At a recent dinner party, a guest claimed something rather surprising: "Twiga is a tech company."
Allow me to clarify this misconception.
Tech companies sell technology. Microsoft, for instance, builds Microsoft Office once and sells it an infinite number of times. Each additional sale costs them virtually nothing. Now, let’s contrast this with Twiga. When Twiga sells a banana, can they sell that same banana again? Tech for Twiga is not a profit center; it’s a cost center. The fact that they have to spend their money on tech rather than buy software off the shelf is a bad thing, not a good thing. This is the crux of the Twiga paradox.
Imagine Amazon selling a Kindle book. Every additional sale is nearly pure profit because the cost to reproduce and deliver the book is almost zero. A paper book, on the other hand, involves printing, shipping, and logistics – significant costs that digital sales sidestep. Now, think about selling bananas. Traditional agriculture involves planting, growing, harvesting, and transporting – all tangible, all costly. Twiga may have reduced the cost of getting that banana to market from Ksh 15 to Ksh 10, but the savings predominantly benefit the consumer, not Twiga. Twiga is merely tech-enabled.
Okay, smart guy. Based on that analysis, you are saying that Uber isn’t a tech company but tech-enabled.
Yes. That’s why Uber is having such a hard time making a profit.
What about AgTech? AgTech would be eProd, the agriculture software suite. eProd can sell the same software suite over and over. Unfortately the market size for AgTech is pretttttty small in Africa, so AgTech is generally not a good business either.
In Africa, technology as a business proposition faces inherent challenges. Developers here are often more expensive and have less relevant experience than those in India or Eastern Europe. Consequently, cutting-edge technology flows from the United States, and affordable solutions come from India. Africa, caught in this vice, struggles to find its technological footing. QuickBooks from the US and Tally from India squeeze local options out of the market.
There are, however, niches where African tech can thrive. Take Mpesa, for example. It isn’t a tech company in the purest sense; it’s tech-enabled. Mpesa used technology to create monopoly network effects. Similarly, Shara and Pezesha are essentially banks with tech enhancements, holding banking licenses that afford them government-backed monopolies. Twiga, dealing in bananas, faces no such monopoly prospects.
Investing in African tech because it succeeded in the US is cargo cult investing. We need to…
Back to Apple(s)
Agriculture is not typically seen as a high-return investment in the US or Europe, where each improvement is incremental. But in Africa, the potential is 10x or even 1,000x. Here’s why:
Consider a smallholder farmer with a hectare of land producing a ton of maize. They consume half and lose 20% post-harvest, leaving them with 300kg of low-quality maize worth about $150 during market gluts. Now, hand that land to an experienced agronomist. They could quintuple the maize yield, plant high-value cash crops like tomatoes or mangoes, reduce post-harvest losses to 2%, and add value through processing, like making tomato sauce or drying mangoes for export to the UAE. This transformation could generate $392,000 annually from that same hectare—a staggering 2,613x increase.
Yes, a US farm could switch from maize to tomatoes, but the labor costs would eat away the profit. Wages in developing countries are a fraction of those in the West, making these transformations huge opportunities in Africa but not in more developed economies.
Moreover, agricultural growth drives employment-led economic growth, which significantly empowers women—a key impact consideration. Technology, in contrast, creates relatively few direct jobs.
In most cases, agri-processing is Africa’s best high-growth sector, not tech. The real goldmine in Africa isn’t hidden in lines of code—it’s in the fertile fields and factories waiting to be transformed.
While the potential for 10x or even 1,000x returns in Africa’s agriculture sector is real, it’s crucial to ground these expectations in practical realities. Investing in a full understanding of the sector, the market, and founder capabilities—alongside milestone tracking and feasibility analysis—will ensure more sustainable and impactful outcomes. Success lies not just in theoretical potential, but in day-to-day execution and alignment with market conditions.
It does beg for more thought in the feasibility of the study. For instance, while the potential transformation described is compelling and the unit economics are certainly attractive, it’s important to consider the production factors and constraints that come into play. For example, the ideal growing conditions for different cash crops vary significantly by region, and challenges such as irregular rainfall and soil composition need to be addressed. The use of greenhouses, irrigation systems, or IoT technology to create optimal conditions will significantly impact costs. Additionally, the feasibility of these investments depends on local factors, which must be carefully evaluated. There are many variables beyond just yield improvement to consider in making this a sustainable venture.
Agree. The problem is how you convince educated youth to leave the city for the village, moving stuff and getting their shoes dirty. Running an agri-business won't feel like walking around with your laptop in the new co-working space.
While the potential for 10x or even 1,000x returns in Africa’s agriculture sector is real, it’s crucial to ground these expectations in practical realities. Investing in a full understanding of the sector, the market, and founder capabilities—alongside milestone tracking and feasibility analysis—will ensure more sustainable and impactful outcomes. Success lies not just in theoretical potential, but in day-to-day execution and alignment with market conditions.
It does beg for more thought in the feasibility of the study. For instance, while the potential transformation described is compelling and the unit economics are certainly attractive, it’s important to consider the production factors and constraints that come into play. For example, the ideal growing conditions for different cash crops vary significantly by region, and challenges such as irregular rainfall and soil composition need to be addressed. The use of greenhouses, irrigation systems, or IoT technology to create optimal conditions will significantly impact costs. Additionally, the feasibility of these investments depends on local factors, which must be carefully evaluated. There are many variables beyond just yield improvement to consider in making this a sustainable venture.
Agree. The problem is how you convince educated youth to leave the city for the village, moving stuff and getting their shoes dirty. Running an agri-business won't feel like walking around with your laptop in the new co-working space.