Next Wave: Agritech are startups outpaced by traditional brokers. What can be done?

Tech-driven agricultural startups (agritech) are driving innovation by connecting different players in the agricultural sector. They are particularly helpful for rural farmers, linking them directly with urban buyers. Ghana-based AgroCenta, for example, offers an online marketplace for farmers’ porduce while Hello Tractor uses a mobile app to facilitate tractor rentals for small-scale farmers. Nigeria’s ThriveAgric takes a more comprehensive approach by providing a mobile platform that connects farmers to buyers and suppliers to credit.

However, convincing farmers to collaborate with agritech companies has proven challenging since traditional brokers remain influential in controlling crop and market access. It makes sense because comparing traditional brokers/middlemen with B2C or B2B businesses, there isn’t much of a difference beyond the technology layer.

Agritech startups encounter obstacles when competing with traditional vendors who connect farmers to buyers due to entrenched relationships, local knowledge, and limited need for technology adoption among farmers. According to a report filed by Mozilla about the digital startup ecosystem in Africa, traditional vendors have built long-standing trust and familiarity with farmers, taking advantage of their deep local networks and understanding of farmers’ specific needs. This has made it challenging for agritech startups to penetrate the market, especially in rural areas where technology adoption is low and dependence on traditional farming methods is strong. Cultural and language barriers have also complicated the crisis, as traditional vendors often speak the local language and understand the cultural norms of farming communities, enabling them to establish rapport and trust more easily than agritech startups.

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Overcoming these obstacles will require agritech startups making targeted efforts to build trust, provide localised support, and address the cultural and language barriers that impede the adoption of agritech solutions in farming communities.

Despite agriculture being a crucial economic sector, investment in agritech has attracted little funding over the last couple of years. According to the aforementioned Mozilla report, in 2021, the African agritech sector received $95.1 milliom, which was 4.4% of total funding for tech startups in Africa, marking a notable jump from $59.9 milliom (8.6% of total) in 2020.

Agritech startups, particularly those linking farmers to vendors, face challenges that may worsen in Africa due to rural poverty and natural-resource scarcity. These challenges include addressing competing claims on natural resources, ensuring the inclusion of the poor in the development process, and effectively integrating small-scale farmers into value chains.

To address these issues, agritech startups must tailor their approaches to designing the brokering role. Before establishing market operations, they should analyse innovation system imperfections and gauge stakeholders’ willingness to support or collaborate with them. Building trust and credibility among farmers is essential for success in the agritech industry.

Agritech firms should consider multiple functions required at different stages of innovation but avoid applying them as a fixed template. Flexibility is key, allowing for the reassessment of context, needs, and opportunities as necessary. This also helps networks adapt accordingly. Facilitating interaction is a dynamic process that demands continuous attention to build mutual understanding and trust, particularly in response to evolving visions and networks.

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Sometimes, agritechs face conflicts of interest that require strong conflict management and mediation skills. They must navigate contrasting demands and opposition from other actors in innovation systems resistant to change. Transparency about actions and interventions is key to avoid misinterpretation, particularly in countries with weak governance where challenges like corruption and favouritism may come up.

And despite resource dependencies, agritech firms should avoid being perceived as “hidden messengers” for the government or other parties, as this can undermine their credibility.

Kenn Abuya

Senior Reporter, TechCabal

Thank you for reading this far. Feel free to email kenn[at]bigcabal.com, with your thoughts about this edition of NextWave. Or just click reply to share your thoughts and feedback.

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