KZN-based Agritech startup Agrikool is on a mission to provide all farmers with market access. The call to cut out the middleman is something we have heard all too often. Much less often do we come across local businesses that has managed to create a sustainable business model around a revolutionary idea that actually works. Well, Agrikool’s business concept doesn’t only make a lot of sense, it is also sustainable, profitable and growing!
In a nutshell, Agrikool connects food producers, buyers and transporters. That doesn’t seem like a big deal at first, however, taking a closer look at South Africa’s agri-value chain within the food system makes the actual positive impact behind Agrikool’s business model much more obvious.
According to Co-Founder Palesa Motaung, South African farmers are currently facing two major challenges: “access to finance and access to the market. Many farmers who produce food, struggle to find buyers as well as transportation. Our agri-value chain is fragmented, which means that all key players don’t find each other easily and tasks like finding reliable and affordable food transportation can be very hard. We are positioning ourselves as a sourcing hub for food and agricultural products grown by African farmers. Agrikool helps key players within South Africa’s agri-value chain to directly link, and ultimately trade.”
Building bridges between stakeholders is just one side of the coin when it comes to the actual impact Agrikool has on our food system. There’s something else that makes their business successful; food produced and transported through Agrikool’s market-place becomes cheaper for consumers, farmers receive more for their produce and buyers get the quality they require. This creates somewhat of a holy trinity in South Africa’s food system and food justice.
In the earlier stages of Agrikool’s evolution, the big dream was to make agricultural trade easier so that food can be cheaper and farmers can earn more. “Having a real tangible social economic impact was our main goal and the idea that has been at the heart of our business. We are tired of seeing farmers struggling to make ends meet from selling their produce. We believe that African farmers deserve better!” Palesa says.
Building a successful food business in South Africa that challenges the status quo and makes sense for buyers, growers & retailers, is profitable and sustainable is no piece-of-cake. As a successful social enterprise, Agrikool knows that maintaining integrity is key. “Maintaining our integrity and removing intermediaries without becoming an intermediary was something we worked hard on. We wanted farmers to receive the best price possible for their produce and we’ve managed to keep that promise, of which we are extremely proud.” Many consumers unfortunately have no idea how much it takes to get food to their homes and how many moving parts are part of the agri-value chain.
While established big farmers sometimes can sell directly to retailers or municipal markets, small or medium-sized farmers struggle to find markets partly due to quality issues, transport and lack of market intelligence. This is precisely the economic disadvantage Agrikool is turning around. Let us break it down for you:
Usually, small or medium-large farms are forced to sell their produce to a third party, a so-called intermediary, who buys their produce at a small fraction of the final price. Selling to such an intermediary will get them about 30% of the final selling price. However, selling directly to the retailer gets growers about 65% to 70% of the final selling price. What does Agrikool do differently? They charge the farmer a small commission of 6%, which ultimately allows farmers to make 30% more compared to what they earn working with conventional intermediaries, depending on the value of the produce. Their business model is daring, and visionary and most importantly it works for all parties involved.
Agrikool means more value for farmers and buyers alike! The reality is that buyers nowadays have very specific criteria, and large retailers don’t want to be communicating with hundreds of producers individually. Agrikool provides value to them by offering quality assurance and centralized communication. Buyers don’t have to speak to an array of farmers, they simply have to speak to Agrikool.
This incredibly clever business model has been working so well for Agrikool, that they recently started working with the big fish in the industry.
“When we started servicing Shoprite & Boxer last year, our revenue tripled. We are now proudly servicing the Freshmark & Boxer DCs (distribution centres) in Kwa-Zulu Natal. These centres collect food, inspect it and ship it out to all the stores in the province. Quantities are huge. Shoprite wanted to source locally, and we made it possible for them.”
Africa’s Food Wastage, not the same old tune with Agrikool!
Africa’s food waste and food loss is a gigantic and a well-documented problem. A problem that is all too familiar to stakeholders within South Africa’s agri-value chain, and of course for Agrikool too. Food waste and food loss happens at multiple different stages: harvest, transportation, and of course at the retailers.
Agrikool has successfully reduced food waste for all stakeholders. This is achieved by focusing on quality control and having close communication with farmers, Palesa explains. “The first time any farmer works with us, we make the effort of sending someone to their farm to talk about buyer specs and requirements. This precaution alone has a massive impact when it comes to food loss and wastage. Food waste is a systemic issue, which is why we believe that the solution lies in creating systems that prevent it.”
Agrikool’s relationships with stakeholders and their community have grown and also changed since its inception in 2018. When they were smaller, they were at the mercy of farmers and buyers. However, as they have grown, and introduced the commission model, they have managed to rid themselves of that burden.
Today, Agrikool no longer has to accept substandard produce and as its bargaining power has grown, so has its impact and credibility. It is now becoming easier to get buyers and partners for Agrikool.