Deere taps tractor-hailing technology in bid to break ground in Africa

Deere taps tractor-hailing technology in bid to break ground in Africa
A mobile phone app can show movements of a John Deere tractor, using Hello Tractor technology to connect farmers with vehicle owners. (Reuters)
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Updated 26 February 2020

Deere taps tractor-hailing technology in bid to break ground in Africa

Deere taps tractor-hailing technology in bid to break ground in Africa
  • Uber-style technology could help overcome agricultural finance barrier

NANYUKI, Kenya: It’s ride-hailing, farm style. Deere & Co. is teaming up with the “Uber of tractors” in Africa and betting on a future where farmers summon machines with the touch of a button.

The world’s leading farm equipment maker is outfitting its tractors with startup Hello Tractor’s technology, which allows farmers to hail the machines via an app, monitors the vehicles’ movements and transmits usage information such as fuel levels.

The aim is to help the US company boost sales of it famous green and yellow John Deere tractors, a tough task in a continent with the world’s highest poverty rate and the least mechanized agricultural sector.

Deere is currently testing the technology — a small black box fitted beneath dashboards — on around 400 tractors in Ghana and Kenya. It told Reuters it plans to roll out the devices across Africa in the second half of this year, offering it to all contractors who buy its equipment on the continent.

Jacques Taylor, who heads John Deere’s sub-Saharan Africa business, said that the continent badly needs more machinery to develop its farming industry but most farmers don’t have the scale to justify a large investment.

“We would like to see that every farmer has access to mechanization,” he told Reuters. “The gap that we’ve identified is, how do we connect small farmers with tractor owners?“

Deere declined to comment on the investment costs for the rollout. The risks are clear; there is no certainty of any measure of success in Africa, which accounts for a tiny fraction of its global sales at present.

Held back by low incomes, tiny landholdings as well as a lack of bank financing, tractor numbers have long been stagnant on the continent, even as much of the developing world has experienced a boom in mechanization.

Deere thinks it can help on the financing front: It told Reuters it could pull data from the Hello Tractor platform that showed in precise detail how farmers were using its equipment. That information, it said, could be used by the farmers — who typically lack credit histories — to help secure bank loans.

This would mean they could buy more tractors.

In central Kenya, a Deere tractor zig-zagged across a sun-drenched field, raking up dry grass and dropping bales of hay. The black box monitored its every move.

The tractor belongs to Agrimech Africa, a Nairobi-based agricultural services firm that has taken up the offer to have the devices installed on its Deere machinery. “They do the technology. We do the management,” said Pascal Kaumbutho, who heads the company.

Agrimech, which is paid by farmers to work their land, hopes the new tech will help optimize its Deere tractors and connect them to new customers, allowing it to expand.

Kaumbutho, whose company manages a dozen tractors, envisions a future in which Agrimech runs a 1,000-strong fleet. “Right now, we’re reaching about 1,500 farmers,” he said. “Within the next two or three years, I’d like to reach 20,000.”

Such opportunities exist in markets across Africa, said Hello Tractor founder Jehiel Oliver, but companies like Deere have lacked the tools to develop them.

“Nigeria alone needs 750,000 (more) tractors to be on the global average,” he said. “Our technology is a market-maker for tractor manufacturers who want to sell into those markets.”

Deere’s annual revenue of about $40 billion is dominated by the Americas and Europe. It doesn’t break out numbers for Africa, but combined revenue from Africa, Asia, Australia, New Zealand and the Middle East was $3.9 billion last year.

Outside South Africa, the continent’s most-developed economy, around 80 percent of African cropland is still cultivated by hand. Yields are half the global average. With its population set to double by 2050, increasing productivity is a necessity.

One of the big barriers to mechanization is finance; though agriculture accounts for around a quarter of Africa’s economic output and some 70 percent of jobs, banks often view farmers as high-risk because of the lack of credit histories.

“It’s one thing to go to a bank and say ‘You know. Hey, I work very hard.’ It’s another thing to be able to show it,” Kaumbutho said.

Deere said the data from the Hello Tractor platform shows how often equipment is in use, how much land it’s working, and whether it’s tilling, planting or harvesting. That information can be used to create financial statements, it added.

Tshepo Maeko, vice president and head of agrisales at South African-based lender Absa, sees potential to unlock more lending in this kind of technology which gives banks a fuller picture.

“We will be able to see how big the risk is or how big the opportunity is,” he said.

Deere is working with Hello Tractor and the banks to format the data to create easily digestible automated reports. No loan decisions have yet been made based on the information.

But Antois van der Westhuizen, John Deere Financial’s managing director for sub-Saharan Africa, said that should be possible by the time the scheme is rolled out across Africa.

“The banking systems are trying to adapt,” he said. “It’s a journey for us to really get them to understand it.”

Trust is a rare asset for Iraqi banks

Updated 4 min 51 sec ago

Trust is a rare asset for Iraqi banks

Trust is a rare asset for Iraqi banks
  • Many financial institutions are short on deposits and have risky credits

DIWANIYAH: The bustling streets of Iraq’s biggest cities are lined with private and public banks that promise investment and credit. But businesses barely use them and individuals do not trust them.

“Iraqi banks today are still so far away from global standards,” said Abbas Anid Ghanem, an Iraqi economist and lawyer based in the southern city of Diwaniyah.

The problems date back decades, Ghanem said.

In the 1990s, Iraq was isolated from the outside world by crippling sanctions on then-dictator Saddam Hussein that blocked financial transactions with the country.

Following the US-led invasion in 2003, widespread looting saw bank vaults emptied of any cash, even as businesses from around the world were flying into Iraq to sniff out reconstruction deals.

More than 70 banks have popped up since, but the sector as a whole remains underdeveloped.The three largest — Al-Rafidain, Al-Rasheed and the Trade Bank of Iraq (TBI) — are state-owned and hold about 90 percent of the entire sector’s assets, the World Bank said in 2018. The first two suffer from “capital deficiencies and asset quality problems,” the World Bank said, meaning they are short on deposits and have risky credits.

TBI was established in a 2003 decree issued by the Coalition Provisional Authority, which managed Iraq post-invasion.

“TBI was meant to help Iraq develop and rebuild, but it was affected by sectarian power-sharing and financial corruption,” said Ghanem.

Now, the bank is the Iraqi government’s main conduit for international transactions but provides few loan options or other services.

The top trio have been used mainly for paying salaries and pensions to eight million Iraqis.

But after collapsing oil prices this year drained state coffers, the government had to borrow from state-owned banks for those wages, increasing its domestic debt. Of the 60 private banks in Iraq, most are domestic and operate primarily as exchange houses.

Iraqi businessmen say that the banks’ unappealing profiles are hampering the development of the private sector.

“Iraq’s public banks don’t have the mechanisms for global transactions and don’t seek to draw in entrepreneurs,” real estate developer Adel Salhi said.

“TBI is the only one that allows investors to open lines of credit, but it does not offer professional services and it demands enormous guarantees — sometimes as high as 110 percent to deliver a letter of guarantee,” he said.

Salhi and his Al-Akhiar group have opted to use a foreign bank, like many other Iraqis who turn to Jordan, Turkey, Iran or Lebanon to facilitate their transactions.

Most companies in Iraq still operate in cash: only 26 percent use the formal banking system, the World Bank said. All but 2 percent pay their employees in hard currency and nearly half even pay their suppliers that way.

Less than five percent of Iraq’s small and medium-sized businesses have a domestic bank loan, with most borrowing from family and friends instead.

Ghanem said that is because business loans come with exorbitant interest rates up to 10 percent.

Despite being OPEC’s second-largest crude producer, Iraq is also ranked 172 out of 190 in the World Bank’s “Doing Business” report — barely ahead of Afghanistan or war-ravaged Syria.

For individuals, too, banks are a bane. There is little public trust in financial institutions, with many Iraqis still smarting over the looting of public banks in 2003 that cost them their life savings.