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Digital Inclusion

African Agriculture Has $2B Untapped Digital Services Market

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The untapped market for digital services that could transform African agriculture could be worth more than 2 billion ($2.26 billion). This is according to a new report from the Technical Centre for Agricultural and Rural Cooperation (CTA) and Dalberg Advisors which found that more than 90% of the market for digital services that support African smallholders remains untapped.

The Digitalisation of African Agriculture Report 2018-2019 found there are nearly 400 different active digital agriculture solutions, with 33 million registered farmers across sub-Saharan Africa.

But researchers believe the current digitalization for agriculture (D4Ag) market is likely to be the tip of the iceberg, with a penetration of just 6% and turnover in 2018 of an estimated 127 million ($143 million) out of a total addressable market of 2.3 billion ($2.6 billion).

A new report has found that digital ventures in Africa already have more than 33 million registered users (picture courtesy of CTA).
A new report has found that digital ventures in Africa already have more than 33 million registered users (picture courtesy of CTA).

The study 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.

CTA is a joint international institution of the African, Caribbean and Pacific (ACP) group of states and the European Union (EU). CTA works to advance food security, resilience and inclusive economic growth in ACP through innovations in sustainable agriculture.

The report also found that the sector is growing very quickly, with nearly 60% of the solutions launched in the last three years, and approximately 20% launched since 2018.

"Digitalization can be a game-changer in modernizing and transforming Africa's agriculture, attracting young people to farming and allowing farmers to optimize production while also making them more resilient to climate change," says 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," Hailu adds.

While there are D4Ag solutions present in at least 43 out of 49 Sub-Saharan African countries, interestingly, over half of the solutions are headquartered in East Africa and nearly two-thirds of registered farmers across all solutions are based in East Africa, with Kenya leading the way. Similarly, the largest 20 solutions account for nearly 80% of farmer registrations.

Among the digital solutions tracked and analyzed 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 services -- were associated with yet further improved yields of up to 168%.

"Digitalization 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 naive about the challenges that remain and the significant work required by agribusiness, governments, donors and investors to maximize 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 labor force yet comprise only a quarter of the registered users of digital services. These 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 for ICTs for agriculture at CTA. "The next decade -- the 'D4Ag' age -- will be about translating this potential into reality and doing so equitably and sustainably."

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