Agri-tech entrepreneurs are the Uber of agriculture, offering small and emerging farmers access to markets.
South Africa’s agriculture sector plays a critical role in the country’s food security and economy. It contributes about 2.5% to the country’s GDP, and it provides employment to roughly 5% of the country’s population, according to the Food and Agriculture Organisation (FAO).
The sector provides the country with a diverse range of food products, including grains, fruits, vegetables, and animal products such as dairy, eggs and meat. Furthermore, agriculture also plays a significant role in supporting other industries such as food processing, packaging and distribution.
But, like much of the rest of South Africa’s industries, agriculture and in particular the fresh produce industry, is characterised by a high level of concentration. In terms of income and production a small percentage of farms account for a large portion of total income. Just 6.5% of all farms in South Africa account for about 67% of total income in 2017-18.
The Competition Commission has since released information showing a sustained decrease in the number of farming units in all provinces, with KwaZulu-Natal, Mpumalanga and Limpopo experiencing the largest declines.
These trends are consistent with other high and worsening levels of concentration, which have been identified even in key food sources such as potato seeds.
The pricing of fresh produce in South Africa has also been rising above inflation for a sustained period, having a disproportionate effect on low-income earners who must spend a greater portion of their income to purchase essential products.
One of the main challenges facing small and emerging farmers in South Africa is limited access to markets, with many farmers unable to sell their products at sustainable prices to recurring clients.
Nationally, fresh produce markets account for roughly 22% of all fresh produce trading in South Africa and have been identified as a key level of the fresh produce value chain but they are not always easy to get to, nor do they all offer the same value.
Enter agri-tech start-ups such as AgriKool and Khula. These young black-owned start-ups are solving an overlooked problem for farmers, and it sounds something like this: You grow and nurture the food, and I will sell it. They are the Uber of agriculture, and they are offering small-scale farmers an avenue to market. These start-ups are operating in what is known as the shared economy.
One of the major costs in agriculture is transport. The transportation of fresh produce is charged based on distance, refrigeration needs and weight. These factors are typically combined to provide a quote, with additional fees for special handling. Careful consideration of these factors is essential to maintain profitability while ensuring fresh, high-quality products are delivered to consumers.
The sharing economy is based on the principle of sharing assets instead of owning them. It allows individuals, in this case farmers, to benefit from the assets of others, in this case, it is the refrigeration, transportation, storage and basic technological infrastructure of these new-age agents. Farmers do not have to worry about the client; these new-age agents source the client, who (depending on the agreement and price) shares the transportation fees with the farmer.
These start-ups are the new wave of agricultural agents, creating and facilitating online marketplaces for retail and wholesale buyers to purchase directly from producers. The benefits are clear on both sides of the trade; price discovery on a nation-wide scale for the purchaser and reduced transportation costs for the farmer.
The sharing economy is based on three core principles: access, sharing and collaboration.
It is still early days, but the agricultural sharing economy offers a new way of thinking about ownership, consumption and scaling small-scale farmers. By sharing assets, users of these platforms can create a more sustainable and efficient system that comes with lower cost of transacting, benefiting the environment and the economy.
The sharing economy is already affecting areas such as transport and hospitality, and it is likely to continue to grow in the coming years.
Zanele Mabasois the head of policy development at Kagiso Trust.