Absa has acquired a minority stake in a trading app that connects farmers to buyers and sells farm inputs.
The agritech start-up, Khula!, includes three platforms and has about 13,000 users of which 7,000 are active users.
One of the platforms is the app’s Fresh Produce Marketplace that connects farmers or distributors of fresh produce with retail, wholesale and export buyers.
Farmers can purchase inputs such as seed and fertiliser via the app’s Input Marketplace, which offers more than 5,000 products.
The third platform, which is still being developed, will facilitate transactions between buyers and sellers and link farmers in need of funding with potential investors.
“This transaction underscores our commitment to digitisation in a way that improves efficiency and productivity, which can go a long way in making SA more competitive,” said Faisal Mkhize, CEO for relationship banking at Absa Group.
Absa, the largest banker of agriculture in SA, has previously supported Khula! with enterprise development funding and collaborated with the creators of the app to introduce a standardised payment gateway to facilitate transactions on the app.
Abrie Rautenbach, head of Absa Agribusiness, said the acquisition will enhance the bank’s agriculture proposition for small and medium enterprises.
Absa’s support could cause the start-up to expand their products into other African markets in which the bank operates, Rautenbach said.
“When we initially met the Khula! team, what attracted us was the passion and the thinking behind the development of the app. We were impressed by the solutions it provided across the agriculture ecosystem,” said Kglalaletso Tlhoaele, head of Absa enterprise development.
Some of the challenges new farmers in SA face include gaining market access and accessing finance, and Khula! offers solutions that can bridge these barriers, Tlhoaele told Business Day.
Rautenbach said they believed this app would fulfil a certain role in the market, hence their decision to become a shareholder. They will use the data produced by the app to identify patterns that could support the bankability of new farmers.
By transacting via the app new farmers can build up a track record showing their abilities, which would not necessarily reflect in the financial statements of a new farming business.
Data from the app can be used to identify emerging producers who consistently outperform their peers in terms of yield per hectare, for example.
“We are looking forward to using the data from the app to be more innovative in our financing,” said Rautenbach.
There is a big opportunity to grow their user numbers, given that there is an estimated one million farmers in SA, Khula! CEO Karidas Tshintsholo said.
Many new farmers operate on a small scale and do not yet have secure market access. The app offers small-scale and larger farmers an equal opportunity to connect with buyers.
“We hope that the app will do for farming, what EasyEquities did for equity trading in SA by making entry into farming easier for new, small-scale player,” Tshintsholo said.
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