Untapped market for digital services to transform African agriculture worth up to €2.3 billion, new report finds

Rome, Italy, 21 June 2019. More than 90% of the market for digital services that support African smallholders remains untapped and could be worth more than €2 billion (US$2.26bn), according to a new report.

The study by CTA and Dalberg Advisors, found nearly 400 different digital agriculture solutions with 33 million registered farmers across sub-Saharan Africa.

But the current digitalisation for agriculture (D4Ag) market was likely to be the tip of the iceberg with a penetration of just 6% and turnover of estimated €127 million (US$143m) out of a total addressable market of 2.3 billion (US$2.6bn).

The Digitalisation of African Agriculture Report 2018-2019 found an annual growth of more than 40% for both the number of registered farmers and the number of digital solutions suggesting the D4Ag market in Africa is likely to reach the majority of the region’s farmers by 2030.

“Digitalisation can be a game-changer in modernising and transforming Africa’s agriculture, attracting young people to farming and allowing farmers to optimise production while also making them more resilient to climate change", said Michael Hailu, Director of CTA.

“This report indicates that despite challenges the economics are rapidly improving with a handful of players beginning to develop viable, large-scale businesses. To reach its full potential, companies will now need to focus on converting customer reach to actual use in order for this type of model to yield returns."

Among the digital solutions tracked and analysed in the report were farmer advisory services, which provided weather or planting information via SMS or smartphone applications, and financial services including loans and insurance for farmers.

Other solutions linked farmers with markets for farm inputs and farm produce, or provided supply chain management to improve traceability and last-mile logistics.

Some services used satellite imagery, weather data, powerful big data analytics and machine learning techniques to deliver valuable real-time agricultural insights and forecasts at national and regional levels.

More than a third of participants in the study said they already used at least one form of advanced technology such as drones, field sensors, big data or machine learning, and almost 60% of respondents said they expected to integrate these types of technologies into their operations in the next three years.

Early figures indicated that farmers saw improvements in yields ranging from 23 to 73%, and increases of 18 to 37% in incomes from using these solutions. Models that bundled more than one solution together—so-called “super platforms” which combine digital market linkages, digital finance, and digital advisory service—were associated with yet further improved yields of up to 168%.

“Digitalisation for agriculture has the potential not just to support agricultural transformation in Africa but to do so sustainably and inclusively for Africa’s 250 million smallholder farmers and pastoralists,” said Michael Tsan, partner at Dalberg Advisors and co-leader of the firm’s global Digital and Data Practice.

“While the opportunity is immense, the report is not naïve about the challenges that remain and the significant work required by agribusiness, governments, donors, and investors to maximise the transformative impacts of digital agriculture in years to come.”

The report highlighted several gaps in D4Ag uptake, particularly among women, who account for more than 40% of the agricultural labour force yet comprise only a quarter of the registered users of digital services. Such digital divides and other concerns such as the privacy and safety of farmer data remain potential risks, the authors said.

“The last decade has been the ‘ICT4Ag’ age, focused on developing and testing the potential for digital solutions in agriculture,” said Benjamin Addom, team leader, ICTs for agriculture, CTA.

“The next decade—the ‘D4Ag’ age—will be about translating this potential into reality and doing so equitably and sustainably.”

The report made several recommendations for harnessing the potential of digitalisation in African agriculture. These included:

  • The creation of an alliance to promote partnerships and scale up solutions,
  • More attention to farmer data privacy and security,
  • Further focus on measuring D4Ag impacts,
  • Substantially scaled up investment for D4Ag infrastructure such as national agriculture data systems, weather/climate surveillance, and digitised field agronomy assets.

Supporting quotes from members of the CTA Report Advisory Council:

Leonard Mizzi, Head of Unit at the European Commission, Directorate-General (DG) for International Cooperation and Development:

“We are living in an era of unprecedented transformation and technological change. The world is more interconnected than ever and this is also due to digitalisation, which is crumbling all sorts of borders. Technologies can help stimulate innovation for sustainable agri-food systems and produce better and safer food while preserving natural resources and biodiversity. But we need to be conscious and support solutions that are sustainable and that are tailored to countries’ needs, and embedded into conducive and broader innovation systems. This is in line with the EU's Digital4Development and SDGs agendas that we are proudly promoting.”

Enock Chikava, Deputy Director for Agriculture Development - Bill & Melinda Gates Foundation:

“This essential report provides a detailed and comprehensive view, a snap shot, of the rapidly evolving digital agriculture industry in Africa. Establishing regularity of such a report is essential for stakeholders to keep pace with trends of D4Ag. Africa needs to accelerate inclusive agricultural transformation (IAT), hence the key role of digital innovation - more coordinated, efficient, targeted and relevant application of tools and services for smallholder farmers.

While the activity in the D4Ag sector shows enormous potential, it is currently fragmented with too few examples of solutions reaching scale in an inclusive way. To incentivise the creation of a broader enabling environment (infrastructure, policies/regulations) more evidence of impact on smallholder farmer incomes, productivity and inclusivity is needed. Designing inclusive products requires a deep understanding of the specific challenges, barriers and problems that smallholder women face, for example, access and ownership of mobile phones, which currently widens the digital divide.”

Ishmael Sunga, Chief Executive Officer - Southern African Confederation of Agricultural Unions (SACAU):

“The broad range of D4Ag solutions makes it well suited to the different needs and diversity of smallholders. It also offers a basket of choices. Investments in digital literacy as well as in public ICT infrastructure by donors and governments should increase the value of D4Ag solutions for smallholders.”

Christian Merz, Senior Advisor - GIZ:

“The landmark report provides desperately needed intelligence on the market of digital agriculture solutions in sub-Saharan Africa. Stakeholders across the sector including donors, governments, investors but also implementers and solution providers need to understand size, character and coverage of the market to optimise interventions, select the best solution, define roll out and go to market strategies, etc.

“It’s exciting to see that we are getting closer to widespread digital profiles of individual farms and fields. I wouldn’t call it precision agriculture, but smallholders will soon be able to make data driven decisions that reflect their individual agronomic context and market conditions. I’m sure that in 5 years from now such solutions will be adopted at scale.”

Natalia Pshenichnaya, Head of AgriTech Programme – GSMA:

“As more impact and commercial investments are coming into AgriTech space in the coming five years, we as an agricultural development community need to be extremely careful not to distort the market and have common understanding of the viable business models as well as appropriate financial instruments at each stage of innovation.”

Paul van de Logt, Head Food and Nutrition Security - Dutch Ministry of Foreign Affairs:

“This is an important baseline study that gives us as donors valuable information about the state of the D4Ag sector: who are the players, which models do they use and what is the impact on smallholder farmers? I see opportunities for collaboration with other sector actors in developing viable business models, better capturing impact data, particularly on climate adaptation and gender, and in investing in data infrastructure as a public good.”

Vanessa Adams, Vice President Country Support and Delivery - Alliance for a Green Revolution in Africa (AGRA):

“While only two decades ago, much of the world feared that technology would stop many of the world’s key operations at the turn of the millennia with Y2K doomsday hypotheses, digital solutions are today integrated into nearly every system and process the world relies on. Rural smallholder farmers in Africa should benefit from the same transformational effects through digital agricultural solutions in the coming several years. This tremendous assessment demonstrates that the plethora of digital ag solutions have been created, and are now available to millions of smallholders. The final frontier is the business model to reduce the cost to the users and increase the interoperability of these solutions to reach scale across borders. The majority of African smallholder farmers, especially youth, are the Agripreneurs of the 2020’s! AGRA is proud to contribute to this dialogue and advance the agenda of Grow Digital, at AGRF in Accra, September 2019.”

For more information or to request an interview, contact Donna Bowater, Marchmont Communications, +44 7929 212 534, donna@marchmontcomms.com

About CTA

The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). Its mission is to advance food security, resilience and inclusive economic growth in Africa, the Caribbean and the Pacific through innovations in sustainable agriculture. CTA operates under the framework of the Cotonou Agreement and is funded by the EU.

Be sure you don't miss our latest updates.