Which digital solutions can contribute to SMEs’ digital, climate smart business processes of tomorrow? This was the question agribusinesses and D4Ag providers tackled during a CRAFT Uganda-facilitated workshop recently. This blog is part of a series that looks at effective matchmaking between clients and providers of digital services.
The challenge: harnessing myriad solutions for climate-smart agriculture
Over the last decade, there has been an explosion in the number of digital agriculture solutions available in the market. From providing agronomic advisory and bundled services to e-commerce platforms, these solutions have the potential to drive agricultural knowledge, improve productivity, and enhance incomes. However, most farmers and other agriculture value chain actors are yet to experience and benefit from the global digital transformation. Tapping into the opportunities offered by this rapid development around digital solutions requires some targeted efforts and engagement from the value chain actors and agriculture development programs.
Ugandan context: the importance and vulnerability of SMEs
It is estimated that SMEs in Uganda constitute 90% of the private sector, with 80% being in urban areas and largely involved in trade, agro-processing and small manufacturing. SMEs contribute approximately 75% of GDP, and employ approximately 2.5 to 3 million people, signifying their importance in the economic development of Uganda. SME growth and its survival in Uganda, however, faces severe constraints, with 78% of SME businesses not surviving beyond their first birthday. The key constraints that choke SME survival have been well researched and documented, and include, among others, factors such as lack of access to finance, lack of entrepreneurial skills, lack of business plans, and more.
Ugandan SMEs today must cope with a rapidly changing socio-economic environment and tackle a broad variety of external disturbances such as climate change and more recently, the COVID-19 pandemic. A survey undertaken by Brookings on the impact of COVID-19 on micro, small, and medium businesses in Uganda revealed that 80% of businesses in the agriculture sector had reduced their workforce by more than a quarter, largely due to a severe decline in agriculture demand. Further, COVID-19 induced costs of safety measures, lessened production and productivity, reduced supply of inputs, and credit and liquidity constraints, exacerbated the preexisting issues and risks for the SMEs.
To cope with the risks associated with climate change, pandemics, and other external and internal shocks, SMEs need to become more flexible and dynamic themselves and thus build resilience within their business operations to survive, respond and grow during crises.
The case for digital
Digital solutions can pave the way for addressing some of the constraints and climate related and economic turbulence faced by SMEs. Adopting digital solutions suited to their individual business needs can help optimiz operations, forecast and buffer risks, and enable them to access finance by bringing transparency and increasing financial liquidity.
Despite its benefits, digitalization has become a complex initiative for businesses because of systemic and structural challenges which include:
- uncertainty about the available technology and about the degree to which products are tailored to a specific;
- rapid technical advances and evolution of applications;
- lack of digital knowledge, skills, and talent;
- internal organisational resistance to change;
- limited or scarce resources to invest in digital innovations;
- lack of integration of digital innovations with company operations;
- business executives focus on short-term results, with limited future leadership and vision, and
- risk of exposure of business information to powerful industry competitors.
The Climate Resilient Agribusinesses for Tomorrow (CRAFT) project in Uganda conducted a workshop to showcase different Digitalization for Agriculture (D4Ag) solutions available in the country, that can help optimize the business operations of the agribusinesses (or business champions) that the project supports. The two-day workshop held in Jinja, Uganda, in March 2021, brought together 14 agribusinesses (market off-takers, processors, cooperatives) and 14 D4Ag providers, and showcased the opportunities in the digital space that can help improve the productivity and profitability of the agribusinesses.
As a first and successful step, the workshop helped set the stage for an initial understanding of the different digital solutions available in the market and creating excitement in the agribusinesses present. It also highlighted the urgent need for a next step in deeper and specific business to business (B2B) engagement for operational finetuning between the agribusinesses and the digital solutions providers. Only then will solutions really work and deliver on their potential.
Such deeper B2B engagement will enable the agribusinesses to choose the right solution based on their individual needs and capacities and make it really fit into their operational reality. This entails steps to present the value proposition to their internal teams and boards (where applicable), to allocate resources for the purchase of the solution(s), train staff where needed, and change relevant internal organizational arrangements to adopt the solutions. CRAFT will continue play a facilitating role in this deeper ‘operational match-making’. Thus helping the D4Ag market to mature as demand and supply meets each other effectively. Such facilitation of relations in a nascent market, alongside the development of strategic alliances and bundling of services, forms a pivotal way forward in harnessing the power of digitalisation for climate-smart agriculture.
This is the first blog in a series drawing specific lessons on effective matchmaking between clients and providers of digital services.
Author: Vandana Thottoli
 Sekisaka Farouk: Financing small and medium enterprises: A major hindrance to eradication of extreme poverty in Uganda,