Platform thinking for agriculture in SA: Opening up the margins

The platform economy is growing rapidly, and in the agriculture sector platform marketplaces that link producers and consumers are on the rise.
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HelloChoice, Khula!, TonnUp, Nile, Trigga, SwiftVEE.

These are all names of agritech platform startups that are disrupting the agricultural value chain in South Africa and, in the case of Nile, even further north on the continent.

A white paper on a unique value-at-stake framework, published in 2017 by the World Economic Forum (WEF) with Accenture, estimated that the adoption of four digital technologies could create R671 billion in additional value for the South African agricultural sector, consumers and society between 2017 and 2026.

Considering the catalytic effect the Covid-19 pandemic has played in the prevalence of digital tools and platforms, that number is most likely already higher.

The digital agricultural strategies the WEF framework highlighted as central to securing this value were precision agriculture, connected supply chain, digital marketplace, and autonomous operations. If the proliferation of startups such as those mentioned above is anything to go by, platform thinking, and digital marketplaces, will indeed play important roles as disruptors and game-changers.

Nedbank national head of agriculture John Hudson believes that digital e-trading platforms and marketplaces in the agricultural sector are here to stay.

“The pandemic brought many challenges but also highlighted some of the opportunities that were out there; some of the e-trading platforms that have come to the fore are an example of that,” he says. “As we hopefully wave Covid-19 goodbye, we still need to see what role they will play, but I am confident they will continue to gain traction.”

Agriculture and tech?

If you think technology and agriculture don’t go together, you’re wrong, says Hudson.

He cites the John Deere tractor as an example.

“A tractor is not just a tractor anymore. If you look at today’s John Deere versus that of 10 years ago, the technology that has been built into this piece of equipment is mind-blowing.”

Hudson also argues that due to the nature of farming activities and their geographic location, technology adoption makes sense.

“In many ways it is logical for farmers to adopt technology due to the remote nature of their lives; sometimes the closest neighbour is 10km or more away. Anything that can improve this way of life, cut overhead costs, ease the way of doing business and save time, should be welcomed.”

Does e-commerce have a role to play?

Nedbank launched its Avo super app in 2020. According to Olebogeng Mogale, the bank’s executive for Digital Fastlane, the app provides multiple lifestyle services that one would typically find in various standalone digital apps.

He believes that with the introduction of the new Avo Business offering, the B2B Marketplace, Nedbank now provides exciting opportunities for the agricultural sector as well.

“Our B2B platform is currently a goods marketplace that matches supply and demand between businesses of any size, and across a variety of sectors, including agriculture. As a platform we curate interactions between buyers and sellers, providing safe and secure means for business-to-business trading,” Mogale says.

This end-to-end e-commerce experience also includes the delivery of the goods and the payment of transactions.

“We believe our B2B Marketplace will open market opportunities for farmers, helping them increase their sales by selling to more customers, in more geographies, without having to make any additional investments from a sales and distribution perspective,” he says.

Mogale says the platform will provide primary agriculture producers with an alternative, lower-cost distribution model, and greater access to potential business buyers such as manufacturers, wholesalers and hospitality businesses.

“The bigger aim is to make it easier for industry players to access working capital solutions, and in the process, unlock efficiencies in their businesses.”

Avo B2B offers various services that will make life easier for agri businesses that are keen to embrace digital. These include branded online stores, e-invoicing, escrow services that provide peace of mind for both the buyer and seller when making payments or delivering goods, and optional logistics services to sellers for swift delivery.

Unlocking potential

An MITSloan Management Review study found that platform businesses made up 60% to 70% of over 200 startup unicorns (new companies that have valuations of $1 billion or more) in 2017. As at January 2020, the world’s top seven companies by market capitalisation were all platform businesses: Apple, Microsoft, Alphabet, Amazon. Facebook, Alibaba, and Tencent, it said.

This could give insight into what can be expected from the agricultural sector in the next few years.

The WEF framework allocated R175 billion – of the potential R671 billion in additional value it said digital strategies could unlock for SA agriculture and society – to the role the digital marketplace can play.

The white paper argues that marketplaces will help to reduce wastage, eliminate information asymmetry, and reduce costs by removing intermediaries.

Hudson says these platforms will play a vital role in shortening the chain between producer and consumer, potentially cutting out some of the intermediaries which should result in cost savings and improve on farm returns.

“These platforms are allowing for the digitisation of conventional trading in many ways, and this has multiple benefits. Direct contact between buyer and seller is not only helping to address the cost price squeeze that exists but in addition to the potential cost savings there are other benefits such as wider market access, greater transparency, improved information, and the ability for farmers to connect directly with the consumer.

“Furthermore, these platforms are generating data, which, if used correctly, may help transform how banks fund their clients and manage their risk. It’s not going to be immediate; it isn’t a silver bullet that will fix things overnight. But it has a very important role to play in a continually evolving agricultural sector.”

Brought to you by Nedbank Agri.

Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.

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