2017 Ideas for Action winner Emeka Nwachinemere, Founder and Chief Executive Officer of Nigerian agtech company, Kitovu Technology, discusses the start-up ecosytem in Africa and his own personal journey in the lead up to the Euromoney East Africa Conference.
1. Please can you give us a quick overview of Kitovu Technology Company?
My grandmother was a smallholder farmer, and so were several generations before her, who struggled to survive in the face of low crop yields and high post-harvest losses. Having acquired an education it was a reality that almost became lost on me, but as it turned out, not for long. In 2013, I had the good fortune to have been posted to Oyo State Nigeria, to serve as a corps member as part of the mandatory National Youth Service, where a lot of emphasis was laid on the agro-allied scheme. Encouraged by the free provision of land to willing corps members willing to farm, I got into my first commercial farm - a five hectare maize farm. But at harvest, I found it difficult to find buyers who would offer me a fair price, and with no post-harvest infrastructure, it was certain that I was going to lose everything if I didn’t do something about it. So I built a dryer to dry my maize, so I could store and sell when the rates were better. This attracted some local farmers - a very crucial window for me to understand how bad the plight of smallholder farmers was.
The reality is that most of the world’s poorest people are smallholder farmers. At least 570 million farms worldwide are smallholdings, with more than 475 million of those farms owned by families who cultivate less than two hectares of land. In Nigeria, 70% of the working population, or about 121 million people, are farmers. In Sub-Saharan Africa as a whole, agriculture accounts for 64% of the labour force and 75% of the people who survive on less than $1 per day work in the agricultural sector. This level of poverty results primarily from very low yields, compared with global yield averages, as well as from very high postharvest losses.
The agricultural supply chain in Nigeria is broken. There is a lot of fragmentation and disconnection that ensures that farmers are not privy to best practices, nor do they have easy access to improved varieties and cultivars. Their production is not driven by actionable market demand data. As a result, farms are not matched to the right inputs - fertilizers or seedlings, which leads to very low yields. This broken supply chain means that middlemen exploit farmers, driving up the costs of inputs and making it unattractive for use. The net result of this is that the earning potential of most farms in Nigeria is very low! It is these problems that inspired me to start Kitovu Technology Company.
Kitovu is an agtech company that uses soil and market demand data to provide farmers with soil and crop specific inputs, while guaranteeing purchase of their produce at no extra cost. It is a mobile based supply system that aggregates soil, geo-location, and actionable market data enabling it to match the right soils to the right soil and crop specific fertilizers, quality seeds, and agrochemicals, while connecting farm produce to offtakers. By providing farmers with actionable market demand data and soil and crop specific fertilizers, Kitovu enables them grow crops to specifications with greater precision, which increases their crop yields while ensuring 100% offtake of their produce, ultimately increasing the farmers’ income.
To reach farmers effectively, we run a “humantech” model, where we train youths (Kitopreneurs) in extension, demand aggregation, and data capture, and then deploy them in different localities. This enables us to achieve efficient last mile engagement of farmers, supplying them with inputs and aggregating produce. That way, the youths create income for themselves in a country where youth unemployment makes up about 63% of all adult unemployment.
Working with Kitopreneurs, we capture relevant data; farmers, farm, crops grown, planting times, geolocations; which we analyze and index on our database, enabling us to match each farm with the right inputs - soil and crop specific fertilizers, seedlings, and other agro-chemicals. We then purchase these inputs directly from partnering manufacturers and distribute last-mile to farmers in distant pockets, cutting out middlemen who hike prices through hoarding. These inputs are stored in eco-friendly mud silos in locations where Kitovu covers and distributed on-demand to farmers, who are saved costs of shuttling long distances to make purchases. Our mobile platform also serves as a funnel of information in the form of actionable market demand data that enables us tell farmers the best crops in demand to grow for guaranteed offtake.
The Kitovu team firmly believes that improving the use of inputs by farmers has the potential to lift millions of smallholder farmers out of poverty.
2. What challenges have you faced as a start-up?
The journey hasn’t been an easy one for the Kitovu team, but we won’t trade our learning and experiences along the way for anything. For starters, when we set out to build a solution, our first thought was to build something at par with what was attainable in the rest of the world. So we researched, and came up with a solution. But when we took a second look at those we were building the solution for, we realised that there wasn’t product market fit. We had to build something that would work in an environment with limited connectivity, very low literacy and income levels among farmers. The low income levels meant the farmers couldn’t pay for even soil tests. But in the end, we figured it out after several pilots.
When we started, we realised that there was paucity of data. Whatever data we needed we had to collect by ourselves and that was quite challenging. Access roads to most rural communities were very bad, and mobile penetration very low. This challenge was what pushed us to pivot into our current model, where we train young people as Kitopreneurs and have them provide last mile support to smallholder farmers. But it created problems of its own - the daunting task of training and onboarding Kitopreneurs across Nigeria.
Again, it’s not that easy to change people’s behaviour, and that has been the case with farmers. We had to organise farmer’s meet-ups and run demonstration farms in partnership with the International Fertilizer Development Center. By achieving yield increase from 1.3 tons of maize, which is the national yield average, to 4.2 tons per hectare, we were able to show farmers the benefits of working with us, not just telling them what works. This helped them buy in.
The start-up ecosystem in Africa is quite hostile. Finance isn’t readily available and where available, is very costly. One of the challenges we faced early on was financing. It is very difficult getting financial credit to fund supply orders from companies, and some of these companies require a cash cycle of over two months. And whether soil and crop specific fertilisers from fertiliser companies, or to aggregate commodities from smallholder farmers, we had to pay upfront. Or pay for bulk purchases of soil and crop specific fertilizers. This is a challenge that is a bit general to start-ups in Sub-Saharan Africa. Because we were bootstrapping our solution, there were limits to the number of farmers we could serve. We had to focus on growing organically, one locality at a time, till such a time when we would raise enough funding to fuel our scaling plan.
3. How can development of the start-up ecosystem in Nigeria (and Africa in general) be further encouraged?
According to the World Bank, Nigeria, currently ranks 145th out of 190 countries in the ease of doing business index for 2018, so obviously doing business in Nigeria isn’t exactly a walk in the park. But Nigeria is not alone in that struggle. Several African countries are faced with the same challenge.
African countries must commit to tackling the huge infrastructural deficits like roads and electricity that make it difficult to do business. If this is in place, it would enable start-ups to be globally competitive. They must enact policies that enables business registrations and acquiring of licenses to be concluded speedily. The issues of multiple taxation must be addressed as well.
As a people, we must create a culture that encourages, nurtures and protects innovation, and not stifle it. This happens when we create robust laws on intellectual property protection and patents and go ahead to make sure they are easily enforced. This happens when we revamp our educational sector to guarantee that it is outcome driven and that we are producing enough talents required for start-ups and their innovation to thrive. More importantly, this means that great ideas are in circulation in the ecosystem at all times. This happens when we do away with legislation that kills innovation, as happened in Kenya which recently approved the use of drones for personal and commercial purposes.
We must strengthen our courts to ensure that contracts are upheld and infringements easily penalised. This would create confidence in financial institutions outside our shores, driving foreign direct investment to us. We must make finance easily accessible and affordable to start-ups and encourage the setting up of incubation hubs through public private partnerships. The best ideas and the best talent are useless without the capital to fund the vision. It is critical that capital be available to support each stage of development, from seed to early to growth stages of start-ups. Having seed stage, but not Series A or Series B stage, is a recipe for a likely “flame-out” of that start-up, when they hit the wall in that level of their growth.
4. What advice would you give to other start-ups in terms of accessing finance and growing into the next generation of companies?
Once upon a time, I went from bank to bank and several government parastatals with a business proposal, looking for partnerships and funding to start my business, but it was all fruitless. I know that this happens to a lot of would be entrepreneurs. If it has happened to you, don’t quit, don’t give up on your dream on that account. Just start with what you have. You want to build the next unicorn and there are no funds? Don’t worry. Just scale down your idea, and start with what you have. Find the right team, and vest them to build with you. That way you won't have to worry so much about salaries. Don’t do everything at once and don’t be too uptight about owning 100% of your business. After all 100% of nothing is still nothing. Take a detour when necessary, but keep going. I had to go into farming, doing the tedious farm operations by myself because I couldn't afford to hire a laborer at that point, just to fund my dream! Start growing organically, and as you do, make sure you document. As you grow and show the world how your business works, you derisk it and make it more attractive to investment.
5. What does the future have in store for Kitovu? What are your plans for expansion?
We have carried out a successful pilot in Okaka, Oyo State, Nigeria, where we partnered with the International Fertilizer Development Center to carry out a demonstration farm for maize, achieving more than triple the National Yield average of 1.2 tons per hectare with a yield of 4.2 tons per hectare in 2017. This year, we plan to scale our solution to six states of Nigeria, training 1200 Kitopreneurs and onboarding 20,000 farmers. From these, we would expand first across Nigeria where there are about 64 million farmers, one locality at a time in the next five years, before we set our sights to Sub-Saharan Africa. The result would be increased food production and incomes for smallholder farmers. By 2028, it wouldn’t matter if you are a farmer or a commodity buyer, if you require high quality inputs or produce that is traceable, you would just have to Kitovu it!