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Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture

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In the first part of our series on agritech in Africa, we took a look into how IT and other technology investments are helping small farmers in Africa. In the second part, we are exploring the impact that potential application of advanced technologies such as blockchain can have on the African agriculture sector.

Blockchain, or distributed ledger technology, is already finding utility across several business sectors including financial, banking, retail, automotive, and aviation industries (click here to read our previous Perspectives on blockchain technology). The technology is finding its way in agriculture too, and has the potential to revolutionize the way farming is done.


This article is the second part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part one here: Agritech in Africa: Cultivating Opportunities for ICT in Agriculture


State of blockchain implementation in agriculture in Africa

Agricultural sector in Africa has already witnessed the onset of blockchain based solutions being introduced in the market. Existing tech players and emerging start-ups have developed blockchain solutions, such as eMarketplaces, agricultural credit/financing platforms, and crop insurance services. Companies, globally as well as within Africa, are harnessing applications of blockchain to develop innovative solutions targeted at key stakeholders across the food value chain.

Blockchain to promote transparency across agriculture sector

The most common application of blockchain in any industry sector (and not only agriculture) is creating an immutable record of transactions or events, which is particularly helpful in creating a trusted record of land ownership for farmers, who are traditionally dependent on senior village officials to prove their ownership of land.

Since 2017, a Kenyan start-up, Land LayBy has been using an Ethereum-based shared ledger to keep records of land transactions. This offers farmers a trusted and transparent medium to establish land ownership, which can then further be used to obtain credit from banks or alternative financing companies. BanQu and BitLand are other examples of blockchain being used as a proof of land ownership.

This feature of blockchain also enables creation of a transparent environment where companies can trace the production and journey of agricultural products across their supply chain. Transparency across the supply chain helps create trust between farmers and buyers, and the improved visibility of prices further down the value chain also enables farmers to get better value for their produce.

In 2017, US-based Bext360 started a pilot project with US-based Coda Coffee and its Uganda-based coffee export partner, ​​Great​ ​Lakes​ ​Coffee. The company developed a machine to grade and weigh coffee beans deposited to Great Lakes by individual farmers in East Uganda. The device uploads the data on a blockchain-based SaaS solution, which enables users to trace the coffee from its origin to end consumer. The blockchain solution is also used to make payments to the farmers based on the grade of their produce in form of tokens.

In 2017, Amsterdam-based Moyee Coffee also partnered with KrypC, a global blockchain, to create a fully blockchain-traceable coffee. The coffee beans are sourced from individual farmers in Ethiopia, and then roasted within the country, before being exported to the Netherlands.

This transparency can help food companies to isolate the cause of any disease outbreak impacting the food value chain. This also allows consumers can be aware of the source of the ingredients used in their food products.

Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture by EOS Intelligence

Blockchain-based platforms to improve farmer and buyer collaboration

Blockchain can also act as a platform to connect farmers with vendors, food processing, and packaging companies, providing a secure and trusted environment to both buyers and suppliers to transact without the need of a middleman. This also results in elimination of margins that need to be paid to these intermediaries, and helps improve the margins for buyers.

Farmshine, a Kenyan start-up, created a blockchain-based platform to auger trade collaboration among farmers, buyers, and service providers in Kenya. In January 2020, the company also raised USD$250,000 from Gray Matters Capital, to finance its planned future expansion to Malawi.

These blockchain platforms can also be used to connect farmers to other farmers, for activities such as asset or land sharing, resulting in more efficiency in economical farming operations. Blockchain platform can also enable small farmers to lease idle farms from their peers, thereby providing them with access to additional revenue sources, which they would not be able to do traditionally.

AgUnity, an Australian-start-up established in 2016, developed a mobile application which enables farmers to record their produce and transactions over a distributed ledger, offering a trusted and transparent platform to work with co-operatives and third-party buyers. The platform also enables farmers to share farming equipment as per a set schedule to improve overall operational and cost efficiency. In Africa, AgUnity has launched pilot projects in Kenya and Ethiopia, targeted at helping farmers achieve better income for their produce.

A Nigerian start-up, Hello Tractor uses IBM’s blockchain technology to help small farmers in Nigeria, which cannot afford tractors on their own, to lease idle tractors from owners and contractors at affordable prices through a mobile application.

Smart contracts to transform agriculture finance and insurance

Less than 3% of small farmers in sub-Saharan Africa have adequate access to agricultural insurance coverage, which leaves them vulnerable to adverse climatic situations such as droughts.

Smart contracts based on blockchain can also be used to provide crop-insurance, which can be triggered given certain set conditions are met, enabling farmers to secure their farms and family livelihood in case of extreme climatic events such as floods or droughts.

SmartCrop, an Android-based mobile platform, provides affordable crop insurance to more than 20,000 small farms in Ghana, Kenya, and Uganda through blockchain-based smart contracts, which are triggered based on intelligent weather predictions.

Netherlands-based ICS, parent company of Agrics East Africa (which provides farm inputs on credit to small farmers in Kenya and Tanzania) is also exploring a blockchain-wallet based saving product, “drought coins”, which can be encashed by farmers depending on the weather conditions and forecasts.

Tracking of assets (such as land registries) and transactions on the blockchain can also be used to verify the farmers’ history, which can be used by alternative financing companies to offer loans or credits to farmers – e.g. in cases when farmers are not able to get such financing from traditional banks – transforming the banking and financial services available to farmers.

Several African start-ups such as Twiga Foods and Cellulant have tried to explore the use of blockchain technology to offer agriculture financing solutions to small farmers in Africa.

In late 2018, Africa’s leading mobile wallet company, Cellulant, launched Agrikore, a blockchain-based digital-payment, contracting, and marketplace system that connects small farmers with large commercial customers. The company started its operations in Nigeria and is exploring expansion of its business to Kenya.

In 2018, Kenya-based Twiga Foods (that connects farmers to urban retailers in an informal market) partnered with IBM to launch a blockchain-based lending platform which offered loans to small retailers in Kenya to purchase food products from suppliers listed on Twiga platform.


Read our previous Perspective Africa’s Fintech Market Striding into New Product Segments to find out more about innovative fintech products for agriculture and other sectors financing in Africa


And last, but not the least, blockchain or cryptocurrencies can simply be used as a mode of payment with a much lower transaction fee offered by traditional banking institutions.

Improving mobile internet access to boost blockchain implementation

While blockchain has shown potential to transform agriculture in Africa, its implementation is limited by the lack of mobile/internet access and technical know-how among small farmers. As of 2018, mobile internet had penetrated only 23% of the total population in Sub-Saharan Africa.

However, the GSM Association predicts mobile internet penetration to improve significantly over the next five years, to ~39% by 2025. Improved access to internet services is expected to boost the farmers’ ability to interact with the blockchain solutions, thereby increasing development and deployment of more blockchain-based solutions for farmers.

EOS Perspective

Agritech offers an immense opportunity in Africa, and blockchain is likely to be an integral part of this opportunity. Blockchain has already started witnessing implementation in systems providing proof of ownership, platforms for farmer cooperation, and agricultural financing tools.

Unlike Asian and Latin American countries, African markets have shown a relatively positive attitude towards adoption of blockchain, a fact that promises positive environment for development of such solutions.

At the moment, most development in blockchain agritech space is concentrated in Kenya, Nigeria, Uganda, and Ghana. However, there is potential to scale up operations in other countries across Africa as well, and some start-ups have already proved this (e.g. Farmshine was able to secure the necessary financing to expand its presence in Malawi). Other companies can follow suit, however, that would only be possible with the help of further private sector investments.

Still in the nascent stages of development, blockchain solutions face an uncertain future, at least in the short term, and are dependent on external influences to pick up growth they need to impact the agriculture sector significantly. However, once such solutions achieve certain scalability, and become increasingly integrated with other technologies, such as Internet of Things and artificial intelligence, blockchain has the capability of completely transform the way farming is done in Africa.

by EOS Intelligence EOS Intelligence No Comments

Agritech in Africa: Cultivating Opportunities for ICT in Agriculture

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Agriculture technologies in Africa have been undergoing significant development over the years, with many tech start-ups innovating information and communications technologies to support agriculture at all levels. While some technologies have been successfully launched, some are in initial stages of becoming a success. Private sector investments have been the key driving factor supporting the development of agriculture technologies in Africa. In the first part of our series on agritech in Africa, we are examine what impact and opportunities arise from the use of these technologies in Africa.

Agriculture plays a significant role in Africa’s economy, contributing 32% to the continent’s GDP and employing 65% of the total work force (as per the World Bank estimates). Nearly 70% of the continent’s population directly depends on agribusiness. Vast majority of farmers work on small scale farms that produce nearly 90% of all agricultural output.


This article is the first part of a two-piece coverage focusing on technological advancements in agriculture across the African continent.

Read part two here: Agritech in Africa: How Blockchain Can Help Revolutionize Agriculture


Agriculture in Africa has been under the pressure of many challenges such as low productivity, lack of knowledge and exposure to new farming techniques, and lack of access to financial support, especially for the small-scale farmers. These challenges are prompting investments in newer technologies to enhance the productivity through smart agriculture techniques.

Lately, there have been an increased use of various technologies in agriculture in Africa, such as Internet of Things (IoT), Open Source Software, Cloud Computing, Artificial Intelligence, Drones/Unmanned Aerial Vehicles (UAVs), and Big Data Analytics. Many tech start-ups have developed solutions targeting various aspects of agriculture, including finance, supply chain, retailing, and even delivering information related to crops and weeds. These solutions are accessible to farmers through front-end devices such as smart phones and tablets, or even SMS.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Start-ups lead agritech development in Africa

Many agritech start-ups in Africa have come up with solutions that have led to a rise in productivity of the farms. Drones have been a breakthrough technology, helping farmers oversee their crops, and manage their farms effectively. Drones use highly focused cameras to capture picture of crops, soil or weeds. This, coupled with big data analytics and Artificial Intelligence (AI), provides insights to farmers, saving their time and effort, while also helping them find potential issues which could impact the productivity of their farms.

There are various agritech start-ups that are developing such drones, and providing them to farmers for rent or lease to analyse their crops and farms. A South African agritech start-up, Aerobotics, offers an end-to-end solution to help farmers manage their farms using drones, through early detection of any crop-related problems, and offering curative measures for the problems using an AI-based analytics platform. The company partners with drone manufacturing companies such as DJI and Micasense to deliver these solutions.

Acquahmeyer, another start-up based in Ghana, also provides drones to its farming customers to help them use a comprehensive approach to apply crop pest control and plant nutrition management for their farms.

Advent of advanced technologies such as IoT is also helping farmers to adopt smart farm management through the use of smart sensors connected in a network. This helps every farmer to get granular details of the crops, soil, farming equipment, or livestock, enabling the farmers to devise appropriate farming approaches.

Kenya-based UjuziKilimo provides solution for analyzing soil characteristics using electronic sensor placed in the ground. This helps farmers with useful real-time insights into soil conditions. The solution further utilizes big data analytics to guide the farmers, by offering insights through SMS on their connected mobile phones or tablets.

Hello Tractor, a Kenyan start-up, provides an IoT solution, through which farmers can have access to affordable tractors which are monitored virtually through a remote asset tracking device on the tractor, sharing data over the Hello Tractor Cloud. Farmers, booking agents, dealers, and tractor owners are connected via IoT. The company is also collaborating with IBM to incorporate artificial intelligence and blockchain to their solutions.

AI has also witnessed a rapid growth in adoption across agriculture sector in Africa. Agrix Tech, based in Cameroon, has developed a mobile application that requires the farmers to capture the picture of diseased crop, which is then analyzed via AI to detect crop diseases, and helps the farmers with treatment solution to save their crops.

AI is also helping Kenyan farmers with the knowledge on planting the right crops at the right time. Tech giant, Capgemini, has teamed up with a Kenyan social enterprise in Kakamega region in Western Kenya to use artificial intelligence to analyze farming data, and then send insights about right time and technique of planting crops to the farmers’ cell phones.

There are other agritech solutions that include mobile applications which use digital platforms such as cloud computing to reach out to farmers, and provide them with apt agriculture solutions. Ghana-based CowTribe offers a mobile USSD-based subscription service which enables livestock farmers to connect with veterinarians for animal vaccines and other livestock healthcare services using cloud-based logistics management system. The company focuses on managing the schedules, and delivering the right service to the livestock farmers, to help them safeguard their animals from any health-related problems.

Several agritech investments are also impacting the financial side of agriculture. Kenya-based Apollo Agriculture provides solutions related to financing, farm inputs, advice insurance and market access through the use of agronomic machine learning, remote sensing, and mobile technology using satellite data and cloud computing.

Another Nigerian start-up Farmcrowdy has developed Nigeria’s first digital agriculture platform that provides financial support to the farmers by allowing those outside the agriculture industry to sponsor individual farms.

Several other agritech start-ups across the continent, such as Ghana-based Farmerline and AgroCenta, and Nigeria-based Kitovu have also launched data-driven mobile application for farmers. These technology solutions are proving to be a boon for agriculture sector in Africa, helping improve the overall efficiency and productivity.

Agritech in Africa - Cultivating Opportunities for ICT in Agriculture by EOS Intelligence

Agritech development is concentrated in Kenya and Nigeria

But, when it comes to first adopting the newest technologies and starting an agritech business in agriculture, Kenya and Nigeria have been leading in the adoption of new agritech solutions, accounting for a significant share of agritech start-up across Africa. Kenya has played a pioneering role in bringing agritech in Africa since 2010-2011, when the first wave of agritech start-ups began to bring new niche innovations. Currently, Kenya accounts for 25% of all the agritech start-ups in Africa, and the development is progressing rapidly, thanks to the country’s advancement in technology, high smartphone penetration, and relatively widespread internet access.

Similarly, Nigeria too has sailed the boat of success in agritech start-ups since 2015, and now it accounts for 23.2% of total agritech start-ups in Africa, with include major players such as Twiga Foods, Apollo Agriculture, Agrikore, and Tulaa. The growing inclination amongst Nigerian farmers towards using digital tools in agriculture sector has further pushed the rapid development in agritech sector in the country.

Other countries have also shown potential for agritech development, though it is still in the initial stages of becoming mainstream in their agriculture sectors. Ghana has encouraged several start-ups to launch different technology innovations for making agriculture more sustainable, while South Africa, Uganda, and Zimbabwe have also witnessed the rise in agritech start-ups over the years with newer technologies for agriculture sector.

Recent investments highlight the agritech potential

The agriculture technologies in Africa got the boost from the increased private funding. According to a report by Disrupt-Africa released in 2018, there has been a total investment of US$19 million in agritech sector since 2016. These investments have largely focused on funding agritech start-ups working on bringing innovative agriculture technologies. Also, according to the same report, the number of agritech start-ups rose by 110% from 2016 to 2018.

Some of the recent investments in the agritech sector include Kenya’s Twiga Foods, a B2B food distribution company, which raised US$30 million from investors led by Goldman Sachs in October 2019. The company aims to set-up a distribution centre in Nairobi to offer better supply chain services, while also expanding to more cities in Kenya, including Mombasa.

In December 2019, Kenya-based agritech start-up Farmshine, also raised US$25 million in funding from US-based Gray Matter’s Capital coLabs (GMC coLabs), to expand its operations in Malawi. GMC coLabs also invested US$1 million in another Kenyan B2B agritech start-up Taimba in July 2019. Taimba provides a mobile-based cashless platform connecting smallholder farmers to urban retailers. The investment was focused on strengthening Taimba’s infrastructure and increase the delivery logistics to cater to new markets.

Cellulant, a leading pan-African digital payments service provider that offers a real-time payment platform to farmers, also raised US$47.5 million from a consortium of investors in May 2018, which is the largest investment in the African tech industry till date. Cellulant also plans to channel a significant portion of funds into its Agrikore subsidiary, an agritech start-up dealing with blockchain based smart-contracting, payments, and marketplace system.

EOS Perspective

African agritech is expected to witness high growth in future. According to a CTA report on Digitalization for Agriculture (D4Ag) published in 2018, digital agriculture solutions are likely to reach 60-100 million smallholder famers, while generating annual revenues of nearly US$320- US$470 million by the end of 2020.

Adoption and use of innovative technologies such as remote sensing, diagnostics, IoT sensors for digitalization of agriculture is steadily moving from experimental stage to full-scale deployment, contributing to the data revolution in agriculture, while also unlocking new business models and opportunities.

Apart from these, blockchain is gaining prominence, and finding applications in the agriculture sector in Africa. This technology has the potential to significantly impact the agriculture sector, which we will discuss in the second part of our series on Agritech in Africa.

However, lack of affordability and knowledge to access such technologies, especially by small-scale farmers, has restricted the growth and reachability of these solutions. With the need to educate farmers and make such technology affordable and viable, it is likely that it may take at least 5-7 years before these technologies become truly mainstream in the continent.

A disparity of investments has been observed among the countries in the region. Over the years, countries such as Kenya, Nigeria, and Ghana have experienced a strong growth in terms of private investments, while other countries are left wanting. Investors have prioritized easy-to-reach markets in Africa, leaving behind the lower-income markets, resulting in agritech becoming less sustainable and scalable in these markets. However, several other African countries have shown the appetite to adopt agritech solutions, and offer significant potential.

This requires an intervention and participation from both governments and private investors, which can help improve scalability of agriculture technologies in the region. Implementation of farming digital literacy, public-private partnerships, and increased private sector investments in agritech enterprises can help the agritech industry experience a consistent and higher success rate, thus bringing the agriculture technology to a mainstream at faster pace.

by EOS Intelligence EOS Intelligence No Comments

Beverage Industry in Troubled Waters, Attempting Conservation Efforts

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Water is a finite resource, which is becoming constrained with the growing population and climate change. It is a vital component in production of beverages, both alcoholic and non-alcoholic. From growing raw materials (such as wheat or barley) for beverages, through product development, till the production process, water is indispensable at each step. The beverage industry has come to realize that water scarcity could tremendously impact businesses, forcing them to reassess water management strategies and tap into efficient conservation measures.

Water covers around 70% of the earth’s surface and only 3% is available as freshwater, which can be used for various commercial and non-commercial activities. Unfortunately, this quantity of water is inadequate for growing population and thriving businesses using this resource without considering its limited availability. According to WWF, an international NGO for preservation of wilderness and nature, two-thirds of the world’s population may face water shortage by 2025, with demand for water exceeding supply by 40% by 2030.

Beverage production is highly water-intensive, with water being used at each step across the value chain. According to Water Footprint Network, it takes at least 70 liters of water to produce 0.5 liter of soda, 74 liters of water for a glass of 0.25 liter of beer, and 132 liters of water for a cup of 0.125 liter of coffee. Water footprint for beverage companies is evidently high, and this can be mitigated by implementing water management technologies across the value chain, from farming to beverage production.

Water scarcity posing challenges for beverage producers

Water stress is a pressing problem for all beverage industry players, causing various operational challenges that are impacting business operations.

Opposition to water extraction from natural resources

California suffered a searing seven year drought that ended in 2017. Distress from water scarcity impacted communities, as well as companies operating in the region. For instance, Nestlé, a Swiss multinational food and beverage company, faced opposition from local communities and criticism from conservationists for extracting large quantities of water from Californian springs even during the drought-stricken years.

These events impacted Nestlé’s operations and eventually, succumbing to the pressure, Nestlé invested US$7 million in conservation projects across five of its bottling plants in California in 2017. The projects focused primarily on reducing the amount of water used in filtration process while simultaneously maintaining hygiene of the processing plant. Only after consistent water conservation efforts, Nestlé was granted a three-year permit by US Forest Service in 2018 to extract water within the limit of 8.5 million gallons annually from Californian springs.

Similarly to Nestlé, Coca-Cola faced opposition from local communities in India resulting in closures of two of its bottling plants located in the states of Kerala (in 2004) and Uttar Pradesh (in 2014), due to extensive water extraction from local resources. In order to sustain operations, Coca-Cola announced plans to invest about US$5 billion between 2012 and 2020 to help replenish groundwater in India, allowing the company to also use water for beverage production.

Water shortage impacting business operations

According to global survey of 600 companies by Carbon Disclosure Project (CDP), water scarcity and stricter environmental regulations cost businesses around US$14 billion in 2016. Many companies agreed that water-related issues have affected their businesses directly or indirectly.

For instance, severe droughts in Southeast Brazil in 2014 and 2015 disrupted water supply in the area, limiting production capacity and disturbing operations of Danone, a French multinational food and beverage corporation. As a result the company suffered sales loss of ~US$6 million in 2015.

Not only Danone was affected. As Brazil is one of the world’s leading coffee producers, limited availability of water for irrigation due to the drought, crop production in the region took a hit. Eventually, the situation threatened supply, which led to higher raw material prices for coffee manufacturers. One of the producers that felt the repercussions was J.M. Smucker, an American producer of food and beverages, reported a net loss of US$90.3 million in 2015 due to higher coffee bean prices in Brazil.

Tapping into innovations to reduce water consumption

Water risk for beverage companies highly depends on external factors, such as water quality and availability either through natural resources or municipal bodies. Industry players have very little control over the external factors but can regulate water usage in their internal manufacturing operations to reduce consumption.

Recycling water using zero water technology

Beverage companies are collaborating with technology providers to incorporate innovative water recycling methods.

For instance, in 2014, Nestlé collaborated with Veolia Group (a French company providing water, waste, and energy management solutions) and GEA Group (a German food processing technology firm), to introduce Cero Agua (zero water) technology across dairy production plant in Lagos de Moreno, Mexico. Using the technology, the factory does not have to rely on external water sources. Instead, it recycles and reuses the waste fluid extracted from milk – Nestlé extracts 1ml of water from every 1.6ml of milk. The treated water is used in non-food production applications such as cooling, irrigating the gardens, and cleaning, thus, eliminating the need to depend on external water sources. The company has invested around US$15 million to introduce zero water technology in the plant.

With the help of this technology Nestlé claims to have saved 168 million liters of water in the first year of implementation, reducing water consumption by more than 50%. Zero water technology has been rolled out across its other diary factories located in water-stressed areas of South Africa, India, China, to list a few.

Moreover, between 2004 and 2014, Nestlé claims it was able to reduce water consumption globally by one third and by 50% across its Mexican plants.

Onsite wastewater treatment

Brewing companies are not far from adopting technologies to reduce water footprint. Waste water treatment is one of the effective ways to reuse water and several brewing companies have jumped on the bandwagon to conserve water using this approach.

Since 2014, Lagunitas Brewing Company, a subsidiary of Heineken, has been using EcoVolt membrane bioreactor, a wastewater treatment technology that removes up to 90% pollutants from water so that it can be reused onsite for cleaning purposes. Using this solution, the company has reduced its water footprint by approximately 40%.

In 2016, Bear Republic Brewing Company, a brewery based in California, invested US$4 million in a waste water treatment system that uses electrically active microbes to purify wastewater, which helps the brewery to recycle about 25% of water that it uses to clean factory equipment.

Furthermore, in 2015, a Boston-based craft brewer, Harpoon Brewery, collaborated with Desalitech, a US-based water treatment company, to produce beer made from treated Charles River water. Desalitech uses its ReFlex Reverse Osmosis systems to purify the river water and has been able to recover 93% of the treated river water to brew beer.

Innovative farming techniques

Farming is highly water-intensive and sustainable beverage production can only be achieved if water consumption is cut down during farming. Hence, companies are employing various water management solutions to check water utilization during farming.

In 2014, Anheuser-Busch, an American brewing company installed six AgriMets, a network of agricultural weather stations, in Idaho to provide farmers with real-time weather and crop water use data. Using AgriMet data, growers can monitor rainfall and soil conditions, which helps them to cut down on the amount of water required in irrigation and decide when to irrigate. This ensures efficient use of water across the fields.

Further, for improving water management, the company is employing various seeding and harvesting techniques – for instance, it plants and harvests winter barley earlier in the year, resulting in 30% higher crop yield and 40% lower water usage.

PepsiCo and Coco-Cola have been promoting drip irrigation (a type of irrigation system where water is allowed to drip slowly to the roots minimizing evaporation) in water-scarce Indian states of Maharashtra, Gujarat, Karnataka, Haryana, among others. Coca-Cola started with drip irrigation project in 2008 with 27 farmers covering 13.5 hectares of agricultural land in India, which expanded to over 513 drip irrigation systems installed, stretching across 256.5 hectares of agricultural land by 2011. Drip irrigation leads to significant water conservation, with an average saving of 1200 kiloliter/ hectare of water for a cropping cycle of 110 days/hectare (an agricultural cycle comprising activities related to the growth and harvest of crops). Additionally, savings on account of electricity, fertilizers, and pesticides are estimated at about US$ 29/hectare/year.

Beverage Industry in Troubled Waters - EOS Intelligence

EOS Perspective

For decades, water has been regarded as free commodity in processing and manufacturing environments, but this notion is beginning to change with growing awareness about water scarcity. Limited availability of water puts pressure on industrial activities and often pushes operational costs of beverage companies up. Availability of water is likely to get worse in the future, which could jeopardize operations of food and beverage companies unless the crisis is treated as a priority.

The solution to water scarcity lies in the hands of businesses as much as the governments of various countries. Water management requires stringent policies by the governments to better regulate the use of groundwater or natural resources for irrigation. The governments also need to implement efficient wastewater management and recycling technologies to conserve water. Countries such as Singapore have undertaken water recycling and management measures, but unfortunately such examples are relatively scarce in other parts of the world, with most conservation efforts being implemented only by large food and beverage companies. It is time that the governments as well as all industry players (including small-to-mid sized companies) wake up to the challenges that lie ahead owing to water stress.

Solutions to water scarcity do not always need to be expensive. Small-to-mid sized companies could start with small and inexpensive measures such as installing flow meters or leak detection systems, measuring water usage at each step and setting short and long term goals to reduce consumption across those processes.

Other measures could be to reduce water consumption across most water intensive processes, such as cleaning, which typically accounts for 60% of a beverage plant’s total water consumption. Water could be replaced with dry ice to manually wash equipment or it can be physically cleaned using vacuum systems or high-pressure hoses that can be used to move debris.

Nonetheless, sustainable water management efforts by large beverage companies have resulted in lowering of operational costs, improvement in quality of final products, and in building better brand perception among customers. These strategic advantages could motivate all industry players to reduce water footprint and play their part as responsible water users.

by EOS Intelligence EOS Intelligence No Comments

Infographic: Google’s Tech Initiatives Transforming Industries

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Google, beyond being the leading search engine worldwide, is also one of the largest and most innovative companies. Through its innovations, Google along with other Alphabet companies (parent company of Google and its subsidiaries) is transforming various industries by empowering them with technology. Its solutions have reached diverse industries such as agriculture, manufacturing, healthcare, energy, and fishing, among others.

Innovation has always been at the core of Google’s strategy and it is bringing artificial intelligence (AI), machine learning, augmented reality, robotics, among others to shape various industries. It has introduced surgical robots to medicine, Google glass to manufacturing, AI-enabled programs to energy, among various other solutions that are revolutionizing these industries. We are taking a look at where Google has already left its innovative footprint.

Google’s Tech Initiatives Transforming Industries - EOS Intelligence


Alphabet companies included in the infographic:
Verily – Alphabet’s key research organization dedicated to the study of life sciences
Verb Surgical – A joint venture between Johnson & Johnson and Verily
DeepMind – Alphabet’s artificial intelligence company
Global Fishing Watch – An organization founded by Google in partnership with Oceana and SkyTruth
by EOS Intelligence EOS Intelligence No Comments

Africa’s Fintech Market Striding into New Product Segments

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Fintech is certainly not a new concept in the African region. More than that: Africa has been a global leader in mobile money transfer services for some time. The market continues to evolve and the regional fintech players are now moving beyond just basic payment services to offer extended services, such as credit scoring, agricultural finance, etc. With Africa being significantly unbanked and still lacking financial infrastructure, fintech industry is at a unique position to bridge the gap between consumer needs and available financial solutions.

The African subcontinent is much behind many economies when it comes to financial inclusion and banking infrastructure owing to low levels of investment, under-developed infrastructure, and low financial literacy ratio. As per World Bank estimates, only about 20% of the population in the sub-Saharan African region have a bank account as compared with 92% of the population in advanced economies and 38% in low-middle income economies.


Related reading: Fintech Paving the Way for Financial Inclusion in Indonesia


This gap in the formal banking footprint has been largely plugged by the fintech sector in Africa, especially with regards to mobile payments. While in the developed economies, the fintech sector focuses on disrupting the incumbent banking system by offering better services and lower costs, in Africa it has the advantage of building and developing financial infrastructure. This is clear in the uptake of mobile fintech by the African population, making Africa a global leader in mobile payments and money transfers.

While in the developed economies, the fintech sector focuses on disrupting the incumbent banking system by offering better services and lower costs, in Africa it has the advantage of building and developing financial infrastructure.

However, mobile payments have simply been the first phase in the development of digital finance in Africa. The penetration and mass acceptance of mobile wallets have opened doors for the next phase of digital financial services in Africa. These include lending and insurance, agricultural finance, and wealth management.

Moreover, owing to the success achieved by mobile wallets, global investors are keenly investing in fintech start-ups that are innovating in the sector. For instance, Venture capital firm, Village Capital, partnered with Paypal to set up a program named Fintech Africa 2018. The program aims to support start-ups across Kenya, Nigeria, South Africa, Ghana, Uganda, Rwanda, and Tanzania, which provide financial services beyond mobile payments (especially in the field of insurtech, alternative credit scoring, and fintech solutions for agriculture, energy, education, and health).

Africa’s Fintech Market Striding into New Product Segments

Agricultural finance

Agriculture is the livelihood of more than half of Africa’s workforce, however, due to limited access to finance and technologies, most farmers operate much below their potential capabilities. Due to this, Africa homes about 60% of the world’s non-cultivated tillable land.

However, in recent years, several established fintech players as well as start-ups have built solutions to provide financial support to the region’s agricultural sector.

In late 2018, Africa’s leading mobile wallet company, Cellulant, launched Agrikore, a blockchain-based digital-payment, contracting, and marketplace system that connects small farmers with large commercial customers. The company started its operations from Nigeria and is expected to commence business in Kenya in the second half of 2019.

Under their business model, when a large commercial order is placed on the platform, it is automatically broken into smaller quantities and shared with farmers on the platform (based on their capacity and proximity). Once the farmer accepts the order for the set quantity offered to him, the platform connects the farmer with registered transporters, quality inspectors, etc., who all log their activities on the blockchain and are paid through Cellulant’s digital wallets. All this is done on a blockchain to ensure transparency.


Related reading: Connecting Africa – Global Tech Players Gaining a Foothold in the Market


Another Nigeria-based company, Farmcrowdy, has been revolutionizing financing in Nigeria’s local agriculture sector by connecting small-scale farmers with farm sponsors (from Nigeria as well as other regions), who invest in farm cycles. Farmers benefit by receiving advice and training on best agriculture practices in addition to the financial support. Sponsors and farmers receive a pre-set percentage of the profits on the harvest in that cycle. In December 2017, the company received US$1 million seed investment from a group of venture capitalists including Cox Enterprises, Techstars Ventures, Social Capital, Hallett Capital, and Right-Side Capital, as well as five angel investors.

In addition to these, there are several other players, such as Kenya-based Twiga Foods (that connects rural farmers to urban retailers in an informal market), Kenya-based Tulaa (that provides famers with access to inputs such as seeds and fertilizers, as well as to finance, and markets through an m-commerce marketplace), Kenya-based, FarmDrive (that helps small farmers access credit from local banks through the use of data analytics), etc.

While most ventures in this space are currently based in Nigeria and Kenya, the sector is expected to grow significantly in the near future and is likely to expand into other parts of Africa as well.

In terms of expected trends in services development, with growing number of solutions and in turn apps, it is likely that consumers will tilt towards all-inclusive offerings, i.e. apps that provide solutions across the entire agricultural value chain.

Alternative credit scoring and lending

Large number of Africans have limited access to finance and formal lending options. Since there is a limited number of bank accounts in use, most people do not have a formal credit history and the cost of credit risk assessment remains high. Due to this, large portion of the population resorts to peer-to-peer lending or loans from Savings and Credit Cooperative Organizations (SACCOs), usually at rates higher than the market rate.

Fintech sector has been working towards reducing the cost of credit risk assessment through the use of big data and machine learning. It uses information about a person’s mobile phone usage, payment data, and several other such parameters, which are available in abundance, to calculate credit score for the individual.

Several companies, such as Branch International, have been following a similar model, wherein, through their app, they analyze the information on customer’s phone to assess their credit worthiness. On similar lines, Tala (which currently operates in Kenya), collates about 10,000 data points on a customer’s mobile phone to determine the user’s credit score.

Fintech sector has been working towards reducing the cost of credit risk assessment through the use of big data and machine learning. It uses information about a person’s mobile phone usage, payment data, and several other such parameters, which are available in abundance, to calculate credit score for the individual.

Other business models include a crowdfunding platform, on which individuals from across the world can offer small loans to local African entrepreneurs. Kiva, a global crowd lending platform, has been partnering with several companies across Africa over the past decade (such as Zoona for Zambia and Malawi in 2012) for providing financial support to entrepreneurs. Kiva vets the entrepreneurs eligible for the loan and the loan is repaid over a period of time. Post that lenders can either withdraw the amount or retain it with the company to support another entrepreneur.

Currently, about 20% of all fintech start-ups in Africa are focusing on lending solutions, with investors backing them with significant amount of funding. This is primarily due to a growing demand for financing in Africa. Moreover, limited barriers with regards to regulations for digital lending start-ups also make it easy for companies to enter this space and test the market before investing large sums of money or entering into a partnership with a bank.

This may change in the long run, however, with regulators increasingly monitoring this growing sector. For instance, in March 2018, the Kenyan government published a draft bill under which digital lenders will be licensed by a new Financial Markets Conduct Authority and lenders will be bound by interest rate caps that are set by the authority.

Insurance and wealth management

Apart from agriculture financing and credit scoring and lending, there are several digital start-ups in the space of insurance and wealth management. There are limited traditional solutions for insurance and wealth management in Africa, a fact that presents significant potential for growth in these categories.

South Africa’s Pineapple Insurance is a leading player in the insurtech space. The company operates as a decentralized peer-to-peer insurance company wherein members take a picture of the product they want to insure and the company uses artificial intelligence to calculate an appropriate premium. The premium is stored in the member’s Pineapple wallet and when a claim is paid out, a proportionate amount is withdrawn from the wallets of all the members in that category. Moreover, members can withdraw unused premium deposits at the end of every year making the process completely transparent.

In addition to Pineapple Insurance, there are several other companies that are making waves in the insurtech sector. These include, South-Africa based Naked Insurance (which uses artificial intelligence to offer low cost car insurance), Kenya-based GrassRoots Bim (which leverages mobile technology to develop insurance solutions for the mass market), and Tanzania-based Jamii Africa (which offers mobile micro-health insurance for the informal sector). Companies such as Piggybank.ng in Nigeria and Uplus in Rwanda, also provide digital solutions for savings and wealth management.

Apart from these fintech solutions, a lot of innovations are also taking place in the payments space. Several companies are working towards extending the reach of Africa’s mobile payment solutions. For example, a leading Kenyan mobile payment company, DPO Group, partnered with MasterCard to launch a virtual card that can be topped with mobile money by the end of 2019. The card has a 16-digit number, an expiry date, and a security code similar to a debit card, thereby facilitating transactions beyond Kenya, with rest of the word as well.

EOS Perspective

There is an immense opportunity in the fintech space in Africa at the moment. Most start-ups are currently operating in Kenya, South Africa, and Nigeria, and are expected to move to other parts of the continent once they have achieved certain scalability and outside investment. Having said that, foreign investors are also keenly observing movement in this space and are on the lookout for fresh concepts that have the capability to build new offerings as well disrupt existing financial solutions.

At the same time, with the industry being relatively new, many of its aspects remain unknown, a fact that increases risk of investing in the sector. Currently, a lot of these solutions depend heavily on data (especially through mobile usage). However, there are increasing regulations regarding data privacy across the globe and over the course of time, this trend is also expected to reach Africa.

Moreover, direct regulations regarding the fintech sector may also impact the business of several new players. Currently the companies are evolving fast and the regulators are playing catch-up, however, once the industry becomes seasoned, clear regulations are expected to ensure safety of the money involved. Fintech companies are also vulnerable to risks arising from online fraud, hacking, data breaches, etc., and regulations are extremely important to keep these in check as well.

While the sector enjoys limited scrutiny at the moment, entry and operations may not be as simplistic in the long run as they seem now. Despite this, the sector is expected to prosper and witness further innovation that will drive it into new territories to satisfy the currently unmet financial needs of the African population.

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Is Technology the Solution to the Next Food Crisis?

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The UN estimates rapid population growth with additional 2-3 billion people globally by 2050. To feed this swelling population, food production needs to scale up by 70%, otherwise we are likely to be at risk of a global food crisis. With resources becoming scarce and climate change diminishing crop production by 2% per decade, food production methods need radical transformation and technology could be the possible solution to it. Using technology in farms and fields holds extraordinary promise of helping the agriculture sector become more efficient, productive, and sustainable.

Population increase, resource limitations, and climate change are putting pressure on farmers to produce more with less. To boost production it is essential to efficiently manage farm inputs such as seeds, fertilizers, and pesticides, optimize sowing and harvesting cycles, monitor field data (soil condition, plant stress, etc.) for improved crop yield, among others. However, managing these inputs is cumbersome and laborious without consistent and precise monitoring. Unfortunately, many farmers still rely on guess work and traditional processes instead of actual data to make all farming decisions. Technology could prove useful by helping farmers to closely monitor all farm activities and take informed data-driven decisions to improve production levels.

Technology can offer relief to pressures in agriculture

Emerging technologies such as weather tracking, robotics, and Internet of Things (IoT) can consistently monitor every aspect of agriculture such as soil fertility, health of farm animals, temperature and humidity conditions, optimal time to sow and harvest, schedule chemical application on fields, analyze irrigation requirements, among several other functions.

Weather forecast-based predictive modelling

Weather is a crucial determinant to ascertain the best time to sow, fertilize, spray, irrigate, and harvest crops. About 90% of crops losses are due to weather events and 25% of those losses could be avoided by using weather forecast-based predictive modelling on farms. Integrating weather forecast models with farming practices could enable better decision-making and improve crop yield. Companies such as John Deere, Ignitia, etc., already offer comprehensive weather-based farming solutions.

Robotics

Robotics is another emerging technology gaining traction in the agriculture sector. With robots capable of executing all functions from sowing to harvesting, they could easily replace human labor in the foreseeable future, particularly, at a time when some countries are facing labor shortage. For instance, in 2017, the UK suffered from 20% shortfall in migrant labors, which was mostly blamed on the Brexit vote that has made the UK unattractive for overseas workers to seek employment. The labor shortage is likely to get worse in 2018, making harvesting at labor-intensive vegetable and fruit fields difficult. Hence, some farms across the UK are considering to employ farm robots for vegetable and fruit picking.

Robots are also far more efficient than human labor, which is the key requirement to boost food production – each Harvest CROO Robotics’ robot (made by a US-based company that develops robots for the agriculture sector) is capable of harvesting eight acres in a day, which is equivalent to the work of 30 human pickers.

Internet of Things

Further, IoT has gained significance across several industries and has now entered the farms. IoT is turning farms into a mesh of smart sensors connected in a network, with the help of which every granular detail of crop, soil, livestock, or farm can be analyzed, thus, enabling farmers to devise smart cropping techniques and farming methods. IoT can streamline farming processes, reduce water consumption, and improve production and bottom lines.

EOS Perspective

Eventually, the growing population will put pressure on food supply. In such a scenario, digital farming is the best possible solution to escape the looming food crisis. Technology promises improved communication systems, precise monitoring devices, recommendations that could improve all processes between sowing and harvesting, and efficient livestock monitoring, among others, that could boost agricultural yields, reduce food wastage, decrease the inputs or resources needed per unit of output, and ensure sustainable farming practices.

However, most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption, with most farms unable to bear the high upfront costs. Another common challenge is the lack of robust communication and internet network in rural areas as well as the absence of awareness and skills among farmers to apply technologies in farms.

Most farmers have not adopted digital farming solutions and the use of technology is far from being a mass phenomenon yet. Cost is the most significant barrier to adoption.

Consequently, the development of digital farming will require commitment and intervention by governments across the world, to offer incentives and cover the substantial start-up costs. Fortunately, few organizations have already started undertaking initiatives to tackle challenges. For instance, Mimosa Technology (a Vietnam-based IoT solution provider for agriculture sector) leases IoT-based hardware devices to farmers’ cooperatives in Vietnam to lessen the cost burden for smallholder farmers.

Initiatives are also being taken to ensure network connectivity and improve digital literacy in remote/rural areas – for example, governments of Thailand, India, or the UK, to name a few, are planning to boost digital connectivity in rural areas.

Eventually, technological innovations can be expected to make farming practices precise and to improve output. The use of digital farming solutions is an answer to the probable food crisis but for it to succeed, a mass adoption of technology across farms is a necessity. With growing awareness of benefits of automation in fields and efforts made by various organizations and governments to overcome challenges, digital farming would sooner than later transform the agriculture sector.


Brief description of companies and projects:

  • CropX: A USA-based agriculture-analytics company
  • CLAAS: A Germany-based agricultural machinery manufacturer
  • SmaXtec: An Austria-based provider of solutions to monitor livestock
  • Farmers Edge: A Canada-based company offering digital solutions for agriculture
  • The Weather Company: A USA-based weather forecasting and information technology company, a part of IBM
  • John Deere: A USA-based manufacturer of machinery for agriculture, construction, and forestry
  • Ignitia: A Sweden-based weather forecasting company
  • Robot Thorvald (to be launched): A robot developed by Saga Robotics, a Norway-based manufacturer of robots
  • Deepfield robotics: Robots developed by Bosch, a Germany-based engineering and electronics company
  • Hands Free Hectare: A project developed by Harper Adams University and Precision Decisions
  • Robot Agbot: A robot designed and built by QUT (an Australian university) with support from the Queensland Government
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Infographic: Dwindling Honey Bee Colonies: Impact and Remedial Measures

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Pollination is critical for crop production and honey bees are an integral part of it, performing 80% of pollination globally. Unfortunately, for the past ten years or so, the world has been witnessing massive disappearance of bees, primarily in the USA and Europe, where the annual hive losses are now 30% or higher. Disruption in bee population is largely driven by the use of harmful agricultural chemicals, climate change, and habitat loss.

Depletion of bee population will not only disrupt ecosystems, but will also cause major global food production problems. In countries such as the USA, pollination is responsible for production of at least 90 types of commercial crops, which contribute 15-30% of an average American’s diet.

Disruption in bee populations has already driven up the prices of some food items that are heavily dependent on bees for pollination on a large scale. Besides the agricultural sector, the economic brunt of vanishing bees will also be witnessed by industries using beeswax and honey as raw materials, for instance by the consumer products sector.

Nevertheless, efforts are being made by governments, particularly in the USA and Europe, to develop strategies to preserve the pollinators. Other countries are acknowledging the problem too, for instance scientists in Japan have developed robot bees to pick up some of the pollination slack but the effectiveness of such replacement technologies is yet to seen.

 

Dwindling Honey Bee Colonies - EOS Intelligence

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EU-Mercosur FTA: Old Negotiations, New Zest

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The EU and Mercosur (a trade bloc comprising Brazil, Argentina, Uruguay, and Paraguay*) free trade agreement (FTA) negotiations date back almost two decades, to 1999. After failing to seal the deal in 1999 and again in 2004, the countries initiated new negotiations in 2010 and though started out slowly, they accelerated the process in 2016 (with hopes to finalize the deal by the end of 2017). A trade deal at this moment will be of significant importance to both sides owing to substantial amount of trade between the two blocs. The EU is Mercosur’s largest trading partner accounting for 21% of the bloc’s trade in 2015, while Brazil alone is the EU’s eleventh largest trading partner. However, despite a positive framework for the agreement to happen, there is still a great deal of resistance from few EU countries regarding the opening up of their agriculture sectors. Now it remains to see whether the two blocs can reach the much needed compromises and end up with an agreement by the end of the year or talks will remain hanging once more.
*Venezuela has been suspended from the trade bloc in 2016 and therefore is out of the negotiations

While this may not be the first time the EU and Mercosur sit to negotiate the terms of an FTA, it definitely seems to be the most promising one. The main reason the earlier efforts have gone in vain was the Argentinian leftist government’s adverse stance on trading outside their own backyard. This changed with the election of president Mauricio Macri in December 2015, who unlike his predecessor (Cristina Fernandez de Kirchner), looks at international trade as a growth opportunity for Argentina. Similarly, the impeachment of the Brazilian president Dilma Rousseff in May 2016 resulted in a new political wave in Brazil. While Brazil’s former president did take small steps towards trade liberalization, her successor, Michel Temer, has accelerated this process and has made the EU-Mercosur deal one of his top priorities.

Another reason this deal has gained immense importance for the Latin American bloc has been a declining bilateral trade among Mercosur’s two largest members, Argentina and Brazil, owing to recession. Trade between the countries declined from US$36 billion to US$22 billion during 2013-2016. This has forced the two nations to soften their stance on global trade.

Considering these developments, as well as the changing political and trade dynamics between several Latin American countries and the USA, following the arrival of Trumps administration at the White House, Mercosur’s openness and renewed interest in strengthening international trade ties is fully understandable. We wrote about it in February 2017 in our article Trump in Action: Triumph or Tremor for Latin America? and again later in June 2017 in Japan Hopes to Get a Slice of Mercosur Opportunity Cake as LATAM Exports to USA Decline.

On the other side of the negotiations table, as the EU has maintained a positive outlook towards foreign trade in general, the lost prospect of a Trans-Atlantic Trade and Investment Partnership with the USA under Donald Trump has also reinvigorated EU’s interest in the Mercosur FTA. Moreover, the EU views the deal with Mercosur as a suitable counter-measure to the growing Chinese influence in Latin America.

Apart from these aspects, the main reason for renewed commitment to the deal by both sides is the significant and increasing level of trade and investment between the two blocs. In 2014, EU’s investments in Mercosur countries reached US$494 billion. The EU’s exports to Mercosur expanded from about US$24.6 billion (€21 billion) in 2005 to about US$54 billion (€46 billion) in 2015. Similarly for Mercosur, its exports to the EU increased from US$37.5 billion (€32 billion) to US$49 billion (€42 billion) during the same period. Agriculture products constituted 48% of Mercosur’s exports to the EU, while machinery (29% of exports) and vehicle and parts (17% of exports) were EU’s largest export categories to the Latin American bloc.

The EU stands to gain a great deal from the FTA. As per current calculations, EU exporters would save about US$5.2 billion (€4.4 billion) annually on trade tariffs and stand to double their exports within five years of reaching a deal.

Despite hefty trade benefits and a lot of political and economic factors being in favor of the deal, agriculture remains a sore point. Several EU countries, led by France, do not want to open up their agriculture sector to Mercosur’s exports as they feel their domestic produce (especially grains and meat) cannot compete with that of Brazil and Argentina in terms of price. In addition, they are concerned that Mercosur’s agricultural produce are not subject to the same health standards as their domestic produce.

A quick glance at the average production costs indicates that the EU farmers have a reason to worry. As per estimates, if the deal comes through, the amount of maize available in Brazil and Argentina for export by 2020 will be between 23 and 26 million tonnes. While the average production cost of cereal in Mercosur is close to US$94/ tonne (€80/tonne), it is about US$141/tonne (€120/tonne) in the EU. This is likely to result in substitution of EU-grown maize with that from Mercosur, which will most likely result in a loss of about US$2.3 billion (€2 billion) by 2020 for EU’s agriculture sector. In addition, it can be expected to result in an indirect loss of about US$1.2-3.5 billion (€1-3 billion) as Mercosur-produced maize is likely to also replace wheat for animal feed during high production and harvest months.

In case of meat products, beef produced in Mercosur is more competitive than EU’s beef in terms of pricing. Moreover, a study of the usual trend of beef quotas suggest that they are first filled with noble cuts exports (including filet, entrecote, and rump steak) followed by other hindquarter cuts (such as topside and silverside). In case the deal takes place, it is expected that Mercosur’s beef will largely substitute local beef produce with Mercosur’s export volume (keeping in mind higher quantities of noble cuts, such as Hilton beef) expecting to reach 1 million tonnes. These would be worth US$18.8 billion (€16 billion) and would directly impact the local production and sales value. To bring this into perspective, the value of Brazil’s beef exports (the largest beef exporter among the Mercosur countries) to the EU was US$485 million in 2016. Moreover, low-priced imports from Mercosur will put pressure on the pricing in the domestic EU market resulting in close to a 30% downward price revision, which in turn is highly likely to result in further losses of about US$10.6 billion (€9 billion). In case the EU agreed to 300,000 tonnes at zero duty, this would expectedly result in US$3.5 billion (€3 billion) in direct costs and US$7.1 billion in indirect costs (€6 billion).

In addition to this, there are several non-tariff related issues with Mercosur’s produce, such as lack of tagging and traceability of livestock to identify and guarantee origin. Also, several drugs, such as hormones and growth promoters, as well as few antibiotics and insecticides that are banned in the EU are legally used in Mercosur. These factors have resulted in countries such as France, Ireland, and Poland opposing the EU-Mercosur FTA.

Another source of disagreement for the EU lies in the trade of sugar and ethanol, which the European producers claim should be excluded from the list of freely-traded items. This stems primarily from the fact that the Brazilian government provides subsidies worth US$1.8 billion annually to its ethanol and sugar producers, a fact providing them with an undue advantage compared to the European counterparts.

On the other hand, Mercosur is discontent with EU’s limited concessions on agricultural imports and its stance to continue quotas on the Mercosur’s food imports. Mercosur also has some concerns regarding providing the EU with access to public tenders, which in Brazil alone are worth about US$176 billion (€150 billion), however, they are positive that they will be able to reach a consensus during negotiations.

While few points of contention remain, negotiators at both ends are keen on resolving these issues and signing the deal by the end of 2017, remaining aware of the significance of this deal for both the sides as well as of the tendency for these talks to remain unresolved if not pushed soon. Moreover, both sides want to exploit the current favorable political scenario in Brazil and Argentina. With Brazil heading for presidential elections in 2018, the chances of a leftist-government coming to power do exist, and this can again put the deal in danger if it is not completed by then. Both sides of the negotiating table want to reach an agreement sought-after for the past 20 years as early as possible, even if it means compromising on some expectations.

EU Mercosur FTA Old Negotiations New Zest

EOS Perspective

A goal of completing the deal by the end of 2017 seems like quite a gun to the heads of both the blocs, as past experience, both in the case of this deal as well as other FTAs, proves that the process is never quick nor simple. Moreover, the EU seems somewhat divided on the deal, with Spain, Portugal, and Germany advocating for it and France, Poland, and Ireland opposing it. That being said, this deal – which has been on and off again and again since 1999 – has never been as close to getting finalized as it is now. This is primarily due to the fact that both Argentina and Brazil (that were the two main factors holding the deal back all these years) are extremely keen on reaching this agreement with EU, to the extent that they may be willing to compromise quite a bit as long as the deal includes provisions that leave room for future improvements and it brings increase in trade and thus growth for local economies. However, it remains to be seen whether they will be willing to stretch their compromises far enough to agree to the EU’s terms on the agriculture produce trade. At the same time, it is not clear how much the EU is going to push for these provisions, so there is a chance that both parties will manage to reach a well-rounded deal for both the sides. The least probable scenario is that the deal will come to a stand-still once more, however till the ink dries on the deal, nothing can be considered as certain.

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