By Oluyede Ajayi, Senior Programme Coordinator at the ACP-EU Technical Center for Agriculture (CTA) based in the Netherlands
Walmart. Amazon. Tesla. Many of the world’s biggest businesses started small – and would not be where they are today without the help of start-up loans.
But in sub-Saharan Africa, the small businesses providing on average 24 per cent of GDP across the continent are receiving a meagre one percent of bank lending.
These are Africa’s smallholder farmers, who constitute over half the continent’s population, and are tasked with feeding an ever-expanding and increasingly hungry population.
One reason funds are so hard to come by, is the inherent risk involved in farming that is so subject to erratic weather.
Sufficient investment will never be unlocked while farmers’ future profits remain so uncertain. Yet the African food and beverage market is projected to be worth $1 trillion dollars by 2030, if the right investments are made. We need to find ways to open up African agriculture to this investment, even in the face of a changing climate.
Over 4,000 farmers in Uganda’s mountainous south-western region of Butare are one step closer to achieving this. They have set up digital profiles, which map the location, size and productivity and their farms. Unmanned aerial vehicles have been surveying the skies to collect complementary information. When combined, this data is able to act as collateral for these farmers to receive fertilizer and credit to grow their business. The data gives a credible forecast of what farmers need, and whether they will be able to repay loans.
This approach of digitally profiling farmers is among our best bets to strengthen their operations, and unlock financing.
Centralizing data on farmers’ needs makes it easier to deliver bespoke advice, and services like weather forecasting to help improve resilience to weather shocks. In southern Africa, 74,000 farmers have been digitally profiled in Zambia, Zimbabwe and Malawi to this end.
Phineas Muyabi is living proof that this works. When he retired from the Zambian army in 2001, he invested his lump sum payment in seeds and other agricultural inputs. But drought destroyed his crops and over the next few years his family had to rely on food aid.
Now, he receives weather alerts and farming tips via SMS, as part of a regional project to improve the resilience of cereal and livestock farmers in Southern Africa, led by CTA. A digital platform hosted by the Zambia Open University collates data collected by the Zambia National Agricultural Information Service.
In neighbouring Zimbabwe, this alert system is offered together with a weather insurance product, known as the EcoFarmer “combo”, which allows farmers to insure their crops against the risk of excessive rainfall and excessive dry days for as little as $1 per month.
These digital innovations will be the key to unlocking the investment that African agriculture needs to reach its potential. What will be the key to ensuring their uptake?
Some technology roll-out programmes rely on the appeal of their products alone. For cash-poor, risk-averse farmers, this is rarely enough to entice them on board. This is why the EcoFarmer combo is a “bundled” solution. It provides access to agronomic advice, seeds, and weather insurance (a relatively new concept for farmers) as well as funeral insurance (a product that is well known to farmers). This offers farmers multiple layers of protection, and creates an entry point for new technological approaches to take hold.
Funding to improve telecommunications infrastructure is also going to be extremely important. Between 1998 and 2008, total private sector investment in telecoms in sub-Saharan Africa reached $49 billion, mainly in the mobile market. To ensure this type of investment can continue, African governments need to pave the way for telecoms markets to thrive, by providing the necessary investment-friendly policies, and well-functioning regulatory institutional frameworks to ensure this type of private sector investment can continue into the future.
Encouraging countries with similar climatic conditions to come together and pool resources, will also reduce the risk involved in setting up systems for something as complex and technical as weather-based insurance. The seeds have already been sown for this type of collaboration in southern Africa and will allow significantly more farmers to benefit from the technology.
The United Nations climate change conference in Poland is an important moment to make this case. While actors debate how to transform our food system under a changing climate, boosting investment in the region that is home to six of the ten countries most vulnerable to climate change must be a priority.
Back in Uganda, a newly trained 25-year-old air-to-ground surveillance expert summed up the potential digital innovations present for African farming as he flew a drone over the Igara tea factory plantation. “With this technology,” he said, “the sky is the limit.”
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent. Sign up here.