Armour

Free State Agriculture / Vrystaat Landbou

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THE POTENTIAL OF VIRTUAL mMARKETS FOR REDUCING TRANSACTIONS COSTS &

BRIDGING THE ECONOMIC DIVIDE IN DUALISTIC AGRICULTURE

By: By: R. Jack ArmourR. Jack ArmourFree State Agriculture, Free State Agriculture, Bloemfontein, South AfricaBloemfontein, South Africa

IAALD-Africa Chapter 21-23 May 2012


History / Quotes / Lit. Review:

In 2006 at the AEASA Simon Brand Memorial address - In 2006 at the AEASA Simon Brand Memorial address - Dr Dr Eleni Gabre-MadhinEleni Gabre-Madhin, then Program Leader for Ethiopia’s , then Program Leader for Ethiopia’s Development Strategy and Governance, now CEO of Development Strategy and Governance, now CEO of Ethiopian Commodity Exchange, stated :Ethiopian Commodity Exchange, stated :

““the 2the 2ndnd revolution will be in markets: revolution will be in markets: – “New exchanges” (self regulated) – “086 Ag-trade network”, – low cost V-SAT technology making rural

entrepreneurs into knowledge brokers. – A warehouse / silo = a potential bank!”

WEF research

2009

Boston Consulting Group


Mobile communications to transform smallholding farmers’ livelihoods in

emerging markets 10 October 2011

Vodafone and Accenture announced the findings of a ground-breaking new research programme intended to measure the impact of mobile communications on the lives and prosperity of farming communities in some of the world's poorest countries. Vodafone and Accenture research indicates potential $138 billion addition to developing world farmers’ incomes by 2020Dr Cho, Day2 s4Dr Cho, Day2 s4


The paradox of Africa:“the richest continent with the poorest countries.”“the richest continent with the poorest countries.” - -

David Njie of the United Nations Industrial Development Organisation (UNIDO)

Fortune at the bottom of the Pyramid ? (Grameen Foundation)


The food aid “solution” has crashed! -> G8-MDG

Global Trade undermined African production / innovation?


The global context – key drivers:

Increasing fuel costs , Increasing fuel costs , Green Economy / Climate Green Economy / Climate Change Change necessitate necessitate revamp of the logistics of revamp of the logistics of traditional value chainstraditional value chains60+% mPhone penetration in Africa (20% Mobile 60+% mPhone penetration in Africa (20% Mobile internet in SA)internet in SA)mPhone developments in N-Africa, India/AsiamPhone developments in N-Africa, India/Asia– Grameen Phone, M-PESA, Google Trader, etc.

Wal-Mart entry into AfricaWal-Mart entry into AfricaVodafone / Accenture reportVodafone / Accenture reportIndividual components exists but Individual components exists but NOT the NOT the Integrated wholeIntegrated whole


The Problem:

Dualistic Agricultural sector in South AfricaDualistic Agricultural sector in South Africa

Access to marketsAccess to markets– Transactions costs– Economies of scale– Gap between the formal and the informal markets

30 000 Commercial farmers National food security & Trade

300 000 Small Scale farmers mostly former homelands Local food security

3 000 000 Household and backyard gardeners

Household Food Security / Food Sovereignty


AppLab Wins Best Use of Mobile for Social & Economic Development Award

By grameenfoundation By grameenfoundation 2010 GSMA Mobile World Congress . 2010 GSMA Mobile World Congress . Global Mobile AwardsGlobal Mobile Awards – recognizing the top achievements in the – recognizing the top achievements in the mobile world from the prior year – would get the one of the top mobile world from the prior year – would get the one of the top honors in the industry.honors in the industry.Category: Category: Best use of Mobile for Social and Economic DevelopmentBest use of Mobile for Social and Economic Development partners in the partners in the AppLabAppLab and and Google SMS Google SMS endeavors of the last 2.5 endeavors of the last 2.5 years, Google and years, Google and MTN UgandaMTN Uganda..Grameen Foundation and its partners have been focused on Grameen Foundation and its partners have been focused on leveraging the most successful technological innovation of our time, leveraging the most successful technological innovation of our time, the mobile phone, to improve lives of the low-income individuals the mobile phone, to improve lives of the low-income individuals and communitiesand communities who are always the last to be reached by the who are always the last to be reached by the market.market.


ICT GapGrameen Foundation AppLab does:Grameen Foundation AppLab does:– Google Earth has the GIS Technology– Google Trader has the virtual trade platform– Google sms provides the communications platform– Grameen Foundation /M-Pesa, micro finance

OPPORTUNITY: OPPORTUNITY: – Integrated solution, – database, – Corporate social responsibility, – Etc.


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The Potential Solution:

Integrate:Integrate: Small farmers into value chains Small farmers into value chainsAccess:Access: (MUST be accessible to base of the pyramid - BOP )::– Mobile based (60% African have access to a mobile

phone, 20% mobile internet in SA)– Make transactions costs as low as possible– Access to finance & market information

Agents:Agents: need incentivised and trained agents need incentivised and trained agentsFacilitative infrastructure:Facilitative infrastructure: Role of Gov.? Role of Gov.?


“Mobile communications can help to meet the challenge of feeding an estimated 9.2 billion people by 2050. The 12 specific opportunities explored in this study could increase agricultural income by around US$138 billion across 26 of Vodafone’s Markets in 2020.” - Sept 2011


The holistic integrated systems approach

THE I.C.T. PLATFORM:THE I.C.T. PLATFORM:THE AGENT – PRIMARY FUNCTION:THE AGENT – PRIMARY FUNCTION:– Entrepreneurial market agents, using a GIS enabled

smart phone, THE LOCAL AGROPROCESSING HUB:THE LOCAL AGROPROCESSING HUB:THE AGENT – EXTENDED FUNCTIONS:THE AGENT – EXTENDED FUNCTIONS: – extension officers; suppliers of market info., inputs and

micro finance, THE POTENTIAL NICHE / BRAND:THE POTENTIAL NICHE / BRAND: – traceability


The ITC Platform:

Connects Informal Connects Informal to formal Economyto formal Economy


THE AGENT – PRIMARY FUNCTION:

Entrepreneurial market agents trained to access Entrepreneurial market agents trained to access the database :the database :– Department of Land Reform’s National Rural Youth

Services Corps - NARYSEC student– Agricultural Extension officers, etc.

Using a GIS enabled smart phone / tablet: Using a GIS enabled smart phone / tablet: – calculate shortest route to fill their e.g. 1ton pickup – scan within an x radius what is available– calculate what is the shortest route to complete an

order for xyz product/s


THE LOCAL AGROPROCESSING HUB:

Economy of scale

-Small town amassing / value adding infrastructure


THE AGENTs – EXTENDED FUNCTIONS:

Become incentivised extension officers; Become incentivised extension officers; – Manstrat paper Dr De Villiers

Suppliers of:Suppliers of:– market information / knowledge brokers– Inputs– Micro finance

Catalyse the formation of small Catalyse the formation of small cooperativescooperatives, , Facilitate the Facilitate the transition from subsistence to transition from subsistence to commercial commercial market orientated agriculture.market orientated agriculture.


Linking AGROPROCESSING HUBs:

Use database for Inter hub tradeUse database for Inter hub tradeFranchise model?Franchise model?


THE POTENTIAL NICHE / BRAND:

Traceability, Traceability, – Fair Trade– Organic, Bio, etc.

Online reputation – e.g. e-bay rating Online reputation – e.g. e-bay rating Economies of scale and reduced transactions Economies of scale and reduced transactions costs used by Woking collectivelycosts used by Woking collectivelySTART OF A SPECIALITY CLUSTER AND START OF A SPECIALITY CLUSTER AND SMALLHOLDER REVIVAL?SMALLHOLDER REVIVAL?


Already achieved? BusinessReport


The Challenge:To bring together:To bring together:– the locally applicable supply of exiting ICT

applications and – The demand for these at grassroots organisations

level

Into a HOLISTIC INTEGRATED SYSTEM.Into a HOLISTIC INTEGRATED SYSTEM.

The right suite of App.s is just one part, The right suite of App.s is just one part, and an and an exciting toolexciting tool, within the entire agri-food value , within the entire agri-food value chain.chain.


So Who?Government? Government? Right role of Gov. NB– mLab at Meraka Institute, CSIR– National Agricultural Marketing Council– Dept. Agric.: Extension and Advisory Services– Dept. Rural Dev. & Land Reform: NARYSC

Private sectorPrivate sector– Technoserve– Commercial farmers– Mobile companies: Vodafone, MTN, CellC etc. (Corporate

social responsibility)


HOW? Dr. Gerhard Scheifer

Entire value chain approach – e.g.


Summary & Conclusion:

This paper is a plea to bridge the industry & digital divide:This paper is a plea to bridge the industry & digital divide:– Between farmers, Ag. & social/dev. researchers, extension officers,

Gov. officials & agri-business practitioners on the ground dealing with the physical aspects of growing/processing/distributing food; who know and experience the real problems on the ground AND

– the often very distant ICT programmers and developers.

Working together as an integrated team & with the correct Working together as an integrated team & with the correct structures and systems in place, we could do far more structures and systems in place, we could do far more toward achieving Improved Livelihoods and Food Security in toward achieving Improved Livelihoods and Food Security in Africa. Africa.


THANK YOU!THANK YOU!

Jack [email protected]

071 672 0271

Armour

Business

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