The Covid-19 pandemic is causing major disruptions in agricultural supply chains. Country borders are closed, international demand for goods is falling and both local and international logistics have been severely impacted. Some 500 million households globally are dependent on agriculture for their livelihoods, disruptions to demand and sales will not only have a catastrophic impact on their current financial positions, but will also hinder their ability to plan and invest in the next farming cycle. Smallholder farmers, who produce and sell nearly 70% of food consumed worldwide, are already extremely vulnerable to changes in market dynamics and now they are facing new and exacerbated challenges that have arisen due to Covid-19.
Inaccessible markets, inadequate storage facilities and radical changes in market demand, has led to a 50% drop in demand for produce in Sub-Saharan Africa, especially for fruits and vegetables. Kenya is one of the major exporters of flowers for Europe and they have recorded more than 50% drop in exports, affecting thousands of flower farmers who have lost buyers for their main income generating crop. Similarly, Indonesia has suddenly lost a big part of international demand from USA and Japan for its fresh shrimp, a knock-on effect due to closures of restaurants and the hospitality industry. Unable to store perishable products due to insufficient cold storage infrastructure, the shrimp farmers are significantly impacted.
These unprecedented times have highlighted the existing challenges of our agricultural value chains. We, as a development and technology community, must look towards solutions that improve these value chains’ agility to help support local markets and improve the resilience of rural communities so they are better equipped to withstand shocks.
We have put together some of the emerging insights we have found based on current disruptions caused by Covid-19 and related digital trends:
1. Mobile money is key in reaching rural communities in the time of crisis
Not for the first time in crisis, we are seeing how invaluable mobile money is in fostering resilience by facilitating safe and efficient money transfer and payments services. The government of Rwanda for example endorsed mobile money as an essential service during the pandemic. In an interview with mobile money providers in Rwanda, they reported a surge in wallet adoption and usage, with rural communities who predominantly preferred cash in the past, now organically adopting the use of mobile money to receive and make payments.
2. Agri e-commerce can become the new normal
Agritech solutions that connect farmers directly to consumers and digitising those market linkages are becoming the new normal. We at GSMA published a landscape just last year on their high potential for growth and social impact. During COVID-19, the use of ‘farm to fork’ digital solutions has grown quickly due to increased demand from individual customers in lockdown at home. These new e-commerce models in agriculture are demonstrating the importance of using and integrating technology to ensure agility in local food supply.
Twiga Foods in Kenya has recently signed a partnership agreement with e-commerce player Jumia to allow customers to shop on Jumia’s platform to buy fresh produce from smallholder farmers. Similarly, agri e-commerce platforms in India have seen significant growth in daily orders as a result of lockdowns. In a recently concluded webinar organized by Omnivore, ITC India showcased the opportunities for investors to invest in agritech start-ups that have ventured into solving challenges in market linkages. We at GSMA see e-commerce for food products not only as a short to medium term investment opportunity due to changes in consumer preferences, but as a roadmap to long-term commercial and social impact. These digital solutions are optimising the connection between local farming communities and urban customers (both individuals and organisations) which will improve local economies, food security and resilience to global market volatilities, while increasing and securing incomes for farmers.
3. There is an opportunity to improve and strengthen value chains
Currently, there is an opportunity for the agricultural sector to enhance and develop more formal and co-operative based value chains which can provide smallholder farmers with support such as inputs, training, storage, pre-financing and market access in the times of crisis and uncertainty. COVID-19 has demonstrated how all of these are essential for smallholders to realise a return on investment they have made in their farms. Digital technologies, including geo-tagging, digital profiles of farmer producers, communication and payments will be essential to make such value chains more agile and efficient. It was much easier to scale, pivot and support farmers in the time of crisis for the value chain players that have already embarked on a digital roadmap, and have invested in critical infrastructure. We have seen such digital strategy paying off as demonstrated during the pandemic by Twiga in Kenya, Jala in Indonesia, ‘Farm to Home’ in Pakistan and Safal Fasal in India.
4. The need to improve location-based services
There is a need and an opportunity to digitise address systems to facilitate the shipment and logistics of food products. According to a publication by Mastercard Foundation partnership with FIDA, Sub-Saharan Africa lacks formal address system therefore hindering e-commerce home deliveries, which are instead offered at drop-off points. We are likely to see more investment in creating formal addresses or digital addresses system. For example, imagine if any citizen can easily retrieve their ‘what3words’, even when they are on their basic feature phone and pass it on for the delivery of essential services, be those food supplies or medical help?
In 2015 the Economist wrote about how post-election violence in Kenya in 2008 enabled M-PESA to become the preferred channel for money transfers in Nairobi’s slums as it was regarded as a safer place than the banks to store money. Benefiting from this established customer base, M-PESA then saw significant growth due to network effects whereby existing customers encouraged adoption among new users. At the moment, we see a similar trend in adoption of digital platforms during and post Covid-19 pandemic.
Could we use this crisis as an opportunity to rebuild local value chains and strengthen local businesses and communities? Can technology help us to build back better agricultural value chains? While we at GSMA are certain about the role technology can play to increase agility of the value chains and make them more resilient in the future, we need many decision makers to answer positively to the first part of the question, to make sure this transition happens.