Digitalization of Small-Scale Farms in Africa

Thu 27 Jul 2023

Telecommunications operators, therefore, have an interesting opportunity to capture value on two levels : on mobile money transactions and on transactions across different platforms if they have chosen to engage in this digitalization of the sector


E-agri is an attractive sector for telecom operators in Africa. Agriculture constitutes 23% of the African economy’s GDP, and more than 60% of the sub-Saharan region is made up of small-scale farmers.

A Continent That’s Rich in Land With Agricultural Potential Underutilized

Today, with almost 25% of cultivable land, African agricultural production contributes just 10% of the global volume. Moreover, despite its resources, the continent remains a net importer of agricultural products.

“Small-scale farmers” are defined as farmers with less than 10 hectares of arable land, and most often, they are responsible for areas of less than 2 hectares. The disparity among countries and agricultural value chains results in significant differences characterizing the populations themselves. Households that own the land they operate are numerous.

Small Farmers : Numerous but in Precarious Situations

Productivity failures and market breakdowns present many challenges for these farmers. Housing conditions are often modest, with limited access to water. Geographically isolated from the major economic centers of their country, it is difficult for these families to access complex services. The cost of purchasing daily necessities can also be very high. The lack of infrastructure explains the majority of these difficulties, as it cuts off many of the network effects and cost reductions that larger production volumes can offer.

Differences in productivity can also explain some of the risks these farmers face. The size of their farms and their financial means require them to diversify the species they cultivate in order to optimize the seasonality of each value chain while reducing climate risks. Only large farms can focus on fewer species to improve their know-how and increase their productivity.

Is Business Digitalization the Solution ?

The digitalization of the small-scale farmer’s profession is a concrete solution to improve their daily lives and productivity.

The needs of small-scale farmers are now well-identified. Three key drivers are available to support these farmers in their daily efforts.

Firstly, inputs quickly increase the productivity of these farms. Access to high-quality fertilizers, especially those specific to each agricultural value chain, improves profitability. Hybrid seeds reduce weather and disease risks. And finally, increased knowledge and training ensure the sustainability of these improvements by making farmers autonomous.

Secondly, infrastructure is crucial to help the population gradually increase production volumes. Irrigation, storage and all transportation structures are real assets for helping farmers. Today, many solutions are being developed along these lines and are making the work of these farmers more profitable.

The last lever is essentially access to the various markets, which guarantees the selling prices of their products and stabilizes the incomes of these households. Today, this last lever is not automatically the most popular service but allows the suppliers of these platforms an opportunity to make their model profitable. We can see these levers grouped as super-apps : platforms that position themselves as a single point of access to these services for farmers.

Platforms Serving Farmers

These platforms simplify the profession and daily lives of small-scale farmers. Today, adoption is often rapid, but monetization remains a challenge for the teams developing these solutions. Launched in 2017 in Kenya, DigiFarm features 1.5 million farmers on the platform with an activity rate of around 30%. Thanks to numerous partners, this platform addresses several key components of the value chain. Safaricom’s service provides access to, for example, suppliers, content, or soil analyses. Today, the majority of uses still focus on free services (information services).

The development of these new digital services for farmers is often accompanied by financial services. Increasingly, data is becoming available to intelligently fund these farmers and their operations. Digital platforms allow for the creation of a history of a farm’s activity and therefore the projection of future revenues. Based on this data, scoring can be assessed to grant input credits and support farmers’ cash flow needs. There are also agricultural insurance solutions to protect farmers from climatic hazards in certain regions. Proposals for loans and the financing of agricultural tools (Pay As You Go) also exist to support farmers in the growth and development of their serviceable land. At Digifarm, these financial services are still underutilized. Even though they significantly contribute to generating profits, considerable financial education is necessary to support the development of these services.

The digitalization of these solutions simplifies the processes and thus reaches a wider population, often far removed from more traditional means of financing.

Digital Agricultural Services Remain Up-to-Date but Still Face Challenges

Today, numerous initiatives exist, but many are still searching for their profitable business model.

These platforms, whether agricultural or not, regularly raise the same issues. It is necessary to create a structure of trust to engage users without disappointing them with the services offered. Such options should also succeed in convincing partners that intermediation via the platform is advantageous for their businesses. Moreover, all these digital services are systematically based on human interactions. Establishing a network of effective agents to raise awareness and recruit farmers determines the success of a service.

The business model of these services is not simple, and the structure of income flows, with commissions on transactions, may seem unstable depending on the partners and services offered.

The model rarely generates recurring revenues. Creating a community is not free and requires significant financial resources to successfully reach an effectual size and thus create sustainable value. We see that free services are still the ones mostly used in sub-Saharan Africa. Nevertheless, the development of financial services with these agricultural solutions stands to be a real source of revenue. Digifarm, for example, finances access to inputs through credits, generating transactional revenues with the purchase of input and financial revenues with credit. In the end, the incremental income generated by these services (mobile money, data, messages, voice, etc.), generally convinces these companies to continue their activity.

Telecommunications operators, therefore, have an interesting opportunity to capture value on two levels : on mobile money transactions and on transactions across different platforms if they have chosen to engage in this digitalization of the sector.

It is interesting to note that some players decide to extract themselves from this platform model by focusing on a specific service. Twiga, a market access service for farmers in Kenya, owns numerous assets (warehouses, delivery facilities, etc.) that allow farmers to sell their products easily and regularly. Acting as more than just an intermediary and engaging in the business allows the solution to generate more margin and achieve more sustainable profits. 

The evolution of this sector and the opportunities identified by the major players in the region lead us to envision many more services evolving to support these operators in their daily lives. The size of the market and the identifiable needs make digital agriculture a very promising sector. Nevertheless, the many challenges of the sector require a thorough understanding of the market before developing these services to their fullest.


Mobile financial services consultant manager