Report Explores the Emergence of Smart Farming Solutions in LMICs and Identifies Opportunities to Scale These Solutions

From working a wide range of project such as growing matoke in Uganda, storing apples in Uzbekistan or exporting rice out of Cambodia, I appreciate how innovative technology solutions can help small farmers and businesses in the agriculture sector. Therefore, it was with great interest to read a report published by the GSMA, a UK-based organization that represents the interests of mobile operators worldwide, which presents findings from an assessment of smart farming solutions for smallholders in low- and middle-income countries (LMICs).

With research performed by a team from the Digital Agri Hub, which strives to build a sustainable digital agriculture (D4Ag) landscape towards agriculture transformation LMICs, the assessment examined more than 70 smart farming solutions being implemented in LMICs around the world. The solutions cover three sub-use cases including smart crop management, smart livestock management, and mechanization.

Image of smart farming sub-use cases: GSMA

The Digital Agri Hub team focused their research on answering the following questions:

1. What are the leading smart farming solutions available in LMICs?
2. What smallholder challenges do these smart farming solutions address?
3. What are the enabling factors and challenges impacting the growth of technology-enabled smart farming solutions?
4. What use cases do the various smart farming solutions support and how do they contribute to climate and disaster resilience, inclusivity and increased productivity and well-being?
5. What operational and business models for smart farming are emerging and how can smart farming solutions achieve scale?
6. What technologies are supporting the implementation of smart farming solutions?
7. How are investors perceiving the smart farming opportunity?

In the data collected from researching the aforementioned questions, six key trends were identified:

1. Smart farming solutions have had a strong focus on high-end, capital-intensive crops like horticulture, aquaculture and livestock, in contrast to other digital agriculture solutions where there is a stronger focus on cash crops.
2. Smart farming services require a robust technical background and strong digital services know-how. As a result, there are fewer traditional digital agriculture service players (such as mobile operators, NGOs and governments) playing a leading role in the roll-out of smart farming solutions.
3. Although achieving scale has been elusive for most smart farming solution providers to date, aquaculture management service solution providers have enjoyed some early successes in expanding their user numbers and attracting funding from investors.
4. Smart farming solution providers focused on smallholder farmers are pivoting away from pitching the technology itself (smart sensors, smart greenhouses, smart irrigation systems, etc.) to pitching platforms and solutions that solve specific smallholder problems.
5. Smart farming solutions are often bundled with e-commerce platforms that connect farmers to input suppliers, traders and buyers to help them find markets for their increased yields.
6. Smart farming solutions have struggled to make inroads with female farmers given the nascent stage of most smart farming companies. In the early stages, D4Ag providers have focused on scale without necessarily taking a gender lens approach.

Researchers also identified six main business models being implemented by smart farming solution providers in LMICs: upfront purchase or asset transfer, pay-as-you-go (PAYG), smart farming-as-a-service/subscription, freemium or tiered, service bundling, and data or insights monetization. The report points out that "These are not mutually exclusive as D4Ag providers may rely on different models to target different customer segments. For example, a D4Ag provider may rely on upfront purchases for their business-to-business (B2B) channel but on pay-as-you-go (PAYG) for their business-to-consumer (B2C) channel."

What is more, "To date, the smart farming services that have had the most success achieving scale are those that rely on the PAYG or smart farming-as-a-service models. These business models lower the barrier to entry for smallholder farmers while creating an ongoing relationship that allows the D4Ag provider to maintain control of the farmer relationship and upsell new services over time."

I appreciate the report's assertion that "Given the nascent stage of the smart farming opportunity in LMICs, investors, donors and other industry stakeholders will need to take several steps before deciding to invest in a smart farming venture." Research from the Digital Agri Hub "has resulted in the following recommendations for ecosystem players seeking to invest in smart farming solutions in LMICs:"

1. Prioritize higher-margin value chains for market entry, such as fresh produce, aquaculture and livestock. These value chains give smallholder farmers slightly more room to invest in new technologies than cash crops, which tend to have very low margins and prices are beyond their control.
2. Consider the characteristics of a country before deciding on market entry. Pay particular attention to the regulatory environment, available network infrastructure, the competitive environment and the maturity of the targeted value chains.
3. Prioritize the right partnerships. Smart farming solutions tend to be more complex than other digital agriculture solutions and, therefore, often require the participation of other ecosystem players. Look to other D4Ag providers to enhance the service offering, to agribusinesses and cooperatives to help aggregate demand, to financial service providers (FSPs) to facilitate financing or identify new target segments (for the monetization of data), to mobile network operators (MNOs) for network access and client relationships and to asset or hardware manufacturers to help reduce the cost of the hardware by creating scale.
4. Take a long view. Patient capital from early investors will make it easier for D4Ag providers with smart farming solutions to attract additional investors and scale their business. D4Ag players will need to spend time educating investors about the potential of smart farming solutions.
5. Ensure farmers are involved in the design of smart farming solutions. Solutions must solve challenges that smallholder farmers face in their daily lives, not those that governments, investors or other stakeholders perceive they face.
6. Understand the total cost of the solution being offered and how that compares with a smallholder farmer’s ability to pay for the solution. This includes understanding the full cost of implementing the technology (e.g. setting up the sensors, installing gateways, etc.) as well as the ongoing support (e.g. access to the platform, data connectivity, etc.).
7. Offer more than just data. It is critical, particularly in the context of smallholder farming, that D4Ag solution providers offer more than just the data generated from their smart farming technology. They must translate that data into specific recommendations and, eventually, automated actions. They must also endeavor to offer holistic solutions that help farmers solve a multitude of challenges, not just one specific challenge.

The report correctly notes that "Smart farming solutions can power the transformation of the agriculture sector and assist in the professionalization of smallholder farming by automating decision-making at the farm level." Moreover, "They can help smallholder farmers in LMICs increase their productivity and disaster resilience by opening access to assets and mechanization, optimizing the use of inputs, labor and natural resources and reducing crop and animal losses and waste."

This assessment of the smart farming opportunity in LMICs is the first in a series of reports produced for the Digital Agri Hub that highlight innovations supporting climate and disaster resilience, inclusivity and increased productivity and well-being. I appreciate how the report explores the emergence of smart farming solutions in LMICs and identifies opportunities to scale these solutions. The report also serves as a valuable took in providing supply-side solution providers, such as agritech innovators and mobile operators, as well as the investors and donors that support them, with insights into the smart farming opportunity in LMICs.

What are your recommendations for improving smart farming solutions to help smallholder farmers access assets and mechanization, increase labor efficiency, improve productivity and resilience to climate change, promote the inclusion of groups typically left behind (including women and youth), increase incomes and facilitate smallholder access to credit and insurance products?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

GSMA Report Explores How to Reach and Empower Women in Digital Solutions in the Agriculture Last Mile

"In low- and middle-income countries (LMICs), the digitization of agricultural value chains is enabling access to markets, assets and services for smallholder farmers," the GSMA says in a report that examines "the limited participation of women in digitized agricultural value chains by identifying the main barriers for women in D4Ag [digital agriculture] initiatives and shedding light on best practices to increase women's participation and empowerment in these value chains."

The report further notes that D4Ag "solutions, such as digital payments and digital procurement, create efficiencies for both agribusinesses and farmers in the last mile. Digital procurement solutions can generate a range of records, including farmers' production data that enable the creation of economic identities and help them access finance. Digital procurement solutions can also be bundled with digital advisory services that provide farmers with vital information on new farming techniques, weather forecasts and crop production."

"Yet," according to the GSMA, "women farmers are being left behind. Although they represent 43 percent of the agricultural labor force, women face social and structural barriers that typically relegate them to traditional, low-value and labor-intensive activities, such as plowing, sowing and harvesting." What is more, "Restrictive social norms, lack of access to resources and the mobile gender gap all make it more challenging for women to participate fully in agricultural value chains and embrace the digital agriculture solutions that can connect them to markets and services and strengthen their decision-making power."

The report identifies the following digital solutions in the agricultural last mile:

1. Digital profiles: Mobile for authentication and verification, and a tool to create economic identities/digital profiles
2. Track-and-trace systems, farm management systems: Product verification services, accountability tools
3. Information services: Agricultural extension, education, certification standards, skills development
4. Digital financial services: Mobile money-enabled transfers, payments and financial service
5. IoT applications for agriculture: Equipment logistics, crop, soil and weather monitoring, smart warehousing
6. Agribusiness analytics: Predictive analytics, precision agriculture

With respect the barriers facing women in digitized agricultural value chains, the report looks at the social norms, lack of access to resources, and mobile gender gap that contribute to these barriers. It also presents steps to increase women's participation in digitized value chains including defining a gender strategy to guide gender-inclusive interventions, creating a gender-inclusive environment through foundational interventions, and addressing women's barriers through gender-inclusive interventions.

The report produces the following conclusions:

• "Women's low participation in digitized agricultural value chains can only be addressed through approaches that purposely consider women as well as men."
• "The early impact of gender-inclusive last-mile digital solutions on women farmers' participation and decision-making power is promising." through the efforts of organizations creating digital agriculture solutions that has "increased yields and incomes, as well as increased decision-making power in the household."
• "A deeper understanding of women's agency and the social norms shaping their lives is needed to bridge the gap in commercial agriculture value chains."
• "Donors and impact investors are uniquely positioned to push gender inclusive interventions forward. They can inject capital in initiatives that purposely include and target women, and ultimately help to create a level playing field in which women smallholder farmers have equitable access to digital solutions."
• "Donors and investors should first apply a gender lens to their own investment strategies to identify and reward new D4Ag investees that already apply, and want to test, approaches that reach both women and men."
• "Donors and investors should also leverage their ongoing investments to encourage investees to adopt best practices, such as consistently collecting and using sex-disaggregated data, or involving women in human-centric design research to inform the design of solutions. Investors can also make investments that strengthen the resilience of women farmers to climate change since they are disproportionately affected as a result of lower input use or weaker safety nets."

Lastly, I support the report's assertion that "By incentivizing and rewarding D4Ag providers, donors and impact investors can guide them towards gender-inclusive approaches that aim to improve women's influence, leadership roles and decision-making power, and promote sensitive and equal gender norms at all levels. Without this, gender inequalities are not only likely to remain, but become exacerbated."

What are your recommendations for increasing women's participation in digitized value chains? Which digital solutions are you creating in the agricultural last mile?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Merchant Mobile Payments Nearly Doubled in 2021, According to GSMA's Annual Report on the Mobile Money Industry

"Over the past decade, mobile money has expanded from a niche offering in a handful of markets to a mainstream financial service, moving millions of households in low- and middle-income countries (LMICs) from the informal cash economy into a more inclusive digital economy," according to GSMA's State of the Industry Report on Mobile Money 2022. Available in English and Français, the GSMA, a UK-based organization that aims to unify the mobile ecosystem to discover, develop and deliver innovation foundational to positive business environments and societal change, adds: "In 2012, there were 169 mobile money deployments in 71 countries. Ten years on, the number of live deployments has almost doubled to 316 and expanded to 98 countries worldwide."

A product of GSMA's Mobile Money program, which works to accelerate the development of the mobile money ecosystem for the underserved, the report examines the following major industry trends of 2021:

1. A trillion dollars transacted as the industry diversifies. "In 2021, the mobile money industry processed more than $1 trillion in transactions. The year-on-year increases in transaction values have been driven by new customer uptake and a growing number of mobile money use cases. For example, in 2012, ecosystem transactions such as bill payments, bulk disbursements, merchant payments and international remittances accounted for less than 10 percent of overall transactions. Ten years on, this has risen to 20 percent, a clear sign that mobile money providers are embracing diversification."

2. Mobile money adoption and activity continue their upward trajectory. "In 2021, the number of registered accounts reached 1.35 billion globally, up 18 percent since last year and 10 times more than there were in 2012 (134 million). 518 million of these accounts were active on a 90-day basis and 346 million on a 30-day basis, growing nearly 15 times and 13 times respectively since 2012. The volume and frequency of transactions also registered strong growth. In 2021, more than 1.5 million person-to-person (P2P) transactions were made every hour on average, compared to fewer than 68,000 in 2012, and the average account makes 3.5 P2P transactions per month."

3. Agent networks continue to thrive. "Between 2012 and 2021, the number of active agents grew more than 10 times, from 534,000 to 5.6 million, unlocking access to financial services for the most underserved customers. Despite closures and restrictions on movement during the COVID-19 pandemic, the value cashed in and digitized via mobile money agent networks grew by 18 percent in 2021, reaching a total of $261 billion or more than $715 million a day. Even the most established agent networks registered strong growth, with the 25 largest networks growing by more than 25 percent on average from 2020 to 2021."

4. Regulatory challenges persist. "Despite the huge success of mobile money services in many countries, in others, the sustainability of mobile money services is threatened by certain policy and regulatory interventions, from taxes on transactions to poorly implemented instant payment solutions and costly data localization mandates. The high cost of compliance is shared by mobile money providers and customers alike with potentially negative consequences on future investments in, and customer usage of, mobile money services. Dialogue between policy makers, regulators and industry leaders is of paramount importance in order to prevent adverse policy and regulatory interventions."

5. Merchant payments nearly doubled. "After a momentous year for merchant payments in 2020, in 2021 they nearly doubled, reaching an average of $5.5 billion in transactions per month and accounting for 21 percent of the value circulating in the mobile money system (P2P + merchant payments), up from around 10 percent in the past two years. Uptake has been in part driven by the number of businesses actively accepting and receiving mobile money payments."

6. International remittances are still flowing fast. "Two years on since the onset of the COVID-19 pandemic, diasporas around the world increasingly send money home using mobile money. The number of international remittances sent and received via mobile money grew by 48 percent in 2021, reaching $16 billion. Still, mobile money represents less than three percent of all remittances globally, meaning there is significant potential to digitize remittances and offer faster and more affordable ways to send money worldwide."

7. Bill payments leapt again in 2021. "Like other ecosystem transactions, the number of bill payments processed via mobile money leapt in 2021, growing by 37 percent to exceed $5 billion in transactions per month. For customers, mobile money-enabled bill payments can unlock access to a range of new services, such as off-grid energy, and help low-income users build economic identities. For government agencies and utility companies, mobile money-enabled bill payments can make revenue collection more efficient and cost-effective, strengthen financial transparency and circumvent fraud."

8. Bulk disbursements are seeing remarkable growth. "After registering 28 percent growth in 2020, mobile money-enabled bulk disbursements grew by another third in 2021, topping $65.8 billion. This growth is likely due to an uptick in salary payments as more and more employers turned to mobile money to pay their employees, with the number of unique accounts receiving salaries via mobile money increasing. The number of unique accounts receiving Government-to-person (G2P) payments were also up, as governments forged new partnerships with mobile money providers to deliver pandemic relief and other forms of social support."

9. Savings, credit and insurance are building financial resilience. "According to our Global Adoption Survey, approximately two in five (44 percent) mobile money providers offer credit, savings or insurance products. Uptake of these products in 2021 was encouraging across mature mobile money markets while they also gained traction in less mature markets, where customers are seeking out products to help protect their families and businesses against uncertainty and crisis, invest in their livelihoods and improve their standard of living.

10. Partnerships are pushing interoperability. "After recording exceptional growth in 2020, the value of transactions flowing between banks and mobile money platforms also grew quickly in 2021, up 46 percent, more than doubling since 2019. The continued acceleration of these types of transactions confirms the complementary relationship between banks and the mobile money industry that has been observed in the past few years, confirming mobile money’s key position in the financial ecosystem."

11. The mobile money gender gap is holding women and economies back. "Across LMICs, women are still less likely than men to own a mobile money account. This is due to a variety of reasons including not owning a mobile phone, lack of awareness of mobile money and lack of perceived relevance, knowledge and skills. Encouragingly though, once women have a mobile money account, their likelihood of using it is almost on par with men. As part of the GSMA Connected Women Commitment Initiative, 26 mobile operators across Africa, Asia and Latin America have made formal commitments to reduce the gender gap in their mobile money customer base since 2016."

12. Mobile money is enabling access to humanitarian assistance, utilities and agricultural solutions. "Mobile money is an enabler of many other services that can help solve critical socio-economic and environmental challenges, such as providing access to essential utilities, sustaining the livelihoods of smallholder farmers and delivering rapid financial relief to vulnerable populations. For mobile money providers, these use cases represent valuable opportunities to diversify, which many have already embraced."

Video entitled "Mobile money: tracking a decade of innovation, growth and sustainable impact":

The report concludes by explaining that "2021 has shown how the scale and power of mobile money can build a more inclusive world. Behind the numbers and milestones in this report are hundreds of millions of people participating in a more inclusive digital economy." What is more, "Individuals, communities and the public, private and non-profit sectors are all reaping the socio-economic benefits of mobile money."

The GSMA further says "even more profound benefits are possible if the industry and all stakeholders can catalyze efforts, reducing the mobile gender gap and meeting diverse customer needs to activate the billion registered customer accounts that are currently so infrequently used. In practical terms, this can also mean delivering more fast and secure cash transfers among the over 235 million people in need of humanitarian assistance; providing credit, insurance and other risk management tools to more of the nearly 500 million smallholder farmers growing a third of the world's food; and opening further access to affordable, reliable and safe water, energy and sanitation among the more than 1.2 billion people without access to core urban services."

It is encouraging to read how mobile money continues to grow rapidly, bringing a suite of financial products to hundreds of millions of users worldwide and disrupting traditional financial services. Moreover, mobile money is providing significant growth in merchant payments and enabling access to humanitarian aid, utilities and agricultural solutions. Nevertheless, while I recognize recent improvements to increase financial inclusion for women, more must be done to eliminate the mobile gender gap.

Are there aspects of GSMA's report on the mobile money industry that you found of particular interest?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Understanding How the War in Ukraine Will Change Business

Since Russia's unprovoked invasion of Ukraine on Feb. 24th, 2022, I have held several conversations with colleagues asking how the war will change business. A report published by The Economist Intelligence Unit (The EIU) aims to address this question by noting: "Although primarily a humanitarian disaster, the Russia-Ukraine conflict will also accelerate changes already provoked by the pandemic, US-China tensions and climate change."

The EIU presents five ways in which the war in Ukraine will change business:

1. The war will add to supply-chain disruptions in sectors such as automotive, increasing the pressure for localization.
2. A surge in energy and other commodity prices will hasten public- and private-sector efforts to improve food security.
3. The investment needed to reduce Europe's reliance on Russian energy will affect funding for clean-energy investments in developing countries.
4. Financial sanctions against Russia may accelerate the transition from US dollar-backed financial systems to interoperable central bank digital currencies (CBDCs).
5. Geopolitical tensions over technology (already central to the US-China trade war) will intensify as Russia curbs internet access and faces technology sanctions.

Among the five points presented by The EIU, three are worth exploring more deeply. "Supply chains have already been disrupted by the pandemic, as well as the earlier US-China trade war," the report says. "The difficulties caused by the Russia-Ukraine war will prolong these disruptions and place added pressure on companies in sectors such as automotive to shorten their supply chains and build resilience. This may mean increasing stock of major components, reining in just-in-time production norms or investing in more local suppliers."

As for price increases in commodities driving adoption of sustainable food policies, "The war in Ukraine will keep fuel and commodity prices elevated for much of the year. This will not only raise business costs, but will also heighten existing concerns about energy and food security." Moreover, "The war is already forcing several governments to examine their food and agricultural policies closely, not just in Europe, but also in the Middle East, Singapore and China, among others."

In a separate article, The EIU explains says it expects the "average grain prices to rise by almost a third this year, on top of the 40% increase recorded in 2021" and "prices of sunflower seed oil to increase rather than fall in 2022, as originally forecast before Russia's invasion; prices increased by nearly 60% in 2021."

With respect technology becoming increasingly geopolitical and regionalized, this is happening in two ways. "First," according to the report, "access to technology is seen as a competitive advantage for countries, as evident in US attitudes towards semiconductors. Because the chip sector is fragmented and the product is complex, every actor will need to use US equipment at some point; therefore, any US technology sanction makes a country or company unable to purchase semiconductors."

As for the second way, "the internet is becoming more national and less global. China has driven this change by using a national firewall to restrict access to content that its government deems dangerous—a measure that Russia wants to adopt. The EU, through its values-led approach to data privacy and regulation of artificial intelligence, has also created regional barriers to the internet."

However, the report importantly notes: "This regionalization of the internet will not necessarily lead to a 'splinternet,' where different systems are completely separate and not interoperable. The broader battle is between the US, which wants to retain the multistakeholder governance model of the internet (open, decentralized and industry-led), and China, which wants a cyber-sovereignty model (closed, centralized and country-led). However, the tensions are not just between democracies and autocracies, but also between blocs, as the relationship between the US and EU shows."

The EIU published a subsequent report presenting ten ways the war in Ukraine will change the world:

1. Russia's war in Ukraine will bring about a new division of Europe.
2. Russia's violation of Ukraine's sovereignty signals the end of the post-cold war order.
3. The war in Ukraine will deepen Russia's strategic alliance with China.
4. Russia's actions accelerate the bifurcation of the world into two hostile, competing camps.
5. A renewed focus on European security will constrain the US tilt to Asia.
6. The war in Ukraine will accelerate a global arms race.
7. Germany may begin to play a more assertive role in European security policy.
8. Europe will be forced to decide where it stands in the new global order.
9. The challenge to global democracy will become more pronounced.
10. The war in Ukraine will embolden others and inflame existing conflicts.

With respect to the first point of Russia's war bringing out a new division of Europe, The EIU points out that "Russia's brutal invasion aims to destroy Ukraine's sovereignty and prevent the country from ever joining NATO or the EU. Russia intends to annex at least part of Ukraine, thereby creating a buffer zone between Russia and the West that also includes Belarus and Kazakhstan." Moreover, "Russia's repudiation of the Western-led 'rules based order' signals a turning away from Europe and the creation of a new division of the continent, three decades after the fall of the Berlin Wall."

More troubling is how Russia's actions will accelerate the bifurcation of the world into two hostile, competing camps. As the report explains, "China and the West have been competing for several years to establish dominance in the industries and technologies of the future and to prepare the ground for a future decoupling. The coronavirus pandemic has reinforced this trend, fostering a move towards regionalization and away from globalization." What is more, "By bringing about a decisive rupture with the West, Russia's actions will speed up the division of the world between two rival poles. Some countries will take sides, but many others will seek to maintain a foot in both camps. As time goes on, this balancing act will become increasingly difficult."

I appreciate how The EIU's first report explores the impact Russia's unprovoked war with Ukraine will have on key global industry sectors and the risks these present to businesses. The second analysis also serves as a useful tool in outlining how the conflict will influence the global balance of power and lead to a further unravelling of the post-Cold War order. The situation in eastern Europe has increased several risk factors businesses will need to navigate.

How is the war affecting your business?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

347 African Tech Startups Raised $1.4 Billion in 2020, Says Africa Tech Venture Capital Report

347 African tech startups raised a total of US$1.43 billion in 358 equity rounds in 2020, according to the 2020 Africa Tech Venture Capital Report published by Partech Partners, a venture capital firm with offices in San Francisco, Paris, Berlin, and Dakar. This was an increase of 250 rounds by 234 startups in the previous year, which represents a year-over-year (YoY) growth rate of 44% in deal count.

"This is quite remarkable," the report says. "In such a challenging year, more startups have closed rounds than in any previous year. Activity has grown by almost half. No other region in the world has seen anything like this. The global interest for the African tech ecosystem remains strong even in the context of the global crisis driven by the pandemic."

However, not all is rosy. The equity funding raised by African tech startups in 2020 totaled US$1.429 billion compared to US$2.02 billion in 2019, a YoY decline of 29%. As the report explains: "Despite a strong growth in activity, the total amount raised by African startups decreased for the first time after nearly a decade of accelerating growth. While it is still higher than 2018 and before, this sharp drop clearly marks the impact of the pandemic and subsequent lockdowns."

What is more, "Activity has drastically reduced for mega rounds (above US$50M), barely grown on large-size deals and accelerated on venture-type rounds."

More encouragingly, however, "As the table above shows, the activity level has increased for almost any deal below the US$50M size. Deals between US$200k and US$1M have actually almost doubled, keeping up with previous trends. The main drive for the lower total amount of equity funding raised seems to be the disappearance of mega-rounds. Indeed, when we exclude rounds above US$50M, this total equity amount raised is flat between 2019 and 2020. Thus, this explains to a great extent the drop in funding amount."

Focusing on a breakdown by country, the report maintains that "As in previous years, VC Funding is still concentrated in few markets, but we see strong signs of diversification as half of African countries are now in play."

• Nigeria remains Africa's top destination with US$307M invested (21% of all equity funding) with Kenya following closely behind with US$305M.
• Egypt completes its rally toward #1 in equity deal count, with 86 deals (+83% YoY), almost a quarter of the continent's VC transactions.
• African VC investment remains centered around 4 top countries attracting 80% of the volume invested. However, we see more diversification as Ghana reaches a solid #5 spot, with a 102% increase in equity funding to reach US$111M and in total an unprecedented 26 countries have attracted capital.

As indicated in the image above, fintech is still the leading vertical with 25% of funding (despite a 57% YoY drop in volume). The 2020 highlight, however, is on the rising investment in the digitization of key economic sectors with agritech (US$179M), logistics and mobility (US$157M), offgrid/energy (US$148M) and health tech (US$141M).

"When we further breakdown funding in each vertical by markets, it's clear that investors in each vertical focus on a few countries":

• "Fintech investment is quite concentrated with Nigeria (38%), Egypt (28%) and Ghana (13%) attracting together nearly 80% of all the funding in this vertical.
• "Agritech is even more concentrated with 79% of the equity funding in this vertical flowing into Kenya. However this is partly driven by a single large deal at US$85M.
• "Nearly half of Enterprise funding goes to South Africa. And the same applies with half of funding in Logistics, Mobility and Edtech flowing into Egypt."

Focusing on gender, the report reveals that female-founded startups raised 13% of the rounds in 2020, a four point decrease from 17% in the previous year. But they accounted for 14% of the total equity funding just above 13% in 2019.

Moreover, female-founded startups raised US$204 million in equity funding in 2020, a 22% drop from the previous year. Interestingly, startups in Kenya accounted for 65% of this amount keeping with a similar trend in 2019 when 78% of funding to female-founded startups occurred in Kenya.

As for giving a breakdown of the investors, "Africa's tech ecosystem is not only attracting more investors (+24% YoY), but they are also more committed to the market, with 108 of them involved in 2 or more deals and 22 very active in 5+ deals." Furthermore, "443 unique equity investors were involved in the 359 equity rounds raised by African startups in 2020. It was around 87 when we started tracking this metric in 2017, a 5x growth in 3 years."

"Looking at the investors' distribution per stage, early stages' attractiveness is strongly confirmed with 421 active investors involved in Seed+ transactions (228 rounds), 229 investors in Series A (through 86 rounds), 80 investors in Series B (29 rounds) and 43 active investors in the 16 Growth rounds."

Partech Partners provides the following explanation to its methodology noting that the firm reports on tech and digital VC equity deals above US$200k, in African startups:

1. The numbers are about equity deals. This means Partech excludes everything else: grants, awards, prizes, conventional debt, venture debt, loans, Initial Coin Offering (ICO), non-equity/technical assistance, post-IPO and M&A deals. Examples: Twiga Foods US$29.4M debt from IFC announced in Oct 2020 is not counted. Lumos Global's debt round of US$45M from DFC announced in September 2020 is also not counted.
2. The numbers only include equity funding rounds higher than US$200k. This includes deals that Partech categorize as Late Seed (Seed+) to Growth stage equity rounds. Angel deals and smaller Seed deals below US$200k (numerous on the continent) are omitted voluntarily. Example: Credit startup Swipe's round of US$120k funding from YC as part of the W20 batch in March 2020 is not counted.
3. Partech focuses solely on VC deals that are in the tech and digital spaces. This means Partech only count companies where the value is built around digital technology. Example: In May 2020, the Series A of US$11.2M of insect-based feed and fertilizers company, NextProtein, was not counted.
4. The firm covers African start-ups that they define as companies with their primary market, in terms of operations and/or revenues, in Africa but not based on HQ or incorporation. When this company evolves to go global, Partech will still count it as an African company. Example: Gro Intelligence’s US$85M Series B round is counted as an African deal, as it was founded in Kenya before expanding to the USA.

Having been engaged in the African market as an investor for over two decades, I am encouraged to see the steady rise in the number of tech companies that are raising funds as well as the increasing number of investors who are investing in the continent. As addressed in previous posts on this forum, I remain optimistic on the potential opportunities in high-growth sectors including fintech, agritech, digital health, e-commerce, connected devices (Internet of Things or IoT), and logistics technology and mobility. Challenges remain, however, including the disproportionate number of female-founded startups receiving support from investors. While not mentioned in the report, challenges I have encountered as an investor in Africa include systemic corruption, burdensome government regulations, and an inadequate supply of infrastructure, just to name a few.

What do you think of the report's findings? Which sectors will present the greatest opportunity for investors in Africa?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Landscapes the Agritech Ecosystem for Smallholder Farmers in Latin America and the Caribbean

In 2009, I had the opportunity to lead a project that created a Short Message Service, a system that enables mobile phone users to send and receive text messages, for farmers in Peru. Those farmers who possessed a feature phone, which is a mobile phone that incorporates features such as the ability to access the Internet and store and play music but lacks the advanced functionality of a smartphone, received text messages containing valuable information such as localized weather information, up-to-date market prices for the crops being cultivated, and best practices for maximizing yields. It was through this experience where I learned the importance of the agriculture sector to the Peruvian economy as well as the Latin American economy as a whole. Over a decade later, the GSM Association (GSMA), a UK-based organization representing the interests of mobile operators worldwide, published a report that focuses on landscaping the agritech ecosystem for smallholder farmers in Latin America and the Caribbean.

Published as an output of a project funded by IDB Lab, the innovation laboratory of the Inter-American Development Bank (IDB) Group, for the benefit of smallholder farmers in Latin America and the Caribbean, the report points out that "Agriculture is an important source of employment in Latin America and the Caribbean, particularly in rural areas where 54.6 percent of the labor force is engaged in agricultural production." Furthermore, "The region is an important source of food globally, generating 13.6 percent of total agricultural exports. Thanks to a wealth of natural resources and a vast and varied topography capable of producing a range of crops, Latin America is becoming known as the breadbasket of the world."

What is more, "The study is part of this endeavor to better understand technological solutions and opportunities in agriculture that will allow IDB Lab to support strategies and investments with social and economic impact and expand the agritech ecosystem in the region. The report features innovations aimed at smallholder farming, particularly in countries of Central America and the Andean region, thus bridging the information gap left by much of the literature to date."

"Although much of Latin America shares the same language and cultural heritage," the report says "the structure and scale of the agriculture sector vary significantly from country to country. Southern Cone countries are characterized by capital-intensive, highly-mechanized farming of export crops, while Central American and Andean countries rely much more on smallholder farming for crop production."

In addition, "Several barriers have prevented the region's agriculture sector from achieving its full potential, including some of the world's lowest productivity levels, low financial inclusion and a lack of resilience to external shocks, such as those caused by climate change and the global COVID-19 pandemic. Recognizing the positive impact that digital agriculture tools can have on productivity, incomes and resilience to climate change, agriculture-sector stakeholders throughout Latin America are implementing a range of tools aimed at easing pain points and benefiting those in the agricultural value chain, both on the supply and the demand side."

Examining 131 digital agriculture tools deployed throughout Latin America that are addressing the challenges of smallholder farmers, the GSMA AgriTech team looked at five use cases: digital advisory, agri digital financial services (DFS), digital procurement, agri e-commerce and smart farming. Key trends emerging from this review include:

• "Latin America's digital agriculture tools have failed to reach the scale of those in Asia and Africa. Most digital agriculture services available in Latin America today are led by governments or NGOs and have between 1,000 and 5,000 users, making them difficult to sustain long term.
• "Smallholder farmers in Latin America are increasingly looking for holistic solutions that address a range of farmer challenges, from knowledge gaps and low productivity to financial exclusion, climate change and poor access to markets.
• "New technologies, such as IoT sensors, drones, satellites, AI and big data, are increasingly underpinning digital agriculture tools in the region. IoT sensors, drones and satellites are automating data collection, making the process more efficient and accurate for ecosystem players. Meanwhile, AI and big data analytics are enabling richer, more personalized and actionable data for smallholder farmers to increase production and decrease costs.
• "Blockchain is being used for agri DFS and digital procurement. Heifer International, EthicHub, COOPSOL and other organizations are taking advantage of the transparency, security, speed and low-cost offered by blockchain to facilitate loans between lenders and smallholder farmers, provide traceability to crop buyers and support land registration.
• "Colombia has emerged as an agritech innovation hub for smallholder farmers in Latin America. This has been due to a confluence of factors, including a strong (by regional standards) DFS ecosystem, an enabling regulatory environment, a robust startup and investment culture, rising incomes and a relatively strong middle class. In Central American countries and Bolivia, where the opportunity for digital agriculture innovation is as strong due to the prevalence of smallholder farming, the sector has suffered from a less enabling and comparatively weaker environment."

Crucially, "The GSMA AgriTech team's research highlighted two opportunities in digital agriculture that could address farmers' low productivity and access to financial services in the short to medium term. These include:

• "Smart farming tools: Over the last two years, smart farming pilots for smallholders in Latin America have shown promising results, with production increases as high as 50 to 80 percent, and cost reductions of 20 to 40 percent. Despite these benefits, few smart farming solutions have moved from the pilot phase to commercial viability. Implementation costs are the main barrier, including the cost of equipment (sensors, gateways, drones) and the cost of on-going connectivity (sensors powered by cellular data).
• "Using farmer data from digital agriculture tools to extend financing to smallholders: Smallholder farmers in Latin America face significant gaps in short- and long-term financing, both for agricultural and non-agricultural financial needs. Access to credit from formal financial institutions requires an economic identity that most smallholder farmers do not have, but mobile-based digital agriculture tools can generate digital financial footprints populated with farm and farmer data. This data can be used to perform credit risk assessments thus offering a pathway to financial inclusion for farmers. This offers huge potential to bridge the data gap in smallholder financing and open a pathway to financial inclusion. Digital tools that enable farmers to access markets, such as digital procurement solutions and e-commerce services, are especially useful in generating rich data sets, such as transactional data from the sale of crops."

The report also presents the following seven enablers driving the adoption of digital agriculture solutions by smallholder farmers in Latin America and the Caribbean:

1. Coverage for mobile internet services is nearly ubiquitous in Latin America, but there are gaps between urban and rural areas;
2. Smartphone penetration in Latin America is the highest of all developing regions;
3. Mobile money services are available in Latin America and the Caribbean, but have not been widely adopted outside Paraguay, Haiti and Honduras, limiting the potential of agritech tools;
4. A growing middle class is changing consumption patterns;
5. Investment in agritech is increasing;
6. Latin America is a leading producer of crops that are well suited to digitization; and
7. An enabling regulatory environment is key to the success of many digital interventions.

Lastly, "The GSMA AgriTech team has developed a set of 11 recommendations to support funding, product development and marketing for several key stakeholders in the digital agriculture ecosystem, including agritech companies, donors and investors."

1. Support viable, private sector-led digital advisory services;
2. Ensure that users are at the center of service design;
3. Focus on developing a strong value proposition that offers an end-to-end solution and a clear revenue model;
4. Build reliable partnerships;
5. Carefully assess smart farming opportunities before launch;
6. Do not approach the region with a one-size-fits all approach;
7. Focus on value chains where digital interventions can have the greatest impact;
8. Create an enabling regulatory environment, focusing on markets with the greatest need;
9. Help address the financing gap;
10. Support smallholder farmers to mitigate the impact of climate change; and
11. Leverage existing mobile assets and explore partnerships to develop digital solutions for smallholders.

As noted in a blog post published just over a couple of months ago on GSMA's report about Latin America's mobile economy, the region's digital landscape is evolving rapidly. The report said that in "Latin America, mobile technology continues to play a key role in bringing unconnected populations online and providing a platform to create, distribute and consume life-enhancing digital services." This provides hope that the 11 aforementioned recommendations will be implemented to build and strengthen the region's digital agriculture ecosystem.

What are your recommendations for how to improve the agritech ecosystem for small farmers in Latin America and the Caribbean?

 

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Opportunities in Digitizing Payments in Agricultural Value Chains

In 2004, I had the opportunity to collaborate with the Government of Uganda in making improvements to the country's agriculture sector, which is the sector where most Ugandans make their living. During our assessment, my colleagues and I witnessed a variety of inefficiencies including the low yield per hectare as a result of poor utilization of technology that farmers in developed countries had long utilized, lack of dry or cold storage facilities (and the lack of reliable electricity to power the latter) that led to a high rate of produce spoilage, and the glacial transfer of payment process within the typical agricultural value chain.

While much has improved over the past 16 years, I continue to see inefficiencies during my more recent trips to Africa, Asia, and Latin America. Therefore, I read with great interest a report, Digitizing payments in agricultural value chains: The revenue opportunity to 2025, published by the GSMA, a UK-based trade organization.

Focusing on countries with an agricultural value-add (percentage of GDP) greater than 10 percent in 2017 as determined by The World Bank (with Mexico, Peru and Sri Lanka being exceptions and have been included to show the potential of digitizing payments in the agricultural value chain), the report explains that it "is aimed at mobile money providers, which have the opportunity to drive growth in rural areas in developing countries by digitizing agricultural payments. Two types of payments are ripe for digitization: procurement payments from agribusinesses to smallholder farmers in formal value chains and subsidies paid out by governments to smallholder farmers. Both offer mobile money providers an entry point to digitize agricultural payments and enhance financial inclusion for smallholder farmers."

Furthermore, "Using proprietary methodology, this report looks at the growing opportunity to digitize business-to-person (B2P) payments (typically between agribusinesses and farmers) and government-to-person (G2P) payments (typically between governments and farmers) in agriculture in 72 developing countries. The revenue opportunity for mobile money providers from digital B2P payments is expected to increase from $2.4 billion in 2021 to $3.2 billion in 2025, while the revenue opportunity for digitizing G2P payments is expected to rise from $152 million in 2021 to $210 million in 2025."

Importantly, "Digitization can reduce transactional costs and make agricultural value chains more efficient, safe and transparent. This report examines the opportunity to digitize agricultural payments and lays out the foundational elements that must be in place for mobile money providers to realize this opportunity. Prerequisites for digitization include an enabling regulatory environment, the availability of active and liquid agents in rural areas and the presence of agribusinesses and government bodies willing and able to deploy digital tools. While initiatives to digitize B2P payments are beginning to emerge, there are much fewer examples of digital G2P schemes. This report highlights the challenges that have constrained the growth of digital G2P payments."

Below are the report's key findings and recommendations regarding B2P payments:

• The revenue opportunity for mobile money providers in digitizing agricultural B2P payments is expected to reach $3.2 billion by 2025.
• Asia offers almost 80 percent of the global opportunity to digitize agricultural B2P payments due to the large volume of formal agricultural B2P cash payments available. Sub-Saharan Africa has a smaller revenue opportunity, but strong mobile money uptake, especially in East Africa, means that the region is ripe for digitization.
• To digitize B2P payments to smallholder farmers, mobile money providers should work with agribusinesses in formal value chains.
• If operating in an enabling regulatory environment, mobile money providers should ensure they have active rural agents with sufficient liquidity for cash-outs when farmers receive agricultural payments.
• Mobile money providers should also allow agritechs to integrate real-time payments solutions to create holistic digital agricultural tools that can add value for both farmers and agribusinesses, such as digital farmer records and advisory services.

The report also presents the following key findings and recommendations with respect to G2P payments:

• The revenue opportunity for mobile money providers in digitizing G2P payments in agriculture is expected to grow to $210 million by 2025.
• With established traditional subsidy schemes, most notably in India and Pakistan, East Asia and South Asia together offer the highest revenue opportunity in G2P digitization. However, there is a significant opportunity in digitizing G2P payments in Sub-Saharan Africa too, particularly in larger markets, such as Ethiopia and Nigeria – with the former having implemented a nationwide scheme to digitize fertilizer and seed subsidies to farmers in 2012.
• Assuming the presence of an enabling regulatory environment, digitizing G2P payments in agriculture offers mobile money providers a significant revenue opportunity, especially in countries with large, established, cash-based subsidy schemes.
• However, digitizing G2P payments presents a different set of challenges than B2P payments, primarily dealing with complex governmental procurement processes and the risk of shifting government priorities.

In addition to my work in Sub-Saharan Africa, I had the privilege advising government agencies and agribusinesses in Afghanistan, Iraq, and Uzbekistan. These experiences provided me with the opportunity to understand the challenge of getting "payments to farmers in the last mile of agriculture value chains, as well as government subsidy payments to farmers." According to the report, "In agricultural value chains, the 'last mile' is the web of relationships and transactions between buyers of crops, such as agribusinesses, cooperatives and middlemen, and the farmers who produce and sell them." A digital payment system could provide a remedy.

As the report encouragingly explains, "With 290 live mobile money services in 95 countries (as of December 2019), there is an opportunity for mobile money providers to digitize payments to farmers in the last mile of agricultural value chains, as well as government subsidy payments to farmers. The benefits for mobile money providers and mobile network operators (MNOs) can be both direct and indirect":

Direct benefits of digitization

• Revenue from payment transaction fees
• New mobile money customers in rural areas
• New mobile network service users
• Increased loyalty or stickiness of existing users
• Licences for payment platforms and management systems

Indirect benefits of digitization

• Higher use among existing mobile money users
• Mobile money ecosystem use by new customers
• Increased network use (SMS, calls, data)
• Increased agent activity – ecosystem development
• Uptake of adjacent products (loans and insurance)

What solutions do you think will help improve efficiencies in the agricultural value chain?

 

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Mobile Is Accelerating Digital Transformation in Pakistan, Says GSMA Report

"Mobile technology is at the heart of digital transformation in Pakistan driving social development and economic growth," explains a report by GSMA Intelligence, the research arm of the GSMA, a UK-based industry association. "Digital transformation is underway in the country, with government and public institutions as well as private and development organizations using digital platforms to increase engagement and improve service delivery to its citizens."

The power of mobile to accelerate digital transformation in Pakistan discusses the following:

• Pakistan government socioeconomic aspirations in context;
• Digital transformation in Pakistan and the role of mobile technology;
• Mobile technology contribution to social and economic progress in Pakistan; and
• Opportunities ahead to accelerate the impact of mobile-enabled digital transformation on socioeconomic progress.

Based on my experience of working in developing countries such as Afghanistan, Uzbekistan, and Iraq, I concur that a "knowledge-based economy is built on the foundation of common access to fast, reliable and affordable digital content and services by individuals, businesses and public institutions." The report notes that in "Pakistan, this is primarily enabled by mobile technology, which now provides access to digital services for more people in the country than any other communications technology; 70% of internet users in Pakistan only ever access the internet on a mobile phone."

The report further says: "Rising smartphone adoption means more people are able to use feature-rich and IP-based digital content on their mobile devices, mitigating the challenge of much lower penetration of PCs and other data-enabled devices. The Pakistan Citizens Portal, which connects government organizations both at federal and provincial levels, is powered by smartphone apps on the Android and iOS platforms, so can be accessed by people on mobile devices."

Moreover, "In addition to internet connectivity, mobile technology enables cellular IoT (Internet of Things) connectivity for a variety of personal and industrial devices. Currently, IoT applications in Pakistan include solar-powered home solutions enabling off-grid rural households to power electronic devices; on-board diagnostics (OBD) devices for fleet management; and IoT solutions integrated with vehicle and motorcycle insurance products to reduce theft. In future, cellular IoT connectivity and services will play a vital role in implementing smart city solutions, which can help governments at different levels to cope with rapid urbanization and improve security services."

The report's key findings include:

• Mobile broadband networks now cover 80 percent of the population and 97 percent of internet connections are mobile;
• Pakistan has nearly 700,000 cellular IoT connections across areas including agriculture, clean energy and safe water solutions;
• Mobile technology is the primary channel for digital financial services, digital birth registration initiatives, digital health solutions and digital learning;
• Mobile operators and the ecosystem also provided direct employment to around 320,000 people in Pakistan in 2018;
• The mobile ecosystem in Pakistan plays an increasingly important role in economic growth, contributing around $16.7 billion, equivalent to 5.4 percent of GDP; and
• Enablement of digital ecosystem is largely supported by timely policy interventions for the facilitation and enablement of the industry and most importantly the end-user.

What mobile products or services do you think should be developed to help accelerate Pakistan's digital transformation?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

GSMA Report Examines the Market Opportunity in Agriculture E-Commerce in Developing Countries

Over the course of my career, I had the opportunity of working in developing countries where the agriculture sector serves as the primary contributor to a country's gross domestic product. In 2009, for example, I advised officials with Afghanistan's Ministry of Rural Rehabilitation and Development on a strategy to grow the country's economy through agriculture and agribusiness development. While some Afghans owned mobile phones at the time, e-commerce was virtually non-existent. If presented with the same opportunity today, e-commerce will play an essential role in growing the agri economy in Afghanistan and most developing countries worldwide. This post is about an insightful report on agri e-commerce.

GSMA Intelligence, the research arm of GSMA, a UK-based organization that represents the interests of mobile operators worldwide, published a report that "examines the market opportunity in agri e-commerce, with a focus on Sub-Saharan Africa as well as developing countries in Asia and Latin America." The report also "highlights key emerging trends, business models and recommendations for stakeholders to maximize the agri e-commerce opportunity. As part of the research, we interviewed 21 businesses across Sub-Saharan Africa, Asia Pacific and Latin America. Three of these companies (AgroCenta, Farmcrowdy and Twiga Foods) have received grant funding through the GSMA's Ecosystem Accelerator program in recent years. Interviewees included agri e-commerce businesses, mobile operators and mobile money providers."

E-commerce in agriculture: new business models for smallholders' inclusion into the formal economy presents the following key findings:

Agri e-commerce can disrupt traditional agricultural value chains

"Traditional agricultural value chains involve multiple intermediaries between farmers and consumers. Typically, farmers sell their produce at the farm gates to middlemen. Produce then passes through multiple intermediaries before reaching the end customer. As a result, farmers receive only a small proportion of the price paid by the end consumer as each intermediary in the value chain earns a margin.

"Agri e-commerce provides an opportunity to streamline the agricultural value chain and reduce inefficiencies in the distribution of farm produce. It represents a new way for farmers to sell their produce to an array of buyers, including agri businesses, retailers, restaurants and consumers. Agri e-commerce also increases farmers' access to new markets and adds transparency to the value chain. It enables farmers to bypass several intermediaries, resulting in higher income for the farmers, reduced wastage, and the potential to deliver fresher produce to customers. Such benefits are especially significant in developing regions, where more than 97% of people employed in agriculture live and where the sector's contribution to GDP is in double digits."

GSMA's agri e-commerce Market Attractiveness Index highlights the maturity of key markets

"Agri e-commerce is an emerging opportunity in developing regions. However, there is considerable variation in the readiness of developing countries in regards to agri e-commerce. These differences are examined in our Market Attractiveness Index, which ranks countries according to a number of agri e-commerce enablers."

GSMA Intelligence's "research identified seven enablers for agri e-commerce in any given market. One of the foremost enablers is internet connectivity, allowing buyers and sellers to perform key tasks over online platforms. Logistics is another key agri e-commerce enabler. National infrastructure (such as roads) in addition to delivery services and purpose-built facilities (such as warehouses) allow agri e-commerce businesses to transport produce between farmers and buyers more cost effectively. Countries that have high mobile internet penetration and improving logistics infrastructure, such as Malaysia and Thailand, score highly on our Market Attractiveness Index."

Business models must fit local market conditions

The report explains that "[t]o maximize the emerging opportunity, agri e-commerce businesses require scalable and sustainable business models. The choice of business model depends on the operational functions the agri e-commerce business performs in the context of their local market. It also depends on factors such as product category and the strategic objectives of the business. A sustainable business model balances these considerations to build trust and increase user loyalty."

What is more, "The business models of agri e-commerce businesses in developing regions can be grouped into five levels. Each is defined by the operational functions and capital intensity of the business model, with businesses that perform the least functions at level 1 and those with the most integrated approach at level 5. Asset-light business models are less capital intensive but – in the context of developing markets – have a higher potential for farmer and customer churn. Conversely, asset-heavy business models are more capital intensive but enable the agri e-commerce business to have greater control over key elements of the service, including customer experience, product quality and packaging, and farmer education."

Mobile operators can add value to agri e-commerce businesses in several ways

Matoke for sale at a public market
I visited in Uganda

Based on my experience, I agree with the assertion that "[m]obile operators can play a central role in the emerging agri e-commerce space. At a foundational level, mobile operators provide the connectivity that enables online services and, increasingly, facilitates digital payments through mobile money. Beyond connectivity and payments, there is scope for mobile operators to leverage other key assets, such as APIs, investment capital and distribution channels, to increase their footprint in agri e-commerce."

Moreover, "As mobile operators are increasingly participating in both agriculture and e-commerce segments – by launching their own products and working in partnerships – the emerging opportunity in agri e-commerce is a key strategic consideration. The integration of operator-led mobile money services into agri e-commerce platforms can increase mobile money adoption and usage by meeting the demand for digital payments. Mobile operators' scale and existing relationships with customers could serve as a platform to expand services more quickly for agri e-commerce businesses. In addition, agri e-commerce can deliver benefits to operators' core services in rural areas through improved customer acquisition and retention, as well as increasing network usage and ARPU."

Stakeholders must align to fulfill the agri e-commerce opportunity

While there is much discussion on the subject including numerous conferences and whitepapers, GSMA Intelligence is correct to note: "Agri e-commerce is at a nascent stage of development, especially in developing regions. However, the commercial opportunity and potential social impact are not in doubt. Apart from agri e-commerce businesses and mobile operators, governments and investors can tap into this opportunity to drive growth in the agricultural sector and improve the livelihoods of farmers."

The report adds: "The development of the agri e-commerce ecosystem requires government ministries and regulators to establish an enabling regulatory environment. Government ministries can further support agri e-commerce businesses by supplying information on local farming regions and holding events to raise farmer awareness of agri e-commerce opportunities. Donors and investors also have an important role to play – for example, through investing in agri e-commerce businesses that have a sustainable competitive advantage and potential to scale. This means understanding local market dynamics and the level of development of the key agri e-commerce enablers."

What products or services do you see as vital to the development of the agri e-commerce ecosystem?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

China's Emerging ODI Focus: Agriculture, Financial Services and Real Estate

Photo: EIU

In the previous post, I discussed a few key points from a webinar produced by The Economist Intelligence Unit (EIU) that focused on China's recent economic developments, regional opportunities and risks, overseas investment, and an overview of the EIU's Access China service. Some key points from EIU's report, China Going Global Investment Index or GGI, which was first published in 2013 and updated annually "to help Chinese investors to understand the evolving opportunities and risks ahead," are included in the webinar. The latest update to the index ranks the attractiveness of 67 major economies to Chinese firms and provides a framework to evaluate investment prospects on the country level based on 70 indicators. This post explores certain findings from the GGI for 2015, which the EIU makes available in English and Chinese through its website.

The report's introduction explains: "Since Chinese outbound direct investment (ODI) took off in 2005, annual outflows have grown at an average rate of 35% per year, reaching US$123bn in 2014" making China the world's third largest investor, only behind the United States and Japan. "China's share of global ODI stock remains small as it is still in early stage (China 2.3%, US 22% and Japan 4.5% in 2013)," according to the Organisation for Economic Co-operation and Development (OECD). "Fast growth," however, "is expected in the coming years with strong government support, which should increase China's share rapidly."

The GGI notes that agriculture ODI grows rapidly despite being in a early stage. "As China becomes a major food importer, its food security strategy requires securing sources of import." This is exemplified through WH Group's acquisition of U.S.-based Smithfield Foods, Inc., the largest pork processor and hog producer in the world, for US$4.7 billion in 2013, which is the biggest agriculture ODI to date by a Chinese company.

Additionally, according to the report, "Agricultural ODI has been diverse, ranging from small demonstration rice fields in Africa, to massive soybean plantations, processing facilities, and ports in Brazil. Adding new indicators for agriculture has gained scores for countries with abundant agricultural resources and sophisticated farming production processes, such as US (corn), Australia (beef), Argentina (soybean), and New Zealand (dairy)."

 

The EIU webinar produced on Feb. 25, 2016 said China's emerging ODI focus include financial services and real estate. These sectors, according to the GGI, "have attracted new interests from Chinese investors." Moreover, "Chinese ODI in financial intermediations was five times as much as that in real estate in 2012, but the latter sees faster growth and closes the gap quickly," which is reflected in the chart to the right.

What is causing an increased interest in foreign property by Chinese investors? The slowdown in China's domestic real estate market. "A report by MSCI, a US-based finance company, shows that global property market delivered a return of 9.9% in 2014, and that in the US was 11.6%, when the return in Chinese property market was only 7.1%," the GGI explains. Furthermore, "Chinese investors usually avoid emerging markets in this field due to high currency risks, and their favorite objectives are office buildings, retail stores and hotels, according to a 2014 study by Cushman & Wakefield, a US real estate services company. US is one of the most popular destinations for property investments."

The report recommends that in order "for Chinese ODI to keep up its momentum, firms will need to approach investment in a more sophisticated manner. In the past, Chinese investment exhibited a strong pro-cyclical pattern—firms bought natural resources when its economy was growing fast and, as a result, they found themselves often paying peak prices for commodities. A counter-cyclical approach and long-term thinking will be the key to success for future ODI."

I also support the suggestion that "Chinese investors and authorities ought to be aware of challenges lying ahead. Although more markets are opening to Chinese investors, anti-China sentiment has also been observed. Poor labor conditions and a reliance on imported Chinese workers have caused tensions in some countries, while a less-than-stringent approach to environmental management has also caused problems for Chinese companies." In addition, the report accurately states that "a failure to mitigate national security concerns has thwarted Chinese investors in some markets."

The GGI's concluding paragraph says: "This means that investors should have a well-thought-out plan before making the ODI decisions and be sensitive to the contours of the market in which they are investing. The scope for an increase in market access is limited, with bilateral investment treaty negotiations with the US and EU yet to bear fruit, and an international debate still ongoing over whether China should be given market economy status."

Finally, the report correctly advises that "Chinese companies need to focus clearly on the opportunities and risks already available. A better investment promotion regime is needed, along with diplomatic efforts."

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

U.S. Government Allocates $320 Million for Rural Broadband Projects

I occasionally blog about the digital divide that exists in developing nations; namely, the issue of that many people in the world’s financially impoverished nations do not have access to the Internet. While the United States is certainly not financially impoverished, a digital divide does exist when comparing Internet access by remote or rural communities to those residing in urban areas. Many people and businesses located in rural America are increasingly becoming dependent on modern information and communications technology (ICT) services to obtain education, financial, and health services. Therefore, I was pleased to read a recent announcement by the United States Department of Agriculture (USDA) to improve the ICT infrastructure in specific rural areas located throughout the United States. (Photo of Cherryvale, Kansas (population 2386) courtesy of U.S. Department of Agriculture)

In a press release dated January 25, 2010, USDA Secretary Tom Vilsack “announced the selection of fourteen Recovery Act Broadband Infrastructure projects that will receive $309,923,352 through funding made available by the American Recovery and Reinvestment Act (ARRA). An additional $3,551,887 in private investment brings the total to $313,475,239. Altogether, Congress awarded USDA $2.5 billion in Recovery Act funding to help bring broadband services to rural un-served and underserved communities.”

Here is a sampling of the 14 projects receiving grants and loans: Providing middle mile connectivity to 65 communities in Southwestern Alaska, expanding high speed DSL broadband service to remote, unserved households in rural Alabama and fiber-to-the premises broadband service to unserved homes and businesses in North Dakota. Furthermore, people residing in remote and rural communities in Tennessee will see an upgrade to the infrastructure that provide advanced voice, video, and data services exceeding 20 megabytes per second (Mbps), an expansion of fiber-based broadband access to approximately 1,500 households, local businesses and anchor institutions in central California, and extending existing fiber network by building out from the nearest fiber splice point through the funded service area in Oregon, which will provide broadband connectivity to residential and business end users.

USDA explains that “funding of individual recipients is contingent upon their meeting the terms of the loan, grant or loan/grant agreement.” While I continue to be concerned with the increase debt the U.S. government is incurring, I am encouraged to see some the funds provided by ARRA invested in ICT infrastructure to close the digital divide that exists in rural America.