Technological innovations being developed and implemented have the potential to alter production, supply chains, and consumption patterns drastically, in the Middle East and Nort Africa’s (Mena) agritech and foodtech sectors.
Also, rapidly growing interest among Venture Capital funds and sovereign funds to invest in desert tech innovation is bound to grow with state-led food security initiatives, writes, Zada Haj, CEO of Dana, the Abu-Dhabi based venture builder and investment platform.
The regional agriculture market is projected to grow at a compounded annual rate of 5.7% through 2026 - not the least because the impact of technology promises to deliver new levels of productivity.
Beginning of their growth
Mena’s agritech and foodtech sectors - or, specific to the region, ‘desert tech’ - are just at the beginning of their growth, expanding especially rapid within the UAE, KSA, North Africa, and Israeli markets. Unlike other emerging sectors, like ecommerce or fintech, agritech and foodtech do not yet enjoy a robust ecosystem of regional entrepreneurs and investors.
A main reason for this difference lies in the long history of agriculture. Farming and food production form the basis of the oldest commercial practices of our region. While the agricultural knowledge accumulated over millennia is an invaluable resource, it has also had the side-effect of slowing the speed with which technology penetrates this old market.
Agriculture and food production make up a large percentage of Mena countries’ GDP. For example, 14% of Egypt’s and 16% of Morocco’s GDP rely entirely on the on the agricultural sector.
Desert tech solutions
For these large markets to maintain their significance and sufficient levels of production in the face of climate change-induced water scarcity, there is dire need for desert tech solutions to be implemented at scale.
Agricultural and other food exports also must adjust to increasingly high standards of EU premium markets - a task agritech and foodtech will play a key part in addressing.
Entrepreneurial spirit is met with a welcome regulatory initiative on the part of Mena governments, leading the way for desert tech to become the new standard in agriculture.
Increasing food production
The KSA is implementing the Sustainable Agricultural Rural Development Programme 2018-25, while the UAE has issued the National Food Security Strategy 2051. Both measures are geared to increase local food production through technology, regulation, and investment.
Qatar’s State Food Security Projects 2019-23 includes establishing an integrated food waste programme, and Morocco’s Green Generation 2020-30 initiative strives to create conditions for high-quality agritech innovation.
Sovereign funds and investment vehicles - important facilitators of growth in the region - have also started to invest more in desert tech. The Abu Dhabi Investment Office invested $100 million in four agritech companies in 2020, while the SVC has invested in several funds backing agritech companies.
While these initiatives are indicative of increased sector relevance and value, the regulatory hurdles are still a significant challenge for the agritech, foodtech, and desert tech sectors. Some regulations in place make it difficult to implement new solutions to be approved and technology to be imported.
The private sector is only getting started to follow suit. Between 2014 and 2020, private investment in desert tech startups amounted to $250 million - a sum split between 33 investments.
At the same time, desert tech’s potential is far from being understood well enough to be accurately priced in at this point in time.
Understanding these sector trends, and acting on them, Dana is one of the very few pioneering platforms in Mena focusing exclusively on desert tech solutions for sustainability in arid climates. “We achieve this by emphasising agrifood innovation through offering in-house pilots and proof-of-concept with our network of beta sites and experimental farms, and identifying solutions that are specifically oriented to the needs and technological literacy of Mena farmers, food producers, and supply chains.”
Successful investment in the agrifood space, and therefore the sector’s growth, are directly tied to the availability of technology infrastructure to convert academic research, prototypes, and early stage patents into commercial operations. This is only made possible by opportunities to test and implement in the field.
Setting an example
This process is not only about effective due diligence, but also sets the example for how private sector entities interested in desert tech should set up infrastructure to serve the ecosystem and their portfolio.
Another contributing factor for desert tech sector growth are new environmental standards being on the rise globally. This trend will become especially salient for the region with the upcoming COP27 and COP28 being held in Egypt and Abu Dhabi.
While the GCC’s investment culture has traditionally favoured low risk, the maturing regional startup ecosystem and increased private funding have opened new opportunities for capital and time intensive ventures – like most desert tech innovations. Often having a longer timeline, this is frequently paired with higher and more stable returns. Mena’s sector growth is in line with global trends showing the rise of agritech and foodtech everywhere.-- TradeArabia News Service
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