Why agritech startups struggle to gain firm footing in Kenya


 Farmers learn more on value added farm produce during a field day in Njoro, Nakuru County. PHOTO | FILE | NMG

Kenyan agritech startups are struggling to pick up in contrast to their peers such as fintech and commerce, with the trend attributed to the age and digital literacy gap among farmers as well as intense competition from brokers.

A report from the Mozilla Foundation shows stunted growth and innovation in the application of technology to produce more by making farming more efficient—from field monitoring to the food supply chain in horticulture, and aquaculture to improve yield, efficiency, and profitability.

Agriculture employs more than 60 percent of Africa’s population and about 70 percent of Kenya’s rural population.

“Startups playing in other economic sectors such as agriculture tend to struggle to roll out services as they typically require much more infrastructure to deliver their offerings to end-users and face greater hurdles due to regulations on the movement of products, equipment, and inputs within and across borders,” the report read in part.

“The common challenges faced by agritech startups include adoption and awareness, connectivity and infrastructure, data quality and integration, and regulatory and policy environment where compliance with agricultural regulations, policies, and environmental standards.”

Founders say a general lack of trust from the public in new technologies has been a challenge as it involves a lot of heavy investments in training to raise awareness and onboard new farmers.

“Agritechs in Kenya tend to have a difficult business model for making profits. Most hypothesise that the supply chain in agriculture is fragmented in Kenya. Therefore, an application or technology overlay on a supply chain business can be profitable by cutting out middlemen,” Kopokopo chief executive Chad Larson told The Business Daily.

“The problem is that these middlemen work tremendously cheap in Kenya, and there is just not much juice to be squeezed by such agritechs hence why they struggle to be profitable.”

Mozilla had interviewed a Kenyan key informant who said they see this as “a systemic block” on agritech innovation adding that the age and digital literacy of farmers are barriers to agritech innovation.

“An agritech founder said that these farmers are old and so targeting them with a digital platform is also a challenge. Even as a businessperson, I am wondering, ‘Do I develop an app for finance or agriculture?’ I would go for finance because I’ll do it from the comfort of Nairobi,” reads part of the report.

Market naivety and inexperience also saw a young teenage farmer lose a deal with Tesco UK for not changing the label of their jam.

The concentration of activity within the startup ecosystem is in fintech contributing 30.2 percent, which is the combined total of startups in agritech, e-health and e-commerce.

“Agricultural products are highly perishable, which require you to have cold storage units, warehousing, delivery services, and a lot of capital in terms of goods and services when it comes to a startup, most do not have that kind of capital or money to operate farm to fork,” added Washington Mageto, CEO at PLAT-DEL, an e-commerce startup that connects distributors and consumers.

Population growth and urbanisation were pinpointed as some of the challenges affecting agriculture and innovation as a result of declining farm sizes.

Agritech startups are providing automated irrigation systems, the use of drones and soil sensors, among others to increase productivity in a bid to tackle food insecurity.

Mozilla Corporation collaborated with the African Union Development Agency for this research interviewing startups, incubators, accelerators, entrepreneurs, angel investors, venture capital funders, relevant government agencies and key informants in six African countries—Kenya, Zambia, Nigeria, Ghana, Senegal, and South Africa between January and March last year.

Venture Africa reported in the first half of 2022 that despite being the most important economic activity, investment in agritech solutions underperforms other sectors.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.