As Regional Manager for Structured Trading Systems at the Eastern Africa Grain Council, Samwel Rutto’s work entails promoting structured markets to facilitate trade and eliminating inefficiencies in the grain industry. Here he explains how his experience in the design and operation of an electronic grain trading system has taught him some of the pitfalls to avoid when trying to scale up digital marketing platforms for agribusiness.
Investment in agribusiness related digital
solutions for the Eastern Africa region has grown substantially in the past
decade. However, few have proved sustainable beyond the pilot stage, or brought
about lasting impact. Many continue to face key barriers that impede growth. My
experience in designing and managing an electronic grain trading system – the
GSoko system owned by the Eastern Africa Grain Council (EAGC) - has taught me
much about the pitfalls likely to be encountered in attempts to sustain and
scale up online marketing platforms in the agribusiness sector.
To start with, the software design and development phase is often lengthy, and funding therefore has to be staggered over a period of about 5 years. For instance, developing GSoko took 4 years, mainly due to the need for continuous consultation with the end users, ensuring that the solution was user-friendly and addressed their marketing needs. Time and again, the system had to be redesigned and upgraded. Not surprisingly, this process ends up becoming costly, and affects the scaling of platforms.
The uptake of digital solutions in agribusiness plays a crucial role in determining scalability and sustainability. But adoption rates are adversely affected by unintended and undesired technical difficulties, which include ICT illiteracy, especially at farmer level. During the deployment of GSoko, I discovered that some smallholder farmers have never used an android mobile phone, so are puzzled as to how to use the system. Adding to the difficulties, poor internet access affects the operation of web-based systems. For example, the Katine Farmers’ Cooperative in Uganda has been exporting grains to Kenya through the GSoko platform, but limited internet connectivity has prevented members from participating in some online trading sessions.
While operating the GSoko platform, I learned that regional online marketing platforms must be commercially viable and sustainable. This requires a bankable business model that generates revenue to meet cost obligations. On the other hand, revenue generation is determined by system throughput/value and volumes of commodities traded in the system for each season. Based on my experience and a review of other platforms in the region, the volumes traded are sometimes too small and erratic, while the costs of developing and maintaining systems are extremely high, often exceeding their benefits. Some of the main causes of low traded volumes in online platforms that I have witnessed first-hand have included poor weather and drought - causing low yields - few warehouses linked to farmers for aggregation, and quality issues, such as high levels of aflatoxins, rotten, diseased and broken harvests, mixed varieties, etc. I also observed that crop seasonality affects systems throughput, especially those dealing with annual crops, such as maize. In addition, governments and bureaucracies in the Eastern Africa countries often obstruct online platforms by imposing import regulations, tariffs and taxes.
Promotion and marketing play an increasingly critical role in scaling online marketing platforms, since they help to grow the client base and volume of traded commodities. I believe that the spectrum of services offered and the fees charged to users should be affordable, since most users are either unable or unwilling to pay large sums. For this reason, it is important to do a profitability analysis with extensive stakeholder consultation, to come up with reasonable fees. The challenge is that farmers have become used to free services offered by non-governmental organisations and donors, ard are therefore reluctant to put their hands in their own pockets. Both farmers and traders may resist using an online platform if they feel that it is too sophisticated to use. Finally, the existence of various competing platforms targeting the same users - especially farmers - can affect the uptake of digital solutions.
At the end of the day, there is no doubt in my mind that online marketing platforms can make a valuable contribution to improve the performance, competitiveness and profitability of agribusinesses. However, challenges in system design, revenue traction and uptake have a negative effect on their scalability and sustainability. For this reason, it is essential when investing in agriculture related digital solutions to consider creating business models that demonstrate value to users. By the same token, it is crucial to engage potential users in the design process for user-friendly solutions and diversify the scope of agricultural commodities covered by the platform. Failure to take any of these aspects into account risks compromising the long-term future of the online marketing platform itself, and the potential benefits to anyone who may use it.
This article was created through a CTA-led process to document and share actionable knowledge on 'what works' for ACP agriculture. It capitalises on the insights, lessons and experiences of practitioners to inform and guide the implementation of agriculture for development projects.