How digitisation is moving agriculture

Nedbank’s John Hudson and Olebogeng Mogale discuss how digital technologies are making it easier for farmers to gain greater control over their route to market.

JEANETTE CLARK: Digitisation and technology disruptions have picked up the pace over the last two years, necessitated by the pandemic and businesses having to find new ways of doing business. In the agricultural sector some of the many new ways that were found included agricultural e-commerce – or online trading of agricultural commodities, fresh produce, and even livestock.

Joining me today is John Hudson, national head, Agriculture at Nedbank, and Olebogeng Mogale, executive, Digital Fast Lane at Nedbank, as we discuss the sector and ask whether agriculture has always been a good adopter of new technology.

John, from a wider perspective, please can you tell us what technology innovation and digitisation mean for agriculture?

JOHN HUDSON: Thank you, Jeanette. Quite honestly, agriculture is no different from many of the other sectors. I think it is playing a vital role and, as you said, we have seen [its] uptake just increase over the pandemic. But to be honest I think farmers have been really good adopters of technology and also digital solutions, and really this has been brought about by the cost-price squeeze effect. Farmers have been under pressure, margins have been squeezed all the time. I think one of the ways that farmers have stayed in the game is to take on technology, so in that sense, it is really, really important.

What I do feel is that what has happened over this recent period – the pandemic probably was a spark for that – is that farmers are looking at this with a keener eye because we are seeing examples of where this is now a ‘must-do’, really, just to make their lives easier, to save time, to be more efficient in their businesses. I think technology and digital are really important.

Further to this, we also see that the consumer is putting pressure on the farmers, if you want to call it that, and we see many of the changes happening driven by the consumers. So it’s a combination of things. It’s what farmers look to do better in their own business and do more with less – and that’s to be competitive and so on. But consumers are equally demanding much better service and much better products if you want to call it that.

JEANETTE CLARK: So, in your view, how much of the adoption of change and adaptation of practices [is] being driven by the consumer specifically?

JOHN HUDSON: This is really interesting, but I certainly feel that the consumer is starting to drive this more and more. What I mean by that is consumers are certainly looking to have nutritious food; they want nutritious food for their families. They want safe food as well. They also want to start to understand the story that sits behind producing the food. Of course, sustainability is becoming a big factor as well, so the sustainability credentials of farmers and what they produce is being scrutinised. So what we do see is that consumers are driving this and, quite honestly, farmers have to adapt.

In many cases I think they see this as an excellent opportunity. So whether it’s using blockchain technology, whether using some of the e-trading platforms, whether it’s the ability to connect with their consumers in a much more efficient way, I think that’s where a lot of farmers are realising the value. So they’re not really feeling pressurised in this regard, but they’ve seen the opportunity of how they could turn this around and convey what is a great story to their consumer base.

I think one good example of this is Nedbank Avo. You know, Nedbank Avo is really there to connect businesses to businesses, and businesses to customers. I think that platform has massive opportunity in the agri space, and in fact is already doing some good work in connecting wine farmers either to businesses or to the end consumer. So I think that’s a start and it’s a really good example. But, quite frankly, there are many others as well.

JEANETTE CLARK: Ole, I’m very keen to hear your opinion on some of the digital trends that have relevance to the agriculture sector. Can you expand a little?

OLEBOGENG MOGALE: Absolutely, absolutely. What we find is that the trends tend to really follow the market needs, the market challenges and the market opportunities. There is quite a lot of tech adoption in the sector, particularly as it pertains to how you farm better and smarter. So there’s adoption of drone technologies, [the] Internet of Things and so forth. You have concepts such as connected cars and so forth.

But I think there’s also a growing trend: all the platform economy space, right, that speaks directly to issues of supply and demand, which John just touched on. Most of these trends really relate to two things. One is access – access to market.

I think there’s also a lot around integrity of the supply chain and sustainability issues.

But certainly on the platform economy side, we see the emergence of many e-commerce marketplaces – both locally and internationally – that are focused on the agriculture sector.

Then on the supply-chain integrity front, we’re seeing the adoption of things like RFID [radio-frequency identification] and blockchain as mechanisms to empower the consumer with knowledge and assurance. But because they help with traceability or provenance of goods, they also help a lot, and the use cases are only going to grow. They’ll help a lot when there are outbreaks and those kind of things.

We think that blockchain in particular, because it’s got so many use cases, is definitely going to change the face of the sector. We’re seeing it being adopted in smart contracting, which is really, really great because it facilitates easy exchange of data between players in the industry, it creates more visibility to market participants, thus creating, I think, overall efficiency in the system. Those are some of the trends that we’ve seen.

JEANETTE CLARK: Let’s just take a step back. You’ve mentioned the platform economy – how do you see this being applied to or taking hold in the sector?

OLEBOGENG MOGALE: It’s growing a lot. I think you mentioned or posed a question earlier about whether the sector is a great adopter of technology, and evidence shows to that effect.

So if you look at marketplace platforms or platform businesses such as DigiFarm up in Kenya, it already has over 2.5 million farmers subscribed. So for me there’s no greater evidence when it comes to the question of the sector’s propensity to adopt technologies. What it does is [it] provides farmers with access to market opportunities but, even more importantly or equally importantly, access to financial services and credit solutions. When you look near South Africa and Zambia, you have a platform like Mano [Products], which provided participating farmers with a growth average of more than 7% just in the first year of being piloted.

So it’s definitely a game of enabling access to market, helping the farmers basically with not only their farming activities, but information around market sectors that then determine that supply, and platforms such as CropData in India that really does that very well. Locally, you have a lot of new emerging players in this space, whether you think of Khula!, Nile, HelloChoices. The list is really, really too long.

But there certainly is a proliferation of digital marketplaces seeking to help farmers in particular, co-ops and the like with access to market.

JEANETTE CLARK: It’s interesting when you talk about route to market. Does this mean digital technologies make it easier for farmers, [who] gain greater control over that process, the route to market?

OLEBOGENG MOGALE: Certainly, certainly. This helps provide them with control of how you actually take your products or your produce to market. So for us that’s the first thing. The second thing is that it also really shortens that distance, if you like, between the producer and the retailer or processor, and ultimately the end consumer as well – which does create efficiencies in the system. These [players] can get up to 7.5% or more, depending on the nature of the value chain.

And to John’s earlier point around the margin squeeze, the sector, in particular the farmers, always feel this really starts opening out those profitability opportunities as such. So that’s one key role or unlock that the digital marketplaces definitely will have as a positive impact in the sector. That’s not necessarily to suggest that it’ll be a complete disruption or overhaul of the value chains as we know them, but it certainly does give the farmers [and] the co-ops alternative distribution models, more flexibility and that proximity I spoke about between themselves and the end consumers. So those are the trends, yeah.

JEANETTE CLARK: What do you believe the industry, and farmers in particular, need to do to take advantage of the opportunities that digitisation provides?

OLEBOGENG MOGALE: I think firstly, with respect to, let’s call them, digital marketplaces, they think of these opportunities not only from their route-to-market perspective, but also from a point of view of taking advantage of the sourcing opportunities that these platforms do provide. We are seeing more and more sellers of input material, equipment and the like also in themselves embracing not only e-commerce, their own e-commerce strategies, but also participating in open and digital marketplaces. This means that a farmer then also has an opportunity to source quite easily and conveniently the best price for these input products, and the best possible deal at the right time. So that’s the one part.

I think the second part in terms of opportunities to take advantage of is that the advent of digital marketplaces really does unlock ease of access to working-capital solutions. So with more and more APIs [application programming interfaces] being developed in the market for both lending and payment, it is increasingly becoming a matter of a couple of clicks to be able to get items on credit. This means that in addition to the sales and automation benefits that they get, their own customers will also get the benefits of what we like to call or refer to as ‘buy now, pay later’ with the farmers actually getting their cash quicker or immediately. That’s obviously a win-win for the farmer and the seller.

I think the last point I just want to make on the opportunities is to say that there are not a lot of tools out there in the market that really help farmers with better practices from a data-management perspective, knowing the state of things insofar as your crops, your processes are concerned, and so forth. I think that increasingly those are going to be some of the key factors for lenders when they make credit decisions. So farmers need to embrace more and more of these tools.

JEANETTE CLARK: We’re definitely looking at an interesting future when we consider the new players in the platform economy, e-commerce strategies for agriculture and further digital disruption. Can’t wait to see what is next.

That was John Hudson, national head, Agriculture at Nedbank, and Olebogeng Mogale, executive, Digital Fast Lane at Nedbank, who discussed the sector and what digitisation is doing there.

Brought to you by Nedbank Agri.

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