By Zaheer Dindar, CEO and Co-founder, Pumpkn.io

One of the most significant hurdles to growth across Africa’s food value chain lies in the inefficiencies inherent in traditional processes. Fragmented supply chains, limited access to real-time market information, and outdated farming techniques often lead to significant post-harvest losses and reduced profitability. Here, the emergence of digital platforms and agritech solutions is proving transformative. Digital marketplaces, such as Nile Ag or Khula, for example, are connecting farmers directly with suppliers and buyers, eliminating intermediaries and ensuring fairer prices. 

Africa’s agricultural and food value chain is a lifeblood to its economies and a sector brimming with potential. Yet for small and medium enterprises in the sector, it is still constrained by persistent growth challenges. Some of these constraints include legacy issues related to incredibly slow payments from contracts with the public sector and large private sector players. Contracts for which entrepreneurs entered into, expecting them to result in new growth phases for their businesses, often spending more on employment and equipment as a result. 

The recent trade term adjustment by the USA has also forced players in the agri-food sector to evaluate new markets and re-emphasise the importance of intra-Africa trade and self-sufficiency in Africa’s agri and food sectors. To achieve this self-sufficiency, digital technologies must be implemented to support the growth of the industry and business owners of all scales. However, from the small commercial farmer striving to scale their operations to the fast growing food processor seeking to expand their market reach nationally and internationally, the journey to sustainable growth is fraught with obstacles. 

Now a turning point for the industry looms in the form of a new wave of technological innovation beginning to dismantle barriers. These new technologies offer a glimpse into a more food-secure future for the continent.

New technologies being recognised in the sector include, precision agriculture technologies, the leveraging of data analytics, and IoT devices, which are showing signs of optimising resource utilisation, improving yields, and enhancing sustainability. 

These advancements are not merely incremental improvements; they represent a fundamental shift in how the agri-food sector operates, fostering greater efficiency, transparency, and ultimately, growth.

For too long, the narrative surrounding the financing of agricultural SMEs has been dominated by the limitations of traditional lending institutions. While these institutions play a vital role in the broader economy, their conventional risk assessment models and collateral requirements often exclude the very businesses that form the backbone of Africa’s economy. 

Agri and food SMEs, particularly in their early stages, may lack the established credit history or fixed assets acting as collateral typically demanded by banks. This creates a significant bottleneck, preventing promising enterprises from accessing the capital they need to invest in expansion, upgrade equipment, or even manage their working capital effectively. 

As Pumpkn’s experience has shown, a different approach is needed – one that understands the unique characteristics and potential of these businesses, moving beyond rigid, outdated frameworks.

This is where the power of digital-first financing comes into play. By leveraging technology and alternative data sources, fintech platforms like Pumpkn, re-think agri-funding from the ground up. 

Pumpkn’s digital application processes are designed to be simple, fast and intuitive, eliminating the paperwork and administrative burden often associated with traditional funding applications. More importantly, our assessment models go beyond conventional metrics, taking into account factors such as a business’s cash flow, market linkages, and growth potential, as well as entrepreneurial behaviour and expertise. 

This allows us to identify and support businesses and entrepreneurs that may be overlooked by traditional lenders but possess significant promise. Pumpkn’s “Funding Ladder” exemplifies this approach, offering a pathway for businesses to rapidly and repeatedly access increasing levels of funding as they grow and demonstrate their capacity while building their credit profile with Pumpkn. 

This progressive approach, starting with input finance and scaling to purchase order or asset financing, aligns with the natural growth trajectory of agri and food SMEs, providing the right financial support at the right time.

The consequences of these funding gaps extend far beyond the individual SMEs; they stifle long-term thinking and ultimately harm South Africa’s and the broader continent’s growth. Agri-SMEs are major employers and drivers of economic activity. In many countries across the continent, agriculture employs over 60% of the workforce but receives only a fraction of the required capital. This chronic underfunding perpetuates food insecurity, poverty, unemployment, and economic stagnation, while also increasing the sector’s vulnerability to climate shocks.

When businesses struggle to secure the necessary capital for their immediate operational needs, long-term planning becomes a luxury they cannot afford. Investments in infrastructure upgrades, research and development and market expansion are often postponed or abandoned altogether. 

This lack of long-term thinking not only hinders the growth of individual businesses but also limits the sector’s overall contribution to economic development. A vibrant and well-funded agri-food sector has the potential to create jobs, enhance food security, and drive export growth at a time where African countries look to enhance trade with each other and abroad. By failing to adequately support these SMEs, we are limiting our collective potential.

While the challenges facing Africa’s agri-food value chain are significant, the emergence of new technologies, particularly in the realm of digital lending, offers a powerful pathway to unlock its immense potential. By adopting innovative financing models, personalised to the unique needs of agri and food SMEs, we can empower these businesses to overcome growth hurdles, foster long-term sustainability, and contribute meaningfully to the continent’s economic prosperity. It’s time to move beyond the limitations of traditional approaches and embrace a digital-first future for agricultural and food producers that reaps the rich rewards of a thriving African agri-food sector.