For online agricultural trading platforms to be scaled and sustained, they need to overcome an array of challenges relating to system design, revenue traction and uptake. Here, Samwel Rutto, regional manager for Structured Trading Systems at the Eastern Africa Grain Council (EAGC), highlights the common pitfalls and key considerations for agribusiness when trying to grow their online client base.
Investment in digital solutions related to agribusiness 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 – GSoko, which is owned by the 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.
“The grain hub [part of the GSoko system] is supporting the farmer through increased service delivery. For instance, for a farmer to access a market, they need to understand what the requirements are. So we work with the grain buyers to understand what they want in terms of the crop variety, the quantity they want to buy, and then we communicate back to the farmer, telling the farmer this is what the market wants,” explains Rutto. “So the farmers now can prepare to buy the right seed, knowing that they are going to supply a certain market,” Rutto summarises.
Pitfalls in scaling up online marketing platforms
To start with, the software design and development phase is often lengthy, and funding therefore must 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 and, not surprisingly, this process ends up becoming costly – affecting the scaling of platforms.
Uptake and adoption rates
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 the farmer level. During the deployment of GSoko, I discovered that some smallholder farmers have never used an android mobile phone, so they are puzzled as to how to use the system. Furthermore, 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.
Climate, environment and government
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 bad weather and drought causing low yields; a lack of warehouses linked to farmers for aggregation; and quality issues, such as high levels of aflatoxins, mixed varieties, and rotten, diseased and broken harvests, 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 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 NGOs and donors and are therefore reluctant to put their hands in their own pockets. Farmers and traders may also 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.
The way forward
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.