The COVID-19 pandemic has had devastating effects on smallholder farmers in Africa. In some countries, supply chain disruptions have made it hard for farmers to get seeds, fertilizers, and services in time for growing seasons. In other countries, movement restrictions continue to prevent farmers from going to marketplaces to sell their products. Public financing and private credit agencies have further tightened their already limited support to smallholders.
On the plus side, e-commerce has been found to increase market efficiency along agricultural value chains, improve farmers’ incomes and livelihoods, and create new jobs and business opportunities in farming and related sectors.
During the pandemic, more people turned to shopping on e-commerce platforms out of a desire to maintain social distancing. This has driven the rise of agriculture e-commerce globally, including in Africa. In Kenya, in order to facilitate e-commerce and mobile payments in response to COVID-19, the central bank issued policies that required mobile money providers to waive fees for transactions below the equivalent $10, which equals about 80% of transactions in the country.
In Rwanda, the government recommended e-commerce platforms to the public during the lockdown, including those providing fresh produce from farms. And in Nigeria, new e-commerce platforms emerged to connect farmers and consumers, such as Farmcrowdy Foods.
Since digital agriculture value chains have greater transparency and fewer middlemen than traditional systems, farmers can reach more potential buyers and increase their margins. In addition, e-commerce business models can reduce food waste, helping farmers find buyers during the harvest season instead of having to plow under produce.
Nevertheless, agricultural e-commerce is facing critical bottlenecks that prevent scaling up to serve more farmers in Africa.
There are three primary obstacles:
- Lack of efficient transportation in rural areas: Most online platforms concentrate on farmers in the peri-urban areas of only a handful of big cities. Farmers in remote rural areas can’t benefit from these digital platforms, because transportation costs are too high.
- Shortage of logistics facilities and services: African e-commerce startups normally need to invest in their own warehouses, trucks, and cold chains. These capital outlays constrain their resources, making it harder to expand to engage more farmers. In mature markets, e-commerce companies can rent and utilize competitive storage and logistics services.
- Low inventories: Big African e-commerce firms like Konga and Kilimall have an agricultural products or vegetable category on their platforms, but there aren’t any listings as of this writing because they can’t find reliable suppliers. The low supplies are largely caused by the fact that many farms in Africa are not organized as modern businesses, neither producing enough to achieve economies of scale, nor standardizing quality to meet commercial requirements.
Here are three potential policy solutions:
- Invest in last-mile connections: In recent years, African governments and their development partners, like the World Bank and the African Development Bank, have made unprecedented investments in both physical and online infrastructures. These backbones are tremendously important, but last-mile connections – from hubs and highways to individual farms – remain a challenge in many rural areas.
Governments, e-commerce firms, and development banks can work together to target investment in these rural connections. One key thing they can do is to build roads connecting farmers with e-commerce hubs that are next to railways or highways, for distribution to commercial buyers and consumers.
- Build a robust e-commerce ecosystem:
With these facilities available, e-commerce platforms can put aside more capital for scaling up their businesses, engaging with more farmers and providing more value-added services such as market information, micro credits, business training, and crop insurance.
In addition, a World Bank-Alibaba joint report on China’s e-commerce experience shows that setting up public/private e-commerce public service centers in counties or villages has been instrumental in developing rural e-commerce. These centers provide various services, including collection and payment, purchase and sale, microfinance, and digital literacy and entrepreneurship training.
The challenge is a weak e-commerce ecosystem, particularly in logistics, financing and digital marketing. Governments can partner with the private sector to prioritize building warehouses, logistics centers and data-driven smart logistics networks. Governments may need to reform their tax systems to incentivize private sector investments in these areas.
- Support farmers’ own networks: Farmers’ organizations, such as cooperatives, have huge potential to overcome difficulties that individual smallholders have with e-commerce. African governments can improve the regulation of farmers’ organizations and ensure their accountability to members. Policies can also shape specific and time-bound subsidies and concession loans to farmers’ organizations where applicable.
It might be necessary to have some degree of government involvement in connecting farmers organizations with e-commerce platforms and other supply-chain components, particularly to ensure farmers get fair prices.
Equally important, governments can work with the private sector to improve the organizational and commercial capacities of farmers’ organizations. Policies can be put in place to attract and train tech-savvy, marketing-savvy youth to work for farmers’ organizations. These people can transform producers’ organizations into modern, innovative, market-driven actors, helping members to move up agriculture value chains.
As a trusted humanitarian and development partner to the World Bank and other organizations, the World Food Programme has a decades’ long track record in smallholder and agriculture market support (SAMS), operating with approximately two million farmers in more than 60 countries.