Apollo Agriculture is building a pathway to commercial farming
Since 2016, Apollo Agriculture has been equipping farmers in Kenya with appropriate technology, tools and financing to help them transform small-scale farming operations into profitable enterprises
Summary:
- Apollo agribusiness is a one-stop-shop who can provide small scale farmers with everything from seeds, fertilizers, training, finance and marketing.
- They can double or triple the production by the farmers.
- They are using the most advance technology like sensors and satellites
- They provide financing without providing cash, but vouchers for buying goods
- Farming involves all kinds of businesses
The idea behind Apollo
“We support farmers in producing more and thus making more money and transforming their livelihoods,” Benjamin Njenga tells AFN. He is co-founder and chief customer officer at Nairobi and Amsterdam-based Apollo Agriculture.
Apollo, which functions as an agribusiness marketplace, strives to help farmers overcome productive barriers by serving as a one-stop-shop for all of their farming needs. It sells farm inputs like fertilizer, high-quality seeds and pesticides; it offers financing and insurance, as well as training and capacity building; and it helps farmers find reliable and fair markets for their goods.
“We are seeing farmers posting 200% to 300% increase in terms of production,” Njenga says.
Apollo supported about 1,000 farmers in during its first growing season in operation in 2017. It started in Nakuru, about 170 kilometers northwest of Nairobi, focusing mainly on maize farmers. Apollo has since expanded to eight of Kenya’s 47 counties and worked with 70,000 active customers last year. Cumulatively, Apollo has financed around 100,000 farmers and aims to double the number to 200,000 farmers in 18 counties next year.
The majority of Kenya’s farms range between 0.25 and three hectares in size. These small-scale operations account for most of the country’s food production. But most of Kenya’s farmers operate well below capacity. They harvest only about 1.7 metric tons of maize per hectare of land, according to the United Nations Food and Agriculture Organization. That’s 20% less than farmers globally, and five times less than a typical harvest in North America.
Multi-faceted tech
Apollo has grown quickly because it early on discarded a conventional assumption that farmers in rural areas are hard to reach, Njenga says. The startup has invested in automated operations, creating a seamless system for customer acquisition, lending decision-making, last-mile distribution, and payments and collections. Farmers interact with Apollo via simple SMS and USSD technology, but the network’s backend is built on machine learning, remote sensing, satellite imagery and sensors.
The use of machine learning, for instance enables, Apollo to build a credit profile of its customers and process large amounts of customer data. Satellite imagery enables the company to monitor farms and crops remotely.
“Use of technology has reduced the costs of servicing customers and made us build a business model that is truly scalable and profitable,” explains Njenga.
Till date, approaches to smallholder financing have relied on human-driven and manual processes. The problem is these processes are costly and slow to scale. This is where Apollo comes in, by digitising and simplifying these processes.
No money, but vouchers
To onboard customers, Apollo enables farmers to apply for inputs and financing via SMS, after which it dispatches an agent assess the farm in person.
“We link the loan to the size of the farm,” Njenga says, adding that once a loan is approved, the farmer gets a voucher for the nearest agro-dealer where he or she can pick up their supplies. Apollo has partnerships with several agro-dealers in Kenya. The dealers use Apollo’s app to see what inputs have been approved for each farmer. Apollo then processes payments to the dealer instantly via mobile payment service.
“The farmer does not get cash,” says Njenga; they get inputs instead and coordinate payments with Apollo directly. Farmers must put down a deposit of 10% of the total amount for the inputs they buy and repay the remainder once they sell their produce.
Njenga knew from childhood, that small scale farmers couldn’t increase production, as they couldn’t afford credit to buy the necessary tools.
No banks, but fundraising
Instead of approaching commercial banks as financial partners, for now Apollo has opted to fundraise and lend off of its own books. Last year, the startup raised a small debt round from the Agri-Business Capital Fund, or ABC Fund, which is managed by impact investment firm Bamboo Capital. In 2020, it raised a $6 million Series A equity round from Anthemis Group, Bayer’s venture arm Leaps by Bayer, Accion Venture Lab and Flourish Ventures.
In this way, Apollo Agriculture is solving small-scale farmers’ credit problem in Kenya.
No one-product, but diversification
Long-term, Apollo’s goal is helping farmers to transition to commercial farming by diversifying from maize to high-value crops like tomatoes, potatoes, onions, French beans, tea, cabbage, sunflowers and soybeans. Because of an influx of imports and exploitation by middlemen, it is becoming increasingly difficult for maize farmers to get a good price for their produce, says Njenga.
Apollo also wants to improve farmers’ climate resilience by helping them secure crop insurance and transition from rain-fed agriculture to smart irrigation, he adds.
The inspiration and a perfect match
Njenga studied agribusiness and management at the university and worked for ACRE Africa, a Nairobi-based service provider working in the agricultural insurance value chain.
He met Eli Pollak and Earl St Sauver through a mutual friend. Pollak also had a background in agriculture. He worked for The Climate Corporation, a US-based agritech company that used machine learning to provide optimised recommendations to help farmers increase their yields.
Leaving the company in 2015 after it was sold for a billion dollars, Pollak was also looking to start a company that would help African farmers increase their farm productivity.
“I got connected with my founders with the same mission. With my background and knowledge working with farmers, and their technical skills from the US, we made a perfect match to start a company to support farmers,” Njenga says to Techpoint Africa.
The goal was to use machine learning and automated operations technology to help small-scale farmers with everything they need to maximise their profitability.
Njenga argues that there are very few commercially viable approaches to small-scale agriculture financing in sub-Saharan Africa. To get it right, a company must have a unique combination of skills like software development and data science, to mention a few, and in his opinion, Apollo brings these skills together, leveraging on expertise developed at The Climate Corporation, Tesla, and One Acre Fund.
A conclusion can be stated: Farming and food production in Africa is not an outdated business but involves even the most advanced businesses, technologies, and sophisticated finance.
(Sources: AFN, Apollo Agriculture, Techpoint Africa)
Supplement to the Apollo-story:
African can double or triple food production
Summary:
- African can increase world production by 20 percent.
- Three countries are the biggest contributors.
- Biggest increase by small-scale farmers.
A McKinsey survey stress the importance of the farming sector for Africa’s development. The survey concludes that Africa can produce two or three times more cereals and grains by using better farming methods. The increase in production most come from better production, and small farmers and co-operations are the key to this improvement
Agriculture in Africa has a massive social and economic footprint. More than 60 percent of the population of sub-Saharan Africa is smallholder farmers, and about 23 percent of sub-Saharan Africa’s GDP comes from agriculture. Yet, Africa’s full agricultural potential remains untapped. In a recent analysis, we determined that Africa could produce two to three times more cereals and grains, which would add 20 percent more cereals and grains to the current worldwide 2.6 billion tons of output. Similar increases could be seen in the production of horticulture crops and livestock.
Where will agricultural growth in Africa come from?
Realizing Africa’s full agricultural potential will require significant investment. Sub-Saharan Africa will need eight times more fertilizer, six times more improved seed, at least $8 billion of investment in basic storage (not including cold-chain investments for horticulture or animal products), and as much as $65 billion in irrigation to fulfill its agricultural promise. Much investment will also be needed in basic infrastructure, such as roads, ports, and electricity, plus improvements in policies and regional trade flows. For the purposes of this article, we define sub-Saharan Africa as including all African countries except Algeria, Egypt, Libya, Morocco, and Tunisia. Unless otherwise specified, South Africa is not included in sub-Saharan Africa.
A few countries will account for a significant portion of the potential
Analyzing productivity potential across 44 countries in sub-Saharan Africa showed that nine countries make up 60 percent of the total potential, with three countries—Ethiopia, Nigeria, and Tanzania—comprising half of that. While this potential is highly concentrated, the significant variation in agricultural development and policy on the continent means differentiated approaches are required for each market. The three highest-potential countries illustrate this variation well with respect to government involvement in agriculture, enabling environment, and factors such as improved input adoption.
Land expansion is unlikely to play a major role
We have heard repeatedly that Africa has large amounts of untapped agricultural land that could be used to increase production. Some estimates range from 480 million hectares to 840 million hectares. Recent analysis finds, however, that much of this land is in unreachable areas (because of a lack of infrastructure within countries and across regions), in conflict zones, under forest cover, or part of a conservation area. In fact, looking at dimensions such as market access, population density, and agroecological conditions suggests that only about 20 million hectares to 30 million hectares of additional cropland in sub-Saharan Africa, primarily in nine countries, is readily cultivatable today. This represents a 10 percent potential increase in Africa’s cultivated land.
While Africa continues to be highly targeted for large agricultural land deals, with more than 420 deals comprising ten million hectares completed between 2000 and 2016, few of the deals have gone into implementation, and the simple numbers suggest that land expansion will not be a major factor in increased production.
While the number of medium-size farms is rising, increased smallholder productivity will be the biggest growth driver
A global trend is that urbanization leads to consolidation of land sizes as people leave rural areas, allowing for more large-scale, mechanized farming. In some countries in Africa, there is, indeed, a rising class of five- to 100-hectare-size farms that have a growing share of the agricultural output. However, given the differing stages of development of the agricultural sector across the continent, this trend varies significantly by country. For example, in Nigeria, we found fewer than 100 farms larger than 50 hectares.
Most land is still held by smallholder farmers with less than five hectares. However, if these farmers are to boost productivity, economic conditions in many regions must improve significantly. One striking example of this is that the return on investment (ROI) for smallholder farmers to use improved inputs in some countries can be nearly zero because of local variations in the cost of inputs and the price of outputs.
Even so, some African countries are trying to consolidate some of the smallholder-farmer activity to increase productivity, provide market access, and reduce risk. These efforts include farmer aggregation through cooperatives, such as the Githunguri Dairy in Kenya, which serves close to 40,000 farmers in East Africa; “outgrower schemes,” such as for barley in beer production in Ethiopia; and nucleus farms, such as in Morocco’s Plan Maroc Vert.
(Source: McKinsey)