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Innovations across the Agricultural Value Chain

Segun Ogunwale
Segun Ogunwale
Segun OgunwaleManaging Partner at Kominity Digital

A presentation delivered at 2019 First Bank Agric Expo

Innovations across the Agricultural Value Chain

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Agric Expo 3.0 | Augist 30, 2019
Agricultural Innovations
across the Value Chain
Recognitions
Every week, OpenFarm reachesan a growing audience of more than
2,000 Agribusiness Owners, Professionals, & Key Decision Makers
across Agribusinesses, Government Parastatals, Agric Agencies, and International Organizations.
The OpenFarm Network
$78 Billion
Nigeria’s Agriculture Sector Size by 2017
(PwC)
31%
Agriculture’s GDP Contribution
to Nigeria in 2017
African Food Import Bill
But Let’s Compare
No doubt we are recovering and the Agricultural sector is being
revitalized
$313 Billion
Nigeria’s Food Import Bill
$35 Billion
The Agric Sector in Numbers
(AfDB)
(PwC, 2017)
$4.5 Billion
45-50% | $9 Billion
in Nigeria
Post-Harvest Loss
(GAIN)
• Sector performing extremely below it potentials and global counterparts
• Not a competion of Land Size or Farmers’s Populace.
Can’t continue to do what we are doing expecting the same result or miracles
• A brave new world where ideas; innovation; solutions; compete, win & drive value
Global Comparative Performance
Thailand
(66 Million People)
>
Sub-Saharan Africa
(800 Million People)
AGRICULTURAL EXPORT
Netherlands
(42,508 km²)
>
AGRICULTURAL PRODUCTIVITY
Nigeria
(923,763 km²)
Niger State
(76,363 km² )
• AfcTA Agreement signing;
a threat and an opportunity.
• Ideas rule the world today as the
a scaleable property not limited
by geographic boundaries.
• The present & future belongs to
the innovators and solution
providers.
$200 Billion2015
expected
growth
2030
FAO Market Report on Sub-Sharan Agriculture
Total Market (AfDB)
Market
$1 Trillion
The Continental Opportunity
Innovations + Businesses around these Opportunities
= New Billion Dollars Businesses
1.2 Billion
People
1.7 Billion
People
This is the case for innovation
current
state
To Provide Insights on:
•Areas & Opportunities for Innovation with Case Studies
and Trends
•Path to Successful Innovation and Success Recipe
•Pitfalls to avoid
Class’ Agenda

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Innovations across the Agricultural Value Chain

  • 1. Agric Expo 3.0 | Augist 30, 2019 Agricultural Innovations across the Value Chain
  • 2. Recognitions Every week, OpenFarm reachesan a growing audience of more than 2,000 Agribusiness Owners, Professionals, & Key Decision Makers across Agribusinesses, Government Parastatals, Agric Agencies, and International Organizations. The OpenFarm Network
  • 3. $78 Billion Nigeria’s Agriculture Sector Size by 2017 (PwC) 31% Agriculture’s GDP Contribution to Nigeria in 2017 African Food Import Bill But Let’s Compare No doubt we are recovering and the Agricultural sector is being revitalized $313 Billion Nigeria’s Food Import Bill $35 Billion The Agric Sector in Numbers (AfDB) (PwC, 2017) $4.5 Billion 45-50% | $9 Billion in Nigeria Post-Harvest Loss (GAIN)
  • 4. • Sector performing extremely below it potentials and global counterparts • Not a competion of Land Size or Farmers’s Populace. Can’t continue to do what we are doing expecting the same result or miracles • A brave new world where ideas; innovation; solutions; compete, win & drive value Global Comparative Performance Thailand (66 Million People) > Sub-Saharan Africa (800 Million People) AGRICULTURAL EXPORT Netherlands (42,508 km²) > AGRICULTURAL PRODUCTIVITY Nigeria (923,763 km²) Niger State (76,363 km² )
  • 5. • AfcTA Agreement signing; a threat and an opportunity. • Ideas rule the world today as the a scaleable property not limited by geographic boundaries. • The present & future belongs to the innovators and solution providers. $200 Billion2015 expected growth 2030 FAO Market Report on Sub-Sharan Agriculture Total Market (AfDB) Market $1 Trillion The Continental Opportunity Innovations + Businesses around these Opportunities = New Billion Dollars Businesses 1.2 Billion People 1.7 Billion People This is the case for innovation current state
  • 6. To Provide Insights on: •Areas & Opportunities for Innovation with Case Studies and Trends •Path to Successful Innovation and Success Recipe •Pitfalls to avoid Class’ Agenda
  • 7. Areas & Opportunities for Innovation with Case Studies and Trends
  • 8. The Agricultural Value Chain Similar to the activity chain in Power and the Oil & Gas Sector Each of these components provides challenges & opportunities for innovation • This is also known as Farm2Fork …the farther right you go; the less risky & the more profitable, but also the more the competition Hence, the preference of Financial Institutions for Traders, Processors & other Agribusinesses Farmers & Cooperatives
  • 9. Challenges/Opportunities • Information services for Farmers for the provision of GAPs, weather, and market information. • Access to inputs • 1 Farmer: 5,000 - 10,000 Extension Agents in the Country Innovations and Players • Mobile based extension services; IVR, SMS, USSD • E-Wallets Considerations • Competition is with Government and input suppliers who have an access advantage (partnership can help) • Need for context and personalization (high technical expertise) • An economy where we don’t really pay for information • Monetization is a challenge especially when it involves telcos. Extension Services & Input Distribution
  • 10. Challenges/Opportunities • Underfunded sector • High risk for Financial institutions • Low penetration of Agric Insurance Innovations and players • Crowdfunding as investments in Farming Cycles; Farmcrowdy, EZ Farming • Kenyan Fintech company making it easier to lend to farmers • Derisking by NIRSAL with Credit Risk Guaranteee • Rise in Impact investment Considerations • Agency banking for reaching Farmers at the last mile has a lot of potentials • Cluseters such a cooperative societies to derisk • Input financing over direct cash transfer Financing
  • 11. Challenges/Opportunities • Cutlasses and Hoes still in use making farming unattractive attractive • Undermechanization; some states in the SouthWest have less than 15 working tractors • Low buying power of Farmers; many cannot even afford power tillers Innovations and Players • Infrastructure as a service; tractors, storage etc. to aggregate demand and lessen cost • NAMEL (service providers) and HelloTractor (on demand) partnership to access tractors on demand and estimate cost per usage Considerations • High outlay of investment • Needs to be demand-driven for sustainability • Need for technical skills and Human Resources Agro Support Services
  • 12. Challenges to Opportunities • Low buying power • Unavailability of inputs • Low yield • Climate change Innovations and players • Sachet sized input • Index insurance for input • NIRSAL Comprehensive Index Insurance (NCII). Considerations • Competition against GAPs • Result-driven, requiring thorough control experiment • Last mile distribution is a challenge • Inputs may be subjected to use of other inputs Farm Inputs & Insurance
  • 13. Challenges/Opportunities • Too many smallholding and subsistence operations • Unpredictability of harvest • Massive post-harvest losses and Uncertainty on when to harvest Innovations and players • Nucleus/Out-grower programme to aggregate supply • Satellite imaging for harvest prediction • Direct to Farm startups connecting Farmers to Buyers like Ninjacart Considerations • Huge upfront investment in provding inputs and infrastructure • Loyalty of Famers to contracts in the face of market realities Production
  • 14. Challenges to Opportunities • Massive post-harvest loss (almost 50% in the case of tomato) • Unavailabilty of fresh produce round the year • Underpricing of poorly stored produce Innovations and players • Plastic Trays over Woven Baskets • Solar Driers & Cold Chain • Processing into Chips and flour Considerations • Opportunity for innovation in agro-focused logisitcs, maximimum utlization of trucks on the road and data-driven logistics • Who is the customer? Who pays? Farmer? Trader? Supplier? Logistics, Storage & Processing
  • 15. Challenges to Opportunities • Low buying power of Customers yet High Competition • Growing global population leading to high food demand locally and internationally Innovations and players • Pricing strategy for availability and affordability e.g noodles pricing-strategy for Nigeria’s sachet economy. • Changing the form of the produce for better export value e.g. Poundo yam flour vs raw yam which is 80% water; heavier; takes more space, susceptible to damage Considerations • Dilemma: export require premium value vs a local market sensitive to price Value-Addition
  • 16. Path to Successful Innovation
  • 17. The 5Ps Pain Point Recognition and Solution Ideas Passion to Execute and Follow through Proof-of-Concept/Pilot of Solutions and Iterations Partnerships for Capability and Commercialization Profit from Scale and Market Traction Going from idea, concept to market success
  • 18. Pain Points Availability Accessibility Affordability • Pain Points revolve around unavailability, inacessibility or unaffordability • You must answer WHAT it is, WHO has it, WHO it affects, HOW you intend to solve it • Ideas for an solution must must meet one or more of the criteria below Recurring Trends: • Availability of mechanized services based on Aggregation of Demand for invesment in infrastructure & provision of services e.g NAMEL’s distribution of farm service centres • Access to fund based on Aggregation Supply of funds and interests as investments into farming cycles e.g. Farmcrowdy and Thrive Agric’s • Affordability based on as Service-on-Demand over full cost of ownership e.g HelloTractor that makes mechanized services available, accessible and at an affordable rate. • Technology eases these processes
  • 19. • Takes you beyond the idea • Keeps you going before profit • Fuels you throgh the journey when there is no instant result • Propels you to acquire the required capabilities as agriculture is not savvy Passion
  • 20. The Need: • Think Big. Start Small. • Proof of Concept (PoC) used in Technology | Pilots used in Sciences • Your small experiment to test your assumptions and make adjustments • Risk management before scaling A good Proof-of-Concept/Pilot focuses on: • a single pain point • clearly defined outcome e.g. productivity, cost reduction • a specific or few commodity value chains. Need for comparison with control group for pilots or industry benchmark for PoCs Expectations from a Pilot/PoC: • Collect data • Evaluate Impact • Craft Success Stories Proof-of-Concept/Pilots
  • 21. Acquire or Enhance Capacity this may be human resources (domain expertise), physical space & sites, or risk reduction Public and International Agencies such as IITA (with HarvestPlus & Airtel) or NIHORT Insurance Companies such as crowdfunding companies and Leadway Ministries, Departments and Agencies such as NIRSAL for financial interventions or ADPs for extension services on your solutions or train-the- trainers Institute of Agricultural Research & Training has been an incubation hub for startups providing physical space, farms, and expertise Partnerships Building on your Success Story, you may need partnership to: Acquire Customers this can provide direct route to market or value- adding services to their customers Cooperatives & Microfinance Banks access to smallholder Farmers Banks & Insurance Companies access to Agribusinesses; Owners and Professionals Institutions access to Agroprenuers (IITA and other Agric institutions) Required Be definite about roles and expectations
  • 22. Agri- businesses Agroprenuers Smallholding Farmers • You are either an Agribusiness or innovating for any of these Stakeholders • They are different customer segments requiring different approaches though they interact • Pricing is dependent on the customer segment; volume vs price • Your user is not necessarily your cusomer. Large Farm Owners & Agribusiness Professionals (Money hubs) Youths and Urban-based Farmers (Digitally savvy) Rural-based Peasant & Subsistence Farmers (Populous & at the bottom of the pyramid) Profit from Commercialization
  • 24. Lack of Domain Expertise. Passion or Huge investment cannot substitute for it. Build a multidisciplinary team/advisors. Costly Assumptions which stems from lack of expertise. Test all assumptions. Go to the field. Lack of a Clear Path to Commercialization. You don’t need to figure it out from the start but work on it. One Size does not Always Fit All. Tailor the solutions as may be required. Pitfalls to Avoid
  • 25. Talk is Cheap, The Future belongs to the Doers!
  • 26. Agric Expo 3.0 | Augist 30, 2019 Best Wishes. Thank You!