How agritech startups are contributing to SA’s agriculture sector

Despite little VC capital, South Africa’s agritech sector is pushing forward. TechCabal caught up with a number of to get extra information on their contributions to SA’s breadbasket sector.

According to Wandile Sihlobo, an agriculture economist and writer, know-how has performed a big function in making South Africa’s agricultural sector probably the most superior on the continent.  “South Africa has been able to make great strides in biological and mechanical engineering technologies, which has seen the country’s agriculture sector’s output more than doubled since 1994,” Sihlobo advised TechCabal.

The significance of know-how within the sector is reiterated by Amanda Chembezi, a member of the board of administrators of the Center for Coordination of Agricultural Research and Development for Southern Africa (CARDESA). CARDESA seeks to coordinate and harmonise the implementation of agricultural analysis and growth within the 16 member states, together with South Africa.

“When we talk about food security in Southern Africa, technology is at the forefront of enabling us to increase our food sufficiency and our production levels as well the effectiveness by which we produce food,” Chembezi advised TechCabal.

Despite the clear significance of know-how to the agriculture sector, the sector is struggling to incorporate new applied sciences alongside its worth chain. Numerous agritech startups in South Africa are constructing distinctive options  to speed up the adoption of such applied sciences to increase the sector. These options intention to tackle the challenges, each within the manufacturing and distribution elements of the worth chain, going through the nation’s breadbasket sector.

Agritech startups boosting agriculture manufacturing

One of these startups is Tsehla Holdings, a startup specialising in hydroponic farming. Hydroponic farming refers to rising crops utilizing a water-based nutrient resolution somewhat than soil. Tsehla claims to assist farmers use about 90% much less water than typical farming strategies, a promote issue statistic in a rustic the place water is assessed as a scarce useful resource.

“Technologies like hydroponics help tackle adverse and unpredictable weather patterns which can lead to droughts. With such technologies, we can control our production, thus ensuring that whatever happens with the weather, at least the production of food continues to go on,” Roseline Mapuranga, founding father of Tsehla, advised TechCabal.

Mapuranga shared that the primary problem she confronted was entry to funding, as hydroponics is cash-intensive. She secured an funding from the Africa Trust Group which she used to refine the corporate’s go-to-market technique. After that, she landed a provider contract with one in all South Africa’s main retail chain shops. Tsehla can also be an alumnus of the Grindstone X program, one of many nation’s main accelerators.

Another startup utilizing newer applied sciences to increase manufacturing in South Africa’s agriculture sector is AgriLogiq. The startup, based by Joel van der Schyff, permits farmers to optimise crop yield by means of a totally automated greenhouse administration system. The system features a cloud-based IP-intensive software program platform to permit wi-fi and clever poly greenhouse automation.

“One of our key products is a ventilation system that gets you to 70% of the efficiency of a traditional closed greenhouse at 50% of the capex cost and 20% reduction of running costs. That helps to bring water and chemical usage, leading to a massive impact on a farmer’s bottom line,” van der Schyff advised TechCabal.

Founded in 2021, van der Schyff shares that AgriLogiq has deployed its proprietary system in over 25 farms throughout the nation, tripling its turnover inside its first 12 months of operations and is on monitor to achieve this once more within the present monetary 12 months. The firm additionally resells its system to different greenhouse producers within the nation.

Van der Schyff states that schooling on deploying applied sciences in agriculture has been a urgent problem. To tackle that, Agrilogiq is creating an open-sourced schooling area inside its infrastructure to train individuals about environment friendly farming.

“I think there is certainly an opportunity [to use technology to drive efficiency] because farmers are also innovative in the sense of trying new things and trying to do more with less. But it does come down to finding those farmers and equipping them with the requisite education,” he concluded.

Addressing the distribution bottlenecks

Beyond produce, distribution is one other space the place there’s room to enhance effectivity in South Africa. Challenges just like the nation’s rolling blackouts, referred to as load shedding, have generally led farmers throughout the nation to fail to get their produce to the market. For shoppers, the price of these distribution bottlenecks is handed onto the shelf costs, making meals costlier.

One startup attempting to tackle a few of these distribution issues is AgriKool, based by Zamokhuhle Thwala. The startup claims to “solve the challenges of food affordability” by constructing an ecosystem that reconnects farmers and consumers in order that each events get honest costs and a dependable market.

AgriKool’s product providing is a two-sided on-line market the place producers checklist their accessible produce even earlier than harvest. Buyers use the platform to search for produce they want to purchase. Once the 2 entities decide on an order, AgriKool engages a third-party logistics provider to full the supply. 

The startup additionally facilitates funds to farmers from consumers to scale back the time it often takes for invoices to be settled on the customer facet. According to Thwala, the difficulty of excessive meals costs in South Africa is extra of a logistics than a manufacturing drawback so lowering friction and fragmentation between producers and sellers, contributes to the discount of shelf costs of agricultural merchandise.

“We realised that the best way to make food affordable is to make sure that there’s streamlined logistics so that fresh produce travels the shortest route to market,” Thwala advised TechCabal. AgriKool’s experiences revenues “close to three million rands” from operations based mostly solely in  Pietermaritzburg within the Kwazulu-Natal province. Just a few months in the past, the startup additionally introduced a distribution take care of Shoprite, South Africa’s largest retailer. 

According to Thwala, regardless of the traction, fundraising has been difficult as a result of don’t see the truth that the enterprise is geographically positioned in a single province as compelling sufficient to write cheques for it.

“[At the moment], it doesn’t make sense for us to scale geographically because if we grow too fast, then not only are we going to need to get farmers, we would also need to get retail partners in those areas,” Thwala mentioned. “The issue with that is B2B sales cycles are very long so we would rather try to get our farmers to output more produce to meet demand which has worked for us so far.”

AgriKool helps farmers turn out to be extra environment friendly by means of a course of Thwala refers to as “co-production” whereby they supply a smallholder farmer with the liquidity wanted to increase manufacturing. This is supposed to assist the corporate to be certain that it meets its contractual obligations to suppliers with no need to get produce from further-off farmers, which might improve logistics and transportation prices.

How agritech startups are addressing worth addition problem

Livestock Wealth is a startup in search of to ease entry to farming returns by permitting potential farmers to spend money on livestock. Founded by Ntuthuko Shezi in 2015, the startup goals to construct a worldwide inventory trade that can permit individuals who personal cows and farmland at a big return.

“We have pre-selected farms where we have allocated assets that an investor can own in that specific farm. So for example, we can have a farm with cattle and individual investors can own some cattle without the headache of doing the farming itself. Anyone can go into our console web and mobile app and get started on investment from as little as 2000 rands,” Shezi defined to TechCabal.

An investor can spend money on particular person cattle or in pregnant cows. Individually, a calf is reared over a six months interval till it’s prepared for slaughter. The meat is offered on-line or by means of bulk wholesale and to area of interest export markets, and the investor makes a return of between 10% and 15% every year from the sale of the meat.

With pregnant cattle, the investor owns the calf for 12 months whereas it’s within the farmer’s care. The calf, as soon as weaned from its mom, is offered to the market to generate a revenue. A portion from the sale is given to the investor. Livestock Wealth earns a fee with every transaction.

Livestock Wealth’s resolution tries to foster the inclusion of residents who won’t have entry to farmland in farming in addition to offering vital returns for traders. Livestock Wealth claims that an investor’s common annual return, which takes the month-to-month charges under consideration, is about 10%. For context, the Johannesburg Stock Exchange (JSE) All Share Index during the last 5 years had a median of a 5% annualised return.

With $550,000 raised in October final 12 months, Livestock Wealth is now increasing its mannequin to farmlands, trying to permit traders to safe farmland to pursue varied farming actions. Each portion, which traders can maintain for up to ten years,  is offered for R50 000 and is projected to earn an annual return of 4% every year. Livestock Wealth’s asset worth stands at R120 million (~$6 million).

The way forward for agritech in South Africa

Despite the challenges that agritech innovators face in South Africa, they are constructing sustainability and contributing to the nation’s agriculture sector. According to Sihlobo, innovators who construct merchandise that permit South African farmers compete globally have an opportunity to construct scalable and profitable companies.

Sihlobo is bullish on not solely the extent of innovation that’s but to come but additionally its uptake. “I think there will be a lot more innovation and better technologies. I also think there will be more financing that will need to come in and support those new ventures,” Sihlobo concluded.

Lack of financing was a problem that was reiterated by nearly all of the entrepreneurs TechCabal talked to and the numbers again their considerations. Although some agritech startups in South Africa like Yebo Fresh and FarmTrace have raised enterprise capital, the quantity of funding that traders put into the agritech sector is dwarfed by VC darling sectors like fintech and ecommerce. According to information by Agfunder since 2017, the agritech startup scene in Africa has acquired greater than $1 billion in funding. Nigeria and Kenya every acquired $147.8 million, whereas Egypt acquired $186.1 million and Kenya $88.5 million. The smallest proportion of the 4 was claimed by South Africa.

Despite this lack of curiosity from traders, entrepreneurs like Mapuranga, van der Schyff, Thwala, and Shezi are proof that agritech innovators within the nation are able to constructing sustainable companies even in a less-than-optimal funding atmosphere.  Should extra funding turn out to be accessible, the sky would be the restrict on the standard of innovation that can come out of South Africa’s agritech sector. The ball, or ought to we are saying chequebooks, is within the VC business’s courtroom.