How Agtech and Blockchain Could Invigorate Africa’s Startup Ecosystem

It goes without saying that there are are significant fundamental differences between various African nations owing to political, economic, social, and cultural nuances. However, the continent of Africa is one that is discovering a need to adapt and develop in the modern age.

While there has been a plethora of growth in Infrastructure projects
and agricultural enterprises in the past several decades, disasters such as the spread of locusts in East Africa have highlighted the additional need for both agricultural and technological innovation in the region. It is this combination of agricultural innovation in conjunction with technology, to include blockchain, that will truly spearhead the startup ecosystem on the African continent. 

Africa’s youth and increased technology use: growth and challenges

The African continent continues to be one of the world’s highest-growth tech markets in the near-future with its young population combined with increasing access to Internet. A United Nations report from 2016 stated that at the time, Africa had “a young age structure, with about two-fifths of its population in the 0-14 age bracket and nearly one-fifth in the 15-24 age
bracket.” This prediction has continued to prove true for Africa in 2019, with 60% of Africa’s 1.25 billion people being under the age of 25, making this continent home to the youngest population in the world. Additionally, access to the Internet and to smartphones has risen consistently in the last several years, with some analysts forecasting a smartphone penetration
rate of 50% by 2025. 

However, the tech scene in Africa does face significant challenges for future growth, chief among them infrastructure, cultural, and startup ecosystem issues, among many others. Infrastructure remains a significant issue in Africa, with one noted point of contention being that Internet access remains prohibitively expensive for some African countries due to a lack of competition in the telecom infrastructure space. Furthermore, cultural issues such as the language barrier between Francophone and Anglophone countries, compounded by a reliance on a decades-old, trust-based economic system have hampered the growth potential of current startups. Lastly, the startup ecosystem in Africa lacks several factors for continuous growth, to include continuous problems such as regulatory challenges and limited support for post-revenue companies.

In spite of these detracting factors, Africa’s young population and rising rates of Internet access are the very beginnings of an environment primed for high growth in the near-future. These factors for growth present an
optimistic outlook for African countries seeking to increase the respective
sizes of their startup economies. 

The critical importance of African-based agriculture

With over 60% of the world’s uncultivated arable land, Africa is truly the future of the world’s food supply. Utilization of this food supply would be critical to support the world’s burgeoning population, with the amount of global arable land decreasing by the day. However, Africa’s utilization of agriculture as a means of economic growth has fallen short, in spite of agriculture employing two-thirds of all working Africans and producing one-third of total GDP, with the entire continent being a net importer of food. Events such as the locust epidemic in Africa have also highlighted vulnerabilities in Africa’s food production supply chain. 

Furthermore, while programs to help increase its agricultural productivity have yielded positive results, these results are simply not at the level needed to sustain the Africa’s, much less the world’s, food supply. Critical issues such as reliance on imported fertilizers and rainfall, as well as high
transportation costs, continue to plague African farmers. These challenges must be solved for African nations to reach their true economic and agricultural potential. These facts, combined with Africa’s growth prospects, continue to demonstrate the critical importance of agriculture in Africa. 

Blending of agriculture and technology to spark increased investment

In order to address the many concerning issues facing the African agriculture and technology industries, individuals must look at merging these two rising industries in order to realize the highest growth potential possible. The modernization of Africa’s food systems must happen at a rapid pace in order to keep up with the dynamic market coupled with increasing demand for food. This is a particular necessity given the fact that 80% of all farmland in Africa is managed by small-scale farmers with less than 10 hectares, allowing technology to be the bridge of both modernization and interconnected access between small-scale farmers and other enterprises. Through the use of additional technology-focused initiatives, African agriculture can finally reach its true potential.  

Current growth in Africa’s agtech startup ecosystem

Startups have begun to recognize the need for increased agtech in
order to simultaneously grow the combined African agriculture and tech sectors. On a simultaneous note, startup industries across different African nations are beginning to receive significant traction, in conjunction with organizational recognition of the importance of startups. 

There are multiple examples of successful agtech startups within
African countries in recent history. One notable company is the Kenyan-founded Twiga Foods, whose B2B food distribution model resulted in the raising of $30 million dollars in a Goldman Sachs-led Series B funding round in late 2019. Another notable startup is the Nigerian-based Farmcrowdy, which raised $2.4 million dollars in four funding rounds, demonstrating unprecedented growth through active use in over 50% of Nigeria’s 36 states combined with a 2020 acquisition of large agribusiness and meat processing group Best Foods. 

Agripredict, a Zambian-based startup, has also shown high growth rates, utilizing artificial intelligence to help farmers manage potential risks, enabling access to reliable data to predict weather, identify diseases, and much more.  Ghana-founded TROTRO Tractor has made an impact on agtech by connecting farmers to tractor services, with an emphasis on raising productivity in rural areas and empowering women through job training. 

The example of so many startup successes focusing on the African agtech industry highlight the immense need and future for further agtech development in the region, with the goals of ensuring economic growth, food security, and democratized technology for all.  

Blockchain's widespread applicability in Africa's agtech

Blockchain has immense potential in Africa's startup ecosystem but is also especially relevant in Africa's agrarian community. From successful blockchain startups to acting as an instrument of decentralized finance (DeFi), blockchain's flexibility as a trusted source of information can help empower individuals, communities, and governments alike.

Blockchain-based companies like Bext360, which raised over $3M
in capital in 2018, have even successfully implemented blockchain technology into the African agtech ecosystem. In the example of Bext360, the Stellar Network is used to provide a unique ID for every specific agricultural product down to the coffee bean level. This type of unprecedented supply chain transparency not only helps tokenize products, but also helps to pay farmers upfront. These types of organizations highlight how blockchain can be used for specific agrarian use-cases, further driving economic growth as a whole.

The advantages of blockchain, and with them, cryptocurrencies, are also essential in empowering local farmers and participants within Africa's agtech ecosystem. With such a high mobile penetration rate, these individuals now have access to more efficient payment services, digital banking, and even products like insurance. This increased understanding of available web products to enable local, regional, and global competition for individuals is crucial in kickstarting Africa's startup ecosystem.

Central bank digital currencies (CBDCs) and their associated financial instruments can also be developed by governments seeking to spread DeFi principles further within their communities. These types of digital-first assets will enable access to funds in traditionally unbanked communities, presenting one use-case of how governments can leverage blockchain and digital currencies to promote growth.

Agtech and beyond

Africa’s agricultural and tech industries are currently experiencing
incremental semblances of growth. However, the combination and utilization of agtech and blockchain as catalysts for growth will help bring this industry to its full potential. The combined efforts of high-productivity startups across the African continent give great hope to the rise of agtech and a corresponding enlargement of the African startup ecosystem. It is this type of cumulative effort that will help agtech spearhead growth within throughout Africa.