The myriad challenges facing farmers in Africa – inadequate financing, education, and input distribution – persist and greatly affect agricultural production on the continent. But startups are providing innovative solutions to these problems, and South Africa Khula it’s an example. The startup, launched in 2018, is finding its niche in the ever-growing industry.
Today, it announced a $ 1.3 million seed round to scale operations across the country.
On the surface, it would appear that agriculture in Africa has not taken off as exponentially as other technology-operated industries. But it has: The agricultural sector grew 44% year-on-year between 2016 and 2019, and the continent has the highest number of agricultural services in the developing world, reaching more than 33 million small farmers, according to a report from Farmers Review Africa.
Karidas transformation, Matthew piper Y Jackson Dyora founded Khula three years ago. Khula provides small-scale and commercial-size farmers with software and a marketplace to grow their business.. But This description does not do justice to the painstaking problem that Khula is solving.
Before Khula, Tshintsholo and Piper were school and business partners. They worked consulting jobs after dropping out of college a year before graduating.. But while it allowed them to meet clients across disciplines, the consulting business was not stimulating enough.
“We always wanted something to do something more impactful, something more meaningful, something that could Really change the way the world works, “Tshintsholo told TechCrunch. As time passed, agritech seemed to be the way to go due to the experiences of both founders..
Africa is home to 60% of the world’s arable land. Research also shows agritech in Africa Is projected reach a value of $ 1 trillion by 2030. But a trip to Israel made Piper wonder why the country, although half of its land is considered a desert, had more agricultural products than African countries.
“It doesn’t make sense that we have more land than any other continent,” Tshintsholo said. “And almost everyone on the continent is a farmer and we buy food more than we sell. We wonder how it was possible, considering the great competitive advantage that agriculture has.? ”
Researching more and spending time with farmers exposed another problem: how middlemen scammed farmers in the country.
The agricultural industry in South Africa is known favor industrial agriculture. And like most parts of Africa, small farmers have a tough time as they face a plethora of challenges, from marketing and selling to transporting their goods and products.
Typically, farmers take their products to a large warehouse where large aggregators collect the products and sell them. The problem here is that most of the products They are sold on consignment, which means there is no guarantee that farmers will make a sale. Products, mostly perishable, will also suffer price drops, aand there is a great lack of transparency, which allows intermediaries to scam farmers.
“believe the penny that fell for us was when we started playing detectives. We followed these farmers and realized what the big companies that were listed on the stock market were doing: going to these physical markets, picking up the product and then selling it on the formal market. They would pick it up for R3.50 and sell it for R11.00. They literally added nothing to the value chain other than single pick it up and drop it off. “
In some cases, farmers could sell their products. to a processor who subsequently sells it to a supermarket at a much higher price. The supermarket also makes a profit by selling to individual consumers.. So what a farmer sold for R3.50 ($ 0.24) could end up for R30 ($ 2.07) in the hands of an individual consumer. Thats not all; Farmers must also pay commissions to these intermediaries and to the municipalities in which they operate..
“That’s when we knew this was a fight, and this was the problem we wanted to tackle,” Tshintsholo said. “But then in addressing that issue, we didn’t launch initially. Agriculture can be very complex. What we have now is something we call the Khula ecosystem, and this is because the industry is so interconnected. “
Khula wants to address all of these issues at once and provide farmers with liquidity, access and a market.. The platform is an ecosystem made up of three products.
The Inputs app allows farmers to access approved agricultural inputs and services from local and international suppliers.
The second is the fresh produce market, managed farmers with the challenges listed above. Allows farmers to sell produce directly to formal local and international bulk buyers. By allowing farmers to get involved and negotiate prices with suppliers, the platform aims to reduce the access that intermediaries have that has led to the exploitation of farmers.
The Funder Dashboard then connects institutional investors with farmers who meet their funding mandates.
“The reason we have opted for this ecosystem approach is that it is a more rigid business model,” said Tshintsholo. “So we want to allow farmers to use our ecosystem to buy the products they need and get the services they need.”
Khula has experienced reasonable traction since launch. The company has hired more than 3,000 farmers and more than 100 suppliers now work with the company.. This year, the startup It was accepted in Google for Startups Accelerator Class 6 along with 14 other African companies.
While the company is single announcing this investment, it closed the round last year. That was directed by AECI, one of the largest agrochemical companies on the continent. South African impact investor E Squared Investments also participated.
What’s more In addition to the financial power that Khula receives from its main investor, it will also have access to AECI’s extensive distribution network to scale its application of inputs. With 132 warehouses across the country, Khula says it can deliver products in all provinces, in all major agricultural regions..
Tshintsholo says AECI is the type of investor Khula hopes to have as it moves forward: a long-term partner interested in execution and not quarterly updates.
“We didn’t want an investor at the table who was just going to ask us how we had performed in a specific quarter. We wanted a long-term partner to run with us. A partner with a great reputation in the industry and an incredible distribution network, a partner whose long-term success was tied to a business model like ours. And AECI fits that description perfectly for us.”
“Khula has a very attractive fundamentals, a sizeable accessible market, application development capabilities, key agribusiness networks, and a management team that wants to work with AECI as its preferred agricultural input and technical advisory partner,” Quintin Cross, Director AECI Plant Health manager said in a statement.