Receive our newsletter - data, analysis and deep insights on FDI delivered to you
Sub-Saharan Africa / Angola

Agritech start-ups provide fertile land for African investors

In spite of the Covid-19 pandemic, Africa's start-up agritech community enjoyed a stellar 2020, with project numbers and capital inflows on the rise.

kenya-africa-agritech
Kenya’s farmers have been at the forefront of Africa’s agritech boom. (Photo by Tony Karumba/AFP via Getty Images)

Over the past five years, funding in agritech start-ups across the African continent has been rising consistently, according to data from Disrupt Africa, with hot spots emerging in Kenya and South Africa.

The sector stands in fifth position when it comes to the amount of capital raised by start-ups in Africa, although when ranked according to the number of start-up ventures, agritech is in eighth position.

As the graph below shows, agritech funding in Africa continues to grow at a steady pace, even amid the Covid-19 pandemic.

White papers from our partners

More than $59m was raised by agritech start-ups across Africa in 2020, which represents 8.6% of the total raised by start-ups across the continent and is also an increase of 23.7% from 2019, when the total reached more than $48m.

The Disrupt Africa report also states that there is a better distribution of where the funds go, with the money being spread more evenly among start-ups in 2020. In 2019, Twiga Foods and Apollo Agriculture, both based in Kenya, received 88.4% of the total agritech funding recorded in Africa, while in 2020 two companies received 76.5% of total funding in agritech start-ups, this time Twiga Foods and South Africa’s Aerobotics.

The average sum of money raised by African start-ups in the agritech space went up to $3.7m in 2020, from $2.8m in 2019 and $1.3m in 2018, while six start-ups raised $1m or more in 2020, up from five in 2019 and three in 2018.

The impact of e-commerce in agritech in Africa

There has been a lot of focus on e-commerce platforms in the agritech space in Africa,  according to Mariana Graça, founder and principal consultant at MG Advisory, an agribusiness consultant with a focus on sub-Saharan Africa. These ventures have been favoured to bridge the gap between farmers and buyers, increasing market access to the farmers.

In [developed economies] we often talk about blockchain because of cryptocurrency, but it is being widely used now for food traceability. Mariana Graça, MG Advisory

However, these e-commerce platforms often have to face one major obstacle: low-quality infrastructure, or its complete absence, which is a big problem across Africa, according to Graça. This issue is worsened by the fact that the majority of agriculture on the continent is smallholder-driven, which only serves to complicate matters for what are already often very low yields, she adds.

“Growing enough of the product is an issue in the continent, because although there is water supply, there is land, there are all of these resources, the yields are still very low for most of the commodities because the majority of the agriculture is smallholder-driven, so there’s a lot of issues with growing,” says Graça. “Are we growing enough? Are we growing at an efficient level? No. And then the other issue is that infrastructure is still not at a point where it makes the logistics of it easier.”

How agritech is battling climate risk in Africa

Africa also has to contend with the threat of climate risk, with the UN calling climate change “an increasing threat to Africa” that will impact the continent’s food and water security, its socio-economic development and overall human health and safety.

These issues are increasing interest in agritech, however, according to Graça. Gathering data to help address Africa’s climate issues can make agriculture more resilient and help to improve food security, she adds, which has brought with it the creation of insurance products that are viable for the farmers.

On top of such insurance products, technology that increases the traceability of food is becoming more and more popular, especially as consumers increasingly want to know where their foods come from, according to Graça, and this is where blockchain technology comes into play.

“In [developed economies] we often talk about blockchain because of cryptocurrency, but it is being widely used now for food traceability,” she says.

“The likes of Nestlé and Unilever, all the big consumer goods companies and manufacturers that often operate with smallholder farmers in the [African] continent, now work with this traceability component, particularly where cocoa and oil palm is concerned.”

Dario Giuliani, director of research company Briter Bridges, says: “There are two sides to the large deals in agricultural technology in Africa. One is the financial sector side, so services attached to the financial side of agriculture, and the other one is logistics, which is anything related to ‘from farm to fork’, the supply chain, sourcing directly from farmers and creating a link from the field to the market.

“From a geographical point of view, there is what we call the ‘innovation diamond’, which is made of South Africa, Kenya, Nigeria and Egypt, which in the start-up space are the countries that capture the highest activity and the highest volumes of capital.”

How agritech in Africa contributes to achieving the SDGs

According to the Disrupt Africa report, Kenya and South Africa dominate the agritech market in the continent. One-quarter of funded agritech start-ups in Africa during 2020 were based in Kenya, taking up 59.5% of the total investment.

This is a decrease in comparison with 2019, when the country accounted for 92.4% of total investment. The report points at the increase of funding in South Africa as the reason behind the shrinking dominance of Kenya, which captured 30.9% of total investment and 25% of start-ups in 2020.

Referring to the potential of the agricultural sector in Africa, and agritech in particular, the report states that it “still has room to grow, especially when it comes to addressing increasing global food insecurity”, while also expressing that the continuous flows of funding in the agritech space show that investors have faith that “the sector is ripe for returns and impact”.

“There is a lot of narrative around impact [investing] in Africa,” says Giuliani. “There is a lot of discussion around which of [the UN’s] Sustainable Development Goals [SDGs] the companies [doing the investing can] actually address, and zero hunger, no poverty, and affordable and clean energy are the main ones.”

With the deadline of 2030 looming over all of the SDGs, and the Covid-19 pandemic having denting their progress, seeing Africa’s agritech start-ups thrive during an otherwise difficult 2020 is a rare glimmer of light.

Africa will likely continue to focus on agritech to bring a resilience to its food supply, help it tackle the threats that emanate from climate change, and keep the continent on the path towards better food security.

Marina Leiva

Marina Leiva

Senior reporter

Marina Leiva is a senior reporter at Investment Monitor, where she specialises in the agribusiness sector.