator of food price anomalies
56.5% (28)
N/A
Domestic food price anomaly index score: 6.00 (28)
0%
N/A
N/A
12.3.1 (a) Food loss index and (b) food waste index
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Indirectly impacted stakeholders
People
Corporates
Outcome Risks
Food platforms may increase the barriers related to low internet penetration and lack of access to digital solutions (16)
Gender inequality and/or marginalization risk: Competition arising from the sector's development may drive away the poorest and least productive farmers.(19)
Impact Risks
Execution risk: Activities may not be delivered as planned due to low rates of internet penetration and digital literacy among the farming population.
Gender inequality and/or marginalization risk: Stakeholder participation risk - Because women account for the majority of the farming workforce, their expectations need to be considered.
Impact Classification
What
Connecting farmers with the market through information and communications technology (ICT) is likely to improve poor market linkages for smallholder farmers.
Who
Smallholder farmers with poor access to local food markets with inadequate food reserves who are aggrieved due to undeveloped supply chains.
Risk
There is a risk that in the long run increased competition or non-government organization (NGO) activity may reduce profits because the entry barriers are low.
Impact Thesis
Provide market opportunities for farmers with better conditions, and reduce food waste.
Enabling Environment
Policy Environment
Agricultural Sector Transformation and Growth Strategy: This strategy aims to create a modern and commercial agriculture sector that contributes to growth and guarantees food security. The transformation also aims to address the challenges of women and youth.(20)
Agricultural Sector Transformation and Growth Strategy: The strategy includes increasing the incomes of smallholder farmers (by 40%) and reducing malnutrition in Kenya. One solution is to scale market access and small and medium enterprise (SME) acceleration.(20)
National Agricultural Market Information System (NAMIS): This system supports the government's goal of increasing the use of technologies and ICT in agriculture.(21)
Achieving food security is among Kenya's 'Big Four' policy agenda pillars. The government is supported by the World Bank through projects like the National Agricultural and Rural Inclusive Growth Project, which aims to increase food production and security, the use of ICT in agriculture and develop value chains.
Financial Environment
Financial incentives: There are no specific financial incentives for this investment opportunity area as the ICT related opportunities have not been entirely regulated yet.
Fiscal incentives: Newly listed companies receive preferential corporate tax rates depending on the percentage of listed shares (normal rate is 30% for resident corporations and 37.5% for non-residents).(26)
Other incentives: An allowance can be granted to investors for wear and tear on machinery: Class I @ 37.5% (lorries over 3t, tractors, trucks); Class III @ 25% (lorries below 3t). (26)
Regulatory Environment
The Constitution of Kenya provides every Kenyan with the right to food security.(22)
Agriculture and Food Authority Act 2013: This Act consolidates laws that regulate and promote the agriculture sector.(23)
Agriculture and Food Authority Act: This Act establishes the Agriculture and Food Authority which is a body of Ministry of Agriculture, Livestock and Fisheries. The authority regulates and promotes agriculture, and develops agricultural value chains in Kenya.(24)
Crops Act 2013: This Act aims to reduce the bureaucracy relating to the crop sector, lift barriers to promote free movement of crops and attract private investors.(25)
Marketplace Participants
Private Sector
Twiga, Taimba, Tulaa, Farmers Market Kenya, Taimba, Goldman Sachs, IFC, TLcom, DOB equity, Adolph H.Ludin, Wamda Capital, 1776 ventures, alpha Mundi, Blue Haven Initiative, VC4Africa
Government
Ministry of Agriculture, Agriculture and Food Authority
Non-Profit
US Agency for International Aid (USAID)
Target Locations
Kenya: Rift Valley
Kenya: Eastern
Kenya: North Eastern
References
- (1) World Bank (2020). Kenya Economic Update: Turbulent Times for Growth in Kenya.
- (2) World Bank database, 2020. https://data.worldbank.org/
- (3) ISIC Classification Revision. Comparative Industry Forecast Tables - Agriculture.
- (4) International Food Policy Research Institute (2018). Post-Harvest Losses in Fruits and Vegetables: The Kenyan Context. http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/132325/filename/132536.pdf
- (5) World Economic Forum (2019). Challenges facing Africa's female farmers. https://www.weforum.org/agenda/2019/10/challenges-facing-africas-female-farmers/
- (6) Mercy Corps (2020). Agricultural Logistics in Kenya: Landscape and Solutions. https://www.mercycorpsagrifin.org/2020/09/08/agricultural-logistics-in-kenya-landscape-solutions
- (7) Kenya National Bureau of Statistics (2019). Gross County Product 2019.
- (8) Ministry of Agriculture (2019). Agricultural Sector Transformation and Growth Strategy: Towards Sustainable Agricultural Transformation and Food Security in Kenya 2019-2029.
- (9) Twiga (2019). Twiga Foods Secures $30M to digitize food distribution. https://twiga.ke/2019/10/28/twiga-foods-secures-30m-to-digitize-food-distribution/
- (10) Craft. Twiga Foods competitors. https://craft.co/twiga-foods/competitors
- (11) Kenya National Bureau of Statistics (2020). Kenya Economic Survey 2020. https://www.knbs.or.ke/?wpdmpro=economic-survey-2020
- (12) Deloitte. Reducing Post-Harvest Loss Through a Market-Led Approach. https://www2.deloitte.com/content/dam/Deloitte/za/Documents/consumer-business/ZA_FL2_ReducingPHLThroughaMarket-LedApproach.pdf
- (13) Netherlands Enterprise Agency (2019). Digital Farming in Kenya. https://www.rvo.nl/sites/default/files/2019/12/Digital-Farming-in-Kenya.pdf
- (14) Alliance for a Green Revolution in Africa (2019). The Agribusiness Deal Room at the 2019 African Green Revolution Forum (AGRF). https://agrf.org/dealroom/wp-content/uploads/2020/07/Agribusiness-Deal_Room-AGRF-booklet_020919.pdf
- (15) Mercy Corps (2020). Agricultural Logistics in Kenya: Landscape and Solutions. https://www.mercycorpsagrifin.org/2020/09/08/agricultural-logistics-in-kenya-landscape-solutions
- (16) Nyambura Ndung’u, M., Lewis, C. and Mothobi, O. (2019). The State of ICT In Kenya. Policy Paper No.9, Series 5: After Access. Research ICT Africa.
- (17) World Bank (2019). Country Private Sector Diagnostic - Creating Markets In Kenya: Unleashing Private Sector Dynamism to Achieve Full Potential.
- (18) World Bank (2020). Kenya Economic Update: Turbulent Times for Growth in Kenya.
- (19) Meijers, H. (2007). ICT Externalities: Evidence from cross country data. United Nations University. https://www.merit.unu.edu/publications/wppdf/2007/wp2007-021.pdf
- (20) Ministry of Agriculture (2019). Agricultural Sector Transformation and Growth Strategy: Towards Sustainable Agricultural Transformation and Food Security in Kenya 2019-2029.
- (21) Republic of Kenya (2018). Third Medium Term Plan 2018 – 2022 Transforming Lives: Advancing Socio-economic Development Through The 'Big Four'.
- (22) Constitution of Kenya 2010. https://www.wipo.int/edocs/lexdocs/laws/en/ke/ke019en.pdf
- (23) Agriculture, Fisheries and Food Authority Act 2013. http://extwprlegs1.fao.org/docs/pdf/ken122137.pdf
- (24) Agriculture and Food Authority. Background. https://agricultureauthority.go.ke/index.php/en/homepage/background
- (25) Crops Act 2013. http://extwprlegs1.fao.org/docs/pdf/ken122138.pdf
- (26) KENIvest. Investment Incentives. http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/
- (27) Deutsche Welle (2013). Women take over Kenya's farming sector. https://www.dw.com/en/women-take-over-kenyas-farming-sector/a-16716322
- (28) SDG Tracker (2021). End poverty in all its forms everywhere. https://sdg-tracker.org/no-poverty