Africa’s agricultural landscape sows digitization

In a geographic market as large as Africa, fragmentation within the food and agriculture industry has created many points of friction and inefficiency that disrupt B2B business workflows, both for farmers and their farmers. buyers.

Vendors are often small, independent farms with limited resources available to focus on optimizing their B2B sales initiatives, while buyers similarly operate in a fragmented market with significant barriers to optimizing their business. everything from finding suppliers to paying.

Rick kleinhans, co-founder and chief technology officer (CTO) of the recently launched company Nile, told PYMNTS that many of the most important issues for farmers and buyers can be solved through digitization. In an interview, he explored the industry’s most pressing challenges and highlighted some of the greatest opportunities to inject optimization through technology.

Multi-sided pain points

Across Africa, the traditional process of buying and trading food products takes place in various physical B2B markets across the continent. As Kleinhans described, farmers who need to connect with buyers in these regions face many challenges.

In addition to the potential for food waste involved in the process of trucking produce to and from market – which can often be far removed from where a farm is located – the traditional workflows of these physical markets are plentiful. Farmers rely on third-party traders to find a buyer and set a price for the farmer, who then takes a percentage commission on that sale.

“This raises some issues,” Kleinhans said. “The first is that historically there has been no transparency there. Ultimately the power of price rests with that agent, and the farmer doesn’t really know what he can get. “

The risks of fraud were high, allowing these traders to lie about the price they got in order to skim a higher commission on the transaction. In addition, this B2B mode of transaction also prevents the supplier from obtaining payment in advance, causing cash flow issues.

Moreover, thanks to the fragmentation of these markets across countries and across the continent, it is virtually impossible for farmers to be able to follow the prices in all of them. A market may experience a shortage of apples resulting in an increase in the price of that product, but unless a farmer is able to have visibility into these types of fluctuations, it is unlikely that this seller will be able to benefit.

The alternative to the physical market is to secure direct B2B relationships between buyers and farmers, which means sellers can get paid up front and have better price control. The problem with this strategy, however, is that market fragmentation means sellers would have to manually establish thousands of relationships and individual contracts with their buyers – a feat Kleinhans said farmers lack the resources to do. reach.

While some of Africa’s biggest retail giants have gained the purchasing power to alleviate many sticking points in the sourcing process, the industry is also teeming with smaller B2B customers facing their challenges. own challenges.

Since farmers do not have the capacity to establish direct relationships with buyers, these customers often have to resort to these physical markets to source the produce they need to store the shelves. Like the farmers themselves, small buyers must make what can often be an overnight or multi-day trip to physical markets, with similar risks of food waste.

Data and digitization

Many of these hurdles can be overcome through the digitization of the B2B business workflow, Kleinhans said, with the B2B e-commerce model well suited to provide suppliers with the scale they need to build direct relationships with their buyers. . This strategy improves visibility and efficiency on both sides of the transaction.

Digital business processes can also optimize the actual payment for goods, he added, supporting cash flow for both buyer and seller. Sellers can secure funds in advance, with Nile being able to facilitate EFT transfers as well as the ability for B2B buyers to purchase goods on credit.

For the customer, the choice of payment is vital for an optimized experience. Kleinhans said buyers can choose an EFT service that facilitates near instant fund transfers to the supplier to speed up the negotiation process, if they need to stock their shelves faster. Or, they can choose a traditional EFT that wears off in a matter of days. Nile also supports the ability for buyers to upload funds to some kind of digital wallet, allowing that company to place an order and pay for it with available funds.

“There are a lot of choices for the cash flow framework for the buyer,” Kleinhans said.

In such a vast industry, the opportunities to fight friction and introduce efficiencies into the B2B commerce and payment process are equally prolific. As Nile grows up, Kleinhans said there are other key challenges the company hopes to address by using valuable transaction data aggregated on the platform.

This data can be used to provide suppliers with the level of price transparency in the physical market landscape, for example, or to consolidate smaller orders to enable full loads and optimized logistics operations.

While there is progress to be made to help modernize a highly manual and fragmented industry, Kleinhans said B2B e-commerce technology has the potential to digitize key processes that are already well established for buyers and suppliers. . Technology needs to meet companies where they are in order to gain traction and solve the biggest problems for everyone involved.

“Anytime you’re a B2B marketplace trying to be that bridge between buying and selling an entire industry, you have to deal with the really big players and the small players,” he said.

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NEW PYMNTS DATA: TODAY’S SELF-SERVICE PURCHASE JOURNEY – SEPTEMBER 2021

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