Growing agriculture sector attracts financiers

Transport solutions provider CMC Motors Group last week launched a new tractor called the New Holland TT4 in the latest foray into Kenya’s expanding agribusiness market.

With agriculture accounting for 32.6 per cent of GDP last year, and with the World Bank predicting that agribusiness may become a $1 trillion industry in Sub-Saharan Africa by 2030, the sector presents a rising market opportunity for producers.

Speaking at a launch reception for the firm’s customers in Kisumu, CMC Motors CEO Mark Johnson noted that the growing entry of largely youthful professionals in the agribusiness sector favours mechanised farming solutions and has created latent demand for tractors and related implements.

“At CMC Motors we have noted a close to 30 per cent growth in tractor orders placed with us, largely from farmers, building and construction contractors and the public sector, particularly county governments.

‘‘The New Holland TT4 economy utility tractor range redefines the tractor market with its versatility as an all-round workhorse in the farm and beyond,” he said.

The model features various upgrades including a revolutionary straight rear axle built to withstand 5-ton compression weight, a modern turbo engine, constant mesh gearbox with an option of synchromesh, and a rotary pump with bosh upgraded injector pump.

This gives farmers the added value of new features which can increase the power of the engine by 35 per cent, an attribute that other models may lack.

“When a supplier is developing a new offering in response to customers’ requests or demands, it can use value assessments to determine what improvements are worthwhile and which ones have the highest priority,” said Prof James C. Anderson and Prof James A. Narus in a Harvard Business Review article titled Business Marketing: Understand What Customers Value.

“Knowledge of how their market offerings specifically deliver value to customers enables suppliers to craft persuasive value propositions and they are able to compete on their product offering instead of a price basis.”

Besides transport solution companies, Kenyan banks are also investing heavily in the agribusiness market, offering farmers asset financing.
In fact, according to the Kenya National Bureau of Statistics economic survey 2017, credit advances to the agriculture sector by banks rose from Sh57.5m in 2012 to Sh90.2m in 2016.

This has been driven by widening flexibility in agricultural finance with Stanbic Holdings, for instance, offering farmers up to 80 per cent machinery financing in partnership with US-based tractor and other implements manufacturer John Deere.

A farmer is required to raise a 20 per cent deposit to trigger the financing for the tractor or implements.

“Without a doubt, a farmer will choose to engage with a financial provider that offers them the chance to own or rather use a product that is valuable to their business, but expensive to their business without having to cough up a large sum upfront risking financial ruin,” said Bruce Gumo, a marketing analyst at BizTrace, a market solutions company.

“Therefore, asset financing is a marketing strategy for banks to diversify their business into new markets quickly, acquire customers and stay ahead of the competition in a highly aggressive market.”

Insurance firms have also invested in marketing their product offering in the Kenyan agribusiness market with companies such as UAP Insurance being one of the first firms in the country to offer crop insurance, covering against loss due to floods, theft, uncontrollable pests and lower yield.

In a bid to reach grassroot farmers, insurers have additionally adopted mobile marketing, enabling consumers with even one acre of land to access insurance and increasing consumer accessibility by enabling then to make payments and claims via their cell phones.

-African Laughter