Agricultural Value Added Services (Agri VAS): Market Entry Toolkit Authors: Amol Jadhav, Natalia Pshenichnaya and Fiona Smith, GSMA mAgri Programme. Contents 3—4 Introduction 5—9 Chapter 1 Market Opportunity 10—16 Chapter 2 Market Assessment and User Needs 17—21 Chapter 3 Marketing 22—30 Chapter 4 Service Design 31—38 Chapter 5 Commercial Model and Business Case for Agri VAS 39 Glossary GSMA — mAgri Programme 3 Market Entry Toolkit - Agri VAS Introduction The furious growth of mobile in developing countries, and rural regions in particular, presents a landmark opportunity to deliver critical, information-based agricultural services to rural poor smallholder farmers. There are over 2.3 billion people living in poverty and the majority earn their primary livelihood from small farms in developing countries. The yields of these farmers, especially those in sub-Saharan Africa, typically represent a fifth of those in the developed world. There is a raft of reasons for this, one of which is a lack of access to relevant and actionable agricultural information. Yet this problem is eminently superable. The right information, absorbed and applied correctly, can double or triple productivity in many of these households. Mobile is the leapfrog technology that allows us to complement existing extension efforts by stepping up and meeting this information need. About the Authors This document was written by members of the GSMA mAgri Programme. The GSM Association represents the interests of mobile operators worldwide and within this, the GSMA Development Fund works to identify opportunities in emerging markets for social, economic and environmental impact through mobile services. In partnership with USAID and the Bill and Melinda Gates Foundation (BMGF) the GSMA has recently launched the mFarmer Initiative to support mobile operators and agricultural partners in Sub-Saharan Africa and India in creating commercially viable and scalable mobile information services to benefit over 2 million smallholder farmers. For more information on the initiative and challenge fund please contact [email protected] GSMA — mAgri Programme 4 Market Entry Toolkit - Agri VAS There are no hard and fast rules to follow Mobile Network Operators (MNOs) and when building an Agricultural Value Added Agriculture Organisation Partnerships: 1 Service (Agri VAS). This document does MNOs face the task of growing average not provide a blueprint, nor act as a guarantor revenue per user (ARPU) and market share of success. Those Agri VAS deployments in rural areas. In a congested marketplace, that have achieved success have often done they seek to find ways to differentiate within so through clever adaptation to their a commoditised industry. Agricultural environment. Replicating them elsewhere extension organisations face the challenge of would be to remove a crucial piece of the servicing geographically dispersed farmers jigsaw. However, from the GSMA mAgri while lacking scalable service infrastructure. Programme’s involvement in Agri VAS deployments in Asia and Africa, and from The challenges, therefore, that MNOs and market research on best practice amongst agricultural extension organisations face are existing service providers, it is possible to complimentary in nature. Agricultural discern similarities in the challenges faced, and organisations can help MNOs differentiate by responses to those challenges, from which we targeting rural farmers with their services, can learn. This document represents augmenting their relevance, attraction and current best practice in dealing with them and quality. MNOs can help agricultural is primarily addressed to Mobile Network organisations rapidly scale services and reach Operators (MNOs), other service providers, distant farmers via their network and and agricultural organisations who are looking distribution infrastructure. This forms the to partner and launch Agri VAS. basics of a partnership model for Agri VAS. A significant trend is the complimentary The purpose of this document is to help key benefits emerging from partnership models. players recognise, understand - and act upon Due to the scalability and reach of mobile - the opportunities in the mobile agriculture networks, partnership models are emerging sector. We begin by defining the sheer size of between mobile operators and agriculture this market. organisations in developing mobile solutions for agriculture. Fiona Smith | Director, GSMA Development Fund mAgri Programme. Agricultural Value Added Services form part of the rural VAS portfolio for mobile network operators and VAS providers. A Value Added Service is a non-core service of a mobile operator. The term can be used to refer to all services beyond standard voice-calls. VAS are supplied either in-house by the MNO themselves, or by a third party VAS provider. GSMA — mAgri Programme 5 Market Entry Toolkit - Agri VAS Chapter 1 Market Opportunity Agricultural Value Added Services (Agri VAS) present a considerable business opportunity due to the enormous potential user base in developing countries. The farming sector in these countries often suffers from chronically low productivity. Lack of information acts upon productivity and income levels like a glass ceiling. However, with increasing teledensity in the developing world, the mobile channel is uniquely positioned to address the information needs of farmers – an intervention that can help increase their income and yield. By delivering relevant, actionable content, providers of mobile services for agriculture can offer a valuable and sustainable product. In order to appreciate fully the business opportunity for Agri VAS, it’s important to identify certain key variables in the market place – typically mobile penetration levels, user base and agricultural productivity trends. GSMA — mAgri Programme Chapter 1 6 Market Entry Toolkit - Agri VAS Market Opportunity The Potential User Base for Agri VAS It’s important to understand the sheer size India work in agriculture – this forms 52% of the agricultural sector in the target markets of India’s work force. In Sub-Saharan Africa, (Figure 1.1). In developing countries the the agricultural sector is the largest employer majority of the labour force works in the too. In many of the African countries, over 80% agricultural sector. This population of the work force is employed here – and a constitutes the potential user base for significant proportion of these are women. Agri VAS. Almost 250 million people in Figure 1.1: Agricultural Sector Size 15% 32% 24% 49% 51% 44% 85% 32% 68% GDP – Ethiopia Labour Force – Ethiopia Agriculture Industry Agricultural Labour Force GDP – Ghana Labour Force – Ghana Other Industries Other Labour Force Agriculture Industry Other Labour Force GDP (Purchasing Power Parity): Labour Force in Agriculture: Other Industries Female Agricultural Workers $85.71 Billion 33.96 Million Workers GDP (Purchasing Power Parity): Male Agricultural Workers $39.64 Billion Labour Force in Agriculture: 6.13 Million Workers 18% 23% 11% 25% 48% 52% 64% 82% 77% GDP – India Labour Force – India GDP – Kenya Labour Force – Kenya Agriculture Industry Agricultural Labour Force Agriculture Industry Other Labour Force Other Industries Other Labour Force Other Industries Female Agricultural Workers GDP (Purchasing Power Parity): Labour Force in Agriculture: GDP (Purchasing Power Parity): Male Agricultural Workers $4.20 Trillion 237.88 Million Workers $66.22 Billion Labour Force in Agriculture: 14.03 Million Workers Source: The World Bank and CIA The World Factbook GSMA — mAgri Programme Chapter 1 7 Market Entry Toolkit - Agri VAS Market Opportunity 31% 10% 20% 37% 34% 43% 56% 63% 37% 69% GDP – Malawi Labour Force – Malawi GDP – Mali Labour Force – Mali Agriculture Industry Other Labour Force Agriculture Industry Other Labour Force Other Industries Female Agricultural Workers Other Industries Female Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers $13.05 Billion $16.24 Billion Labour Force in Agriculture: Labour Force in Agriculture: 5.68 Million Workers 3.02 Million Workers 31% 33% 19% 22% 30% 42% 39% 69% 67% 48% GDP – Mozambique Labour Force – Mozambique GDP – Nigeria Labour Force – Nigeria Agriculture Industry Other Labour Force Agriculture Industry Other Labour Force Other Industries Female Agricultural Workers Other Industries Female Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers $21.87 Billion $374.34 Billion Labour Force in Agriculture: Labour Force in Agriculture: 8.91 Million Workers 34.98 Million Workers Source: The World Bank and CIA The World Factbook GSMA — mAgri Programme Chapter 1 8 Market Entry Toolkit - Agri VAS Market Opportunity 29% 10% 34% 20% 27% 24% 63% 66% 56% 71% GDP – Rwanda Labour Force – Rwanda GDP – Tanzania Labour Force – Tanzania Agriculture Industry Other Labour Force Agriculture Industry Other Labour Force Other Industries Female Agricultural Workers Other Industries Female Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers GDP (Purchasing Power Parity): Male Agricultural Workers $12.27 Billion $62.23 Billion Labour Force in Agriculture: Labour Force in Agriculture: 4.47 Million Workers 17.11 Million Workers 22% 25% 18% 16% 15% 27% 55% 69% 75% 78% GDP – Uganda Labour Force – Uganda GDP – Zambia Labour Force – Zambia Agriculture Industry Other Labour Force Agriculture Industry Other Labour Force Other