The agricultural sector has, for a long time remained relatively untouched by disruptive modern technology. However, thanks to the demands of the fourth industrial revolution and disruptive technologies in other sectors in the Kenyan economy, the agricultural sector has now embraced digital technologies to harness associated benefits like improving quality and quantity of food production and managing the value chain.
The agricultural sector faces enormous challenges especially due to global warming which has caused negative economic effects as well as commercialization of previously agricultural land. For instance, previous coffee farms in Kiambu County are now home to residential high-rise buildings. This trend is replicated in many areas across the country. This has informed the need for innovative solutions to these challenges, key among them is the adoption of Ag-tech.
Significance of Agriculture to the Kenyan Economy
Agriculture is the engine of economic growth in Kenya. About 75% of Kenyans earn all or part of their income from this sector. Agriculture accounts for 33% of the nation’s gross domestic product (GDP). Thus, the sector is critical to the government’s Big 4 development agenda, whose aims include attaining 100% food and nutritional security for all Kenyans.
Agriculture is critical to Kenya’s Big 4 development agenda; whose aims include attaining 100% food and nutritional security for all Kenyans. Food security according to the Big 4 Agenda means a 34% increase in the average daily income of farmers, 27% reduction in malnutrition among children under 5 years of age, creation of 1,000 Agro-processing SME’s, 600,000 new jobs, a 50% reduction in the number of food insecure Kenyans and a 48% increase in agricultural sector’s contribution to the country’s GDP.
Ag-tech can play a big role in achieving food security in Kenya. The Government can take practical steps to improve the policy and regulatory framework concerned with Ag-tech. Law and policy can be a catalyst to growth of the sector.
According to a McKinsey research, Kenya accounts for nearly 25% percent of all Ag-tech start-ups in Africa and has a vibrant agriculture sector that is ripe to capitalise on digital technologies and innovations to support agricultural transformation and the government’s development agenda.
What is Ag-tech?
Agricultural technology (Ag-tech) is the term referring to the use of technological innovations in agriculture to increase its yield, efficiency, and profitability. Application of Ag-tech encompasses the following categories;
- Data connected devices using information and communication technology (ICT), internet and artificial intelligence (AI). Notably, The Africa Regional Data Cube (ARDC) is hosted in Nairobi, Kenya. The ARDC is a tool harnessing the latest Earth observation data and satellite technology to help Ghana, Kenya, Sierra Leone, Senegal, and Tanzania address various issues relating to agriculture, food security, deforestation, urbanization, water access, and more. More specifically, predictive analytics use data to track what has happened on the farm, what is currently happening and what is expected to happen in the future. In Kenya, Ujuzi Kilimo is a platform that advances data driven decisions for small holder farmers.
In e-commerce, examples include agricultural digital platforms and farming apps which are driving e-commerce. These apps can serve as digital marketplaces or take the form of business to business (B2B) platforms. Notable examples include M-farm a transparency tool for Kenyan farmers with information relating to the retail price of their products, purchase of farm inputs directly from manufacturers at favourable prices and market for their produce.
- The use of agricultural biochemistry and biotechnology. This comprises of the scientific improvement of plants and animals through innovations such as genetic engineering. It is aimed at improving farming inputs and thus enhancing production.
- The use of farm robotics and automation. For instance, drones have been used to help optimise agriculture operations, increase crop production and monitor crop growth. In Kenya, the use of drone fleets designed to fly over fields to collect accurate, up to date data that farmers can use for data-driven decision making. The use of drones in Kenya is governed by The Civil Aviation (Unmanned Aircraft Systems) Regulations which provide for stringent measures for registration and use of drones for both personal and commercial purposes.
- The use of Smart warehousing and logistics, notably blockchain technology and enterprise resource planning (ERP) software. Notable ERP software includes quick response (QR) codes which are used to trace goods on the supply chain. Such technology enhances farm to fork strategies.
How Ag-tech has revolutionized the Kenyan economy
- Digital marketplace
Access to markets is a key problem facing small holder farmers in Kenya. Digital platforms link small agricultural businesses to an expansive market of buyers. Twiga Foods, a Kenyan company has revolutionised the agricultural marketplace. Twiga’s digital platform and logistics network links retailers with farmers and food manufacturers, presenting a convenient and reliable alternative to the current inefficient and expensive farm/factory-to-market processes.
Access to finance by small holder farmers remains one of the biggest challenges to agriculture in Kenya. Access to credit for farmers is often limited due to the perceived high risk of lending to the agricultural sector and farmers’ lack of financial history. Fintech apps use alternative credit scoring for small holder farmers, alternative data and machine learning to close the gap that prevents traditional financial institutions from lending to creditworthy small holder farmers.
Farmers face a lot of risks and they often find themselves in vulnerable positions due to highly unpredictable factors such as weather and market. As technology aids in increasing productivity, insurance can help in safeguarding the income of farmers. Pula, a leading agricultural technology company that develops and provides crops and livestock insurance uses the crop cut experiment as a claim assessment procedure. This assessment relies heavily on crop cuts and is fed on mobile apps which relay instant feedback to clients.
- Mobile money/technology penetration
According to the World Bank, Kenya is a leading Ag-tech hub with approximately 60 scalable Disruptive Agricultural Technologies operational in the country (as per the stocktaking database). This coupled with Kenya’s financial sector which is also characterized by a robust mobile money ecosystem, with over 70 percent of the population using mobile money on a regular basis, makes it a lucrative field for investment.
Pertinent legal and policy issues facing Ag-tech in Kenya
- Policy and Regulatory environment
The Agricultural industry is fairly regulated with legislations governing both crop and animal farming. However, formulated policies and existing laws do not adequately address technology advancement within the agricultural space. An enabling framework within the ecosystem would ensure that innovated solutions operate rather than just exist.
The Ministry of Agriculture should take the lead in systematically investing in knowledge, innovation and incubation within the ecosystem. Policies in this field should focus on promoting digital innovation within agriculture such as offering incentives for technology diffusion and investments related to digital skills. This will send a strong signal to private investors to take on the residual risks in investing.
- Technology up-take
According to the World Bank, many of the existing digital technologies applicable to the agriculture sector can be deployed even in low-connectivity, rural environments. This is especially helpful because such areas are most suitable for agriculture and would yield best results when Ag-tech is adopted. The challenge however is that despite the progress made regarding mobile penetration and internet connectivity in Kenya, rural areas are ranked low on technology use, especially among smallholder farmers which ultimately inhibits their uptake of Ag-tech tools. The Government therefore must focus on encouraging technology use for investors to consider injecting more capital than is already available in this industry.
- Intellectual property
With scientific improvement of plants and animals through innovations such as genetic engineering, protection of Intellectual Property (IP) Rights is inevitable. Separately, where data provided by the farmers is crucial for the performance of the Ag-tech products or services, the question arises as to who owns the data and how it is protected. While IP rights protect the exclusive rights on intangible assets, there are still discussions as to protection of data and whether it is protected under copyright laws. Investors and farmers alike need to contemplate the IP clauses in contracts and appropriately assign these rights to ensure IP protection of the Ag-tech products and services as well as the data upon which they operate.
- Data Privacy and security
Ag-tech employs different technologies including smart farming techniques. Although these are mainly based on processing non-personal data, assigning such data to an identifiable individual is possible. For instance, data regarding certain crops may make refence to the personal data of the crop owner. This raises data privacy concerns and subjects the use of Ag-tech to the Data Privacy Act. An investor looking to capitalise on Ag-tech should consider such issues to ensure that their investment is in legally compliant ventures.
Data security is also vital. Digitized agriculture needs adequate technical safeguards. Such data is in fact an asset to any venture thus the need to ensure its security.
- Contract negotiation
Contract negotiation is necessary for successful development of Ag-tech services and products. Apart from the obvious reasons for contract engagement, users of Ag-tech products need to identify who will be responsible or liable in case of breach and the duties of each party. Further, there needs to be guaranteed reliability of Ag-tech tools employed through proper certifications and regular audits. Such issues can only best be negotiated through contracts. This also offers greater guarantee and more incentive to the investors.
While the Government works towards realising food security in Kenya, it needs to bring together entrepreneurs, investors and other actors in the Ag-tech ecosystem to provide a catalyst for scaling up disruptive agricultural technologies in Kenya. Undoubtedly, there are still challenges experienced in the agricultural sector when it comes to food production. However, technology offers the opportunity to scale up and restore Kenya’s agricultural productivity which would have positive economic gains for the nation.
Deputy Managing Partner and Head of Telecommunications, Media & Technology