Research Article: The Agricultural Sector of Sub-Saharan African Digital Economy

Abstract

Digital technology is changing the way things are done globally and revolutionizing Sub-Saharan Africa. Digital Inclusion in the region is fast improving, as the region has the world’s fastest growing mobile penetration; and statistics show it will grow faster than every other region over the next five years.

Mobile money is observed to play an increasingly important role in the social and economic development of the rural SSA, especially in the agricultural sector, which is the major source of income and employment in the region. People in SSA were found to pay more for mobile-broadband services when compared with other regions.

The Agricultural Sector of the Digital Economy of SSA was observed to be made up of both developmental projects (e.g. Ethiopia’s Agricultural Hot Line and EthioSIS in Ethiopia, EZ-Farm project in Kenya, eWallet in Nigeria, FieldLook in South Sudan, CTA MUIIS in Uganda and Digital Green Project in Ethiopia) funded by governments or development agencies and services by private companies (e. g. FarmDrive, M-Farm and M-Pesa in Kenya, EcoFarmer in Zimbabwe, M-Lima in Rwanda, Ivorian Bank Société Ivoirienne de Banque (SIB)-Orange partnership and Olam Farmer Information System (OFIS) in Côte d’Ivoire.

The value and impact of these projects, start-ups and services were briefly discussed.

Introduction

The invention of electronic digital computer in the late 1940s (Randell, 1973) and the internet in 1969 (Internet Society, 1997) started a revolution known as the digital revolution. These digital devices and the internet, classified as digital technology have drastically changed the way things are done in every aspect of human life. Digital technology has made the world smaller by improving communication and sharing connectivity between people, places and things. Most importantly, it has made information and technological resources accessible to the people of Africa like never before (World Bank and AfDB, 2012).

It can be said that African countries have never benefitted from any industrial revolution like they are benefitting from the ongoing digital revolution. This is because, unlike in the first revolution which began in Britain in the late 18th century with the mechanization of the textile industry, giving rise to factories, and the second industrial revolution which began in the early 20th century, when Henry Ford mastered the moving assembly line and ushered in the age of mass production (Economist, 2012), Africans are proactively participating in the ongoing revolution known as the digital revolution.

Cheap mobile devices have made it possible for poor African countries to join the digital revolution, leapfrogging landline telephony and even much more. Mobile technology and services have helped African countries leapfrog traditional systems and institutions, to provide local solutions to problems in the continent. Today, Africa can boast of a fast growing digital economy that is impacting on the continent’s economy which include the Agricultural sector (Kende-Robb, 2015).

Mobile Economy of SSA

A digital economy, which is all the economic activities that result from billions of everyday online connections among people, businesses, devices, data, and processes has emerged in SSA as the region participates in the digital revolution. Digital Inclusion in the region is fast improving, as the region has the world’s fastest growing mobile penetration. Mobile internet penetration rate is 26 per cent and will increase to 38 per cent in 2020.

Mobile broadband connection is 33 per cent and will be 60 per cent by 2020, and mobile data traffic is expected to grow by 66 per cent from 2016-2020. Networked devices (Machine-to-machine) connections is predicted to reach 26 million by 2020 (GSMA, 2017a). Sub-Saharan Africa accounts for nearly a tenth of the global mobile subscriber base and is expected to grow faster than every other region over the next five years. There were 713 million mobile SIM connections in 2016, which will increase to 942 million in 2020 (GSMA, 2017a).

The mobile industry plays an increasingly important role in the social and economic development of the region; mobile connectivity has become the main platform for innovation and the driving force for greater inclusion (GSMA, 2017a). Mobile technology and service in Africa generated 6.7 per cent of GDP in 2015 (GSMA 2016) and the Internet could add $300 Billion to the continent’s GDP (10 per cent of total GDP) if it continues to grow at the same pace as mobile telephony did, by 2025 (MGI, 2013).

Despite all these positives, mobile-broadband is still not affordable in most countries in SSA. SSA stands out as the region with the least affordable mobile-broadband services in the world, with an average price that correspond to more than 15 per cent of the Gross National Income per capita (GNI p.c.) for handset-based mobile broadband, and about 30 per cent of the GNI p.c. for computer-based mobile broadband compared to Europe, CIS, Americas and Asia-Pacific with less than 5 per cent of GNI p.c. for all mobile-broadband services, and Arab states with more than 5 per cent.  As such current mobile-broadband usage for most of the region’s population is limited to cheaper plans in the market, with lower data allowances or time metered offers, which greatly limit the potential impact of mobile broadband (ITU, 2015).

Agriculture in The Sub-Saharan Africa (SSA)

The Sub-Saharan Africa (SSA) region accounts for more than 950 million people, approximately 13 per cent of the global population (AfDB, 2011). On average, agriculture contributes 15 per cent of total GDP, ranging from below 3 per cent in Botswana and South Africa to more than 50 per cent in Chad. Agriculture employs more than half of the total labour force (IMF, 2012) and is a means of livelihood for multitudes of small-scale farmers. Smallholder farms constitute approximately 80 per cent of all farms in SSA and employ about 175 million people directly (AGRA, 2014).

The agriculture industry in Sub-Saharan countries is dominated by smallholder families, representing 80 per cent of farms in the region (Wiggin &Keats 2013). These farms are managed by these families with limited technical and input support, poor access to finances and output market opportunities (Hussein and David, 2016). Rural households were excluded from formal sources of credit, with only 6 per cent borrowing from a formal institution (Okonjo-Iweala & Madan, 2016). The lack of primary information or data for farmers and their sales (such as profile, plot location, plot size, and productivity, revenue and cash flow) discourages banks from giving them loans.

Smallholder farmers tend to be geographically dispersed. This strains logistics as agribusinesses have to invest much time and money on traveling to and from individual farms to negotiate contracts, assess crops, and collect loans and payments with farmers trekking to company sites to collect payments and loans (Gustafson, 2016). Farmers lack access to knowledge and tools to identify, assess and communicate agronomic knowledge and advisory services to their members. Most farms are far away in the rural areas and lack access to good roads. Extension service agents find it hard to reach them or disseminate information to them in timely fashion (Accenture, 2015).

Trend in the Agriculture Sector of the Digital Economy of SSA

The Agriculture Sector of the Digital Economy of SSA is made up of both developmental projects funded by governments or development agencies and private companies. Some of these are briefly discussed in this section.

Projects Funded by Governments and Development Agencies:

 Agricultural Hot Line and EthioSIS in Ethiopia

The Agricultural hot line sends text messages and automated calls containing up-to-date agronomic information to farmers. Launched by Ethiopia’s Agricultural Transformation Agency in 2014, the line now has over 500,000 users and has already logged almost 6.5 million calls. The agency is currently developing a soil Information System (EthioSIS), a digital soil map analysing the country’s soils, down to a resolution of ten kilometres by ten kilometres that will be made available to millions of farmers (Foreign Affairs, 2016).

eWallet in Nigeria

The Nigerian eWallet is a data aggregation system that uses digital technology to allot government subsidies, fertilizers, improved seeds, agrochemicals and good farming practices to Nigerian farmers. The Federal Ministry of Rural Development of Nigeria launched the eWallet program in 2012 which would have served an average of 6 Million farmers annually by the end of 2017.

The eWallet technology which has been adopted in Togo and Liberia has served a pool of 500,000 farmers that grew 1.3 Million metric tonnes of rice and maize from May through September 2016. The program covers the 774 Local Government Areas (LGAs) in the country, over 95,315 villages and serves 17 million farmers and 2,714 agribusinesses across Nigeria. Farmers will soon be able to use the wallet to make mobile payment (Cellulant, 2017).

This Digital system drastically improves the fertilizer distribution process in the country, compared to the replaced non-digital system. Approximately 3 quarter of the farmers covered in the system are active users of the eWallet, receiving direct subsidies that cut the cost of fertilizer by 50 percent (Akinboro, 2014). It also improves efficiency and reduces corruption in the Fertilizer subsidy as experienced with the non-digital system. The FMARD estimated that in 2011 only 11 per cent of subsidized fertilizer reached smallholder farmers, after spending NGN 30 billion (approximately US$180 million) on its fertilizer subsidies (Grossman, J. and Taraz, M., 2014).

Digital Green Project in Ethiopia

Digital Green, bringing about increased farm level productivity and literacy. The Digital Green project trains development agencies and agents in communities they work, to produce and distribute locally relevant knowledge, using videos that feature information about farming techniques and nutrition practices, screened by frontline workers among farmer groups, using battery-operated mobile projectors.

These models have spurred farmers to adopt new agricultural practices for about one-tenth of the cost of traditional extension systems and has enabled Digital Green to reach more than 800,000 smallholder farmers with more than 60 per cent of them subsequently applying at least one practice and the adoption of these practices have reduced input costs by an estimated 15 per cent and increased crop yield by a further 20 per cent (Foreign Affairs, 2016). 

IBM’s EZ-Farm Project in Kenya

There is the IBM’s EZ-Farm project currently being tested in Kenya. It is aimed at aiding entrepreneurs who are investing in small-scale farming and those who live in urban areas, far away from where their farms are located. Soil moisture content, water tank levels, performance of irrigation equipment, photosynthesis rate (measured by infrared cameras) are monitored by sensors placed strategically around the farm. These data are streamed wirelessly to the IBM Cloud, which can then be accessed by farmers via a Smartphone app (Mungai, C. 2015).

 FieldLook in South Sudan

FieldLook in South Sudan is a project using satellite imagery to improve water management and crop husbandry in the Gezira irrigation scheme, one of the largest irrigation projects in the world. Satellite images provide agronomic information, which are sent to farmers via SMS. Great interest was generated in the technology by both farmers and administrators working in the Gezira scheme. Farmers participating in the project increased their yields by an average of 60 per cent. The project has increased farmers’ confidence in digital technology, to receive extension advice and there is great interest in the approach from other irrigation schemes in the country (The Africa Agriculture Status Report 2016).

The CTA MUIIS in Uganda

CTA ‘Market-Led, User-Owned ICT4Ag Enabled Information Service’ (MUIIS) combines big data and smart technologies to improve the production and marketing of crops in Uganda. The project offers low-cost, bundled satellite-based information services via mobile phones. The scheme is expected to benefit more than 350,000 Ugandan smallholder farmers, increase food crop yields by 25 per cent, increase farmers’ income by 20 per cent, increase the effective use of agricultural-inputs and water by a 10 per cent and decrease in the risk of using agricultural-inputs by 10 per cent (CTA, 2015).

Digital Service by Private Companies

M-Pesa in Kenya

M-Pesa is a mobile money launched by Safaricom in 2008 to serve people who are disconnected from formal institutions. The M-Pesa model has spread to Rwanda, Tanzania, South Africa and Uganda. Mobile banking now exists in 33 African countries, with 70 per cent of the world’s registered 81.8 million mobile money customers in Sub- Saharan Africa (Juma et al, 2013).

As such, more farmers and agribusinesses in SSA are using M-Pesa and other mobile money establishments for transactions and payments. Multiflower, a seed and cuttings exporter based in Arusha, Tanzania, which works with 3,500 out-growers and has close to US$1 million in annual revenue, uses M-Pesa to transact with growers.

Multiflower issued loans totalling US$6,000 to 200 farmers and paid US$67,000 to 300 farmers in a proof of concept pilot project in 2013. This provided each farmer a simple method for accessing credit in the future. The switch from cash to digital payment also resulted in an average saving of US$10.75 in transport costs and 8 hours per payment, per farmer, with participating farmers saving a total of approximately 6,000 hours over the duration of the pilot program (McKay and Buruku, 2016).

Société Ivoirienne de Banque (SIB) and Orange Partnership in Côte d’Ivoire

In May 2015, another Ivorian bank Société Ivoirienne de Banque (SIB) partnered with three cocoa cooperatives and Orange to launch a pilot targeting the digitization of 1,000 cocoa farmers’ payments for certified sustainable cocoa via a B2M (bank-to-mobile money) channel. The pilot was designed to incentivise saving. As of May 2017, 48 per cent of 2,400 farmers’ SIB bank accounts had integrated with Orange’s mobile money account.

Looking ahead to 2018, project partners are looking to extend the pilot to reach 8,500 farmers across nine cooperatives and digitize procurement payments alongside premium payments. In parallel, project partners are now testing direct mobile money bulk payments with the ambition to pay 100,000 farmers via digital means by the end of 2018 (GSMA, 2017).

M-Lima in Rwanda

M-Lima, formally known as AGRO FIBA is a mobile and web-based platform developed by M-Ahwi, a local Rwandan start-up. It has increased farmers access to loans by 60 per cent by connecting farmers to financial institutions such as Urwego Opportunity Bank, as well as large-scale buyers like the Rwanda Grains and Cereals Corporation and East Africa Exchange. The platform also gives farmers access to agronomic, market and financial data, and has attracted over 10,000 farmers in the maize and rice value chains within a year (The Africa Agriculture Status Report 2016).

Olam Farmer Information System (OFIS) in Côte d’Ivoire

OFIS, an enterprise tool with a purpose-built Android OS application and a cloud-based server built by Olam is used in cocoa, coffee, rubber and cashew nut value chains to collect data, replacing pen and paper in Côte d’Ivoire. OFIS is also used to analyse and visualize key statistical data, keep track of field training implementation versus any predetermined training targets, and communicate directly with field staff through application notifications. OFIS allows farmer groups and cooperatives to manage their operations, offer end-to-end traceability through a bar coding system and integrates digital payment functionality via Mobile Network Operators’ mobile money platforms (GSMA, 2017).

FarmDrive in Kenya

FarmDrive, a Kenyan data analytics start-up, helps smallholder farmers in Africa access credit from local banks, by generating credit scores for them using data input by farmers into their mobile phones and SMS mobile app — an app that helps farmers to track their revenues and expenses — as well as satellite, agronomic and local economic data. So far, 3,000 farmers have registered with FarmDrive, borrowing over $130,000 in loans (Agfunder, 2017).

M-Farm in Kenya

M-Farm is a digital system that provides up-to-date market prices through an app or through SMS. It provides a networking platform to connect to other farmers, in order to sell their goods in larger quantities and connects local farmers directly to suppliers without middle men and give significant discounts on fertilizers and seeds. With over 7,000 registered users, M-Farm updates farmers on current prices of goods across the country (Wired, 2013).

Before the introduction of M-Farm, 43 per cent of farmers learned about prices from market buyers and 50 per cent learned from middlemen. After M-Farm, only 6 per cent consulted market buyers and 23 per cent reported speaking with middle men. Survey results indicate that farmers now prefer receiving information from M-Farm when compared with market buyers or middlemen which were the main sources of information about prices for farmers in Kenya, before mobile devices were popular (Baumüller, 2015). 

EcoFarmer in Zimbabwe

EcoFarmer is a digital service platform developed and launched by Econet in 2013 to serve the smallholder farmers in Zimbabwe. EcoFarmer offers information service that sends advisory extension services through SMS to farmers, and a weather-indexed insurance product, tied to the purchase of quality seeds.

The insurance-premium products covered the needs of small-holder farmers while still remaining affordable for the average size of a smallholder field. Farmers could opt for a premium of only 2 cents a day (as opposed to 8 cents) for the season ($2.50 in total) for a pay-out of $25, which would cover the cost of the purchased seed.  This service has grown to include over 500,000 farmers (Foreign Affairs, 2016).

Conclusion

There is currently a growing digital economy in SSA driven by local innovations and mobile phone technology though mobile-broadband is still expensive in the region. The region is experiencing a growing smart phone penetration rates and Africans’ innovative use of digital technology to bridge some of the infrastructural gaps in their society has led to a significant socioeconomic development in the region.

The Agricultural sector can be said to be a big beneficiary of the digital revolution going on in the region, as national governments and development agencies are funding numerous digitization programs and projects in the sector across the region. They are taking advantage of the increasing penetration of mobile technology in the region, by using it to connect and serve a larger number of smallholder farmers and agribusinesses in rural areas.

The private sector has played a major role in the digitization of the sector by leading the revolution in the region with mobile banking with Safaricom as a leading example; The region’s Agritech industry is growing. New start-ups are coming up and are getting funds from both national governments, development agencies and private investors. Venture capitalists invested more than US$2 billion in agricultural technology start-ups in 2014 and again in 2015; the trend is expected to continue in 2018 and the coming years as the demand for innovative farm technology remains high (AyokaSystems, 2016).

Apart from mobile technology the region’s agricultural sector is also benefiting from the use of satellites, drones, sensors, cloud technology big-data and analytics, to improve farming, a practice known as precision farming (World Bank, 2011). However Precision farming is still an emerging trend in SSA.

References

Accenture, 2015. Digital Agriculture: Improving Profitability, Accenture.
Foreign Affairs, 2016. African Farmers in The Digital Age, How Digital Solutions Can Enable Rural Development; The Digital Thinking Initiative.
GSMA, 2017. Opportunities in agricultural value chain digitisation: Learnings from Côte d’Ivoire. GSMA.
Hussein, K. and S. David, 2016.  Rural-urban linkage and food systems in sub-Saharan Africa (the rural dimension). IFAD Research Series 5. Rome: IFAD.
IMF (International Monetary Fund), 2012. International Jobs Report, Economist Intelligence Unit, Washington, DC.
Juma, C., Tabo. R., Wilson, K. and Conway, G., 2013. Innovation for Sustainable Intensification in Africa, The Montpellier Panel; Agriculture for Impact, London.
Okonjo-Iweala N. and Madan J., 2016. Shine a Light on the Gaps; Smallholder Farmers Represent the Next Frontiers for Digital Financial Services. African Farmers in the Digital Age Report. How Digital Solutions Can Enable Rural Development. Foreign Affairs. Digital Thinking Initiative.
The Africa Agriculture Status Report 2016. Progress Towards Agriculture Transformation in Sub-Saharan Africa: Modernization of Agriculture through Digital Technology. AGRA.
Wiggins, S., and S. Keats, 2013. Leaping and Learning: Linking Smallholders to Markets. London: Agriculture for Impact, Imperial College London and Overseas Development Institute.
World Bank, 2011. ICT in Agriculture; Connecting smallholders to Knowledge, Networks and Institutions. e-Sourcebook; World Bank.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s