Technological innovations being developed and implemented have the potential to radically alter production, supply chains and consumption patterns, in the agri-tech and food-tech sectors in the Middle East and North Africa (Mena).
Additionally, the growing interest of venture capital funds and sovereign wealth funds in investing in desert technology innovation is set to grow with state-led food security initiatives, writes Zada Haj, CEO of Dana, the Abu-Dhabi-based investment and business creation platform.
The regional agricultural market is expected to grow at a compound annual rate of 5.7% through 2026, not least because the impact of technology promises to deliver new levels of productivity.
Beginning of their growth
Mena’s agritech and food tech sectors – or, region-specifically, “desert tech” – are in their early stages of growth, expanding particularly rapidly in markets in the United Arab Emirates States, Saudi Arabia, North Africa and Israel. Unlike other emerging sectors, such as e-commerce or fintech, agritech and foodtech do not yet benefit from a solid ecosystem of regional entrepreneurs and investors.
One of the main reasons for this difference is the long history of agriculture. Agriculture and food production are the basis of the oldest commercial practices in our region. While the agricultural knowledge accumulated over millennia is an invaluable resource, it has also had the side effect of slowing the rate at which technology penetrates this old market.
Agriculture and food production represent a significant percentage of GDP in Mena countries. For example, 14% of Egypt’s GDP and 16% of Morocco’s GDP are entirely dependent on the agricultural sector.
Desert Tech Solutions
For these large markets to retain their importance and sufficient production levels in the face of climate change-induced water scarcity, it is imperative that desert technology solutions are implemented at scale.
Agricultural and other food exports must also adapt to the increasingly high standards of high-end EU markets – a task that agritech and food technology will play a key role in solving.
Entrepreneurship is being met with a welcome regulatory initiative from Mena governments, paving the way for desert technology to become the new normal in agriculture.
Increase food production
Saudi Arabia is implementing the Sustainable Agricultural Rural Development Program 2018-25, while the United Arab Emirates has released the National Food Security Strategy 2051. Both measures aim to increase local food production through technology, regulation and investment.
Qatar’s 2019-23 food security state projects include the establishment of an integrated food waste management program, and Morocco’s Green Generation 2020-30 initiative is working to create the conditions for innovation high quality agrotechnology.
Sovereign wealth funds and investment vehicles – important growth enablers in the region – have also begun to invest more in desert technology. The Abu Dhabi Investment Office invested $100 million in four agritech companies in 2020, while the SVC invested in several funds supporting agritech companies.
While these initiatives indicate increased sector relevance and value, regulatory barriers remain a significant challenge for the agritech, food tech and desert tech sectors. Some regulations in place make it difficult for new solutions to be approved and technology to be imported.
The private sector is only beginning to follow suit. Between 2014 and 2020, private investments in desert tech startups totaled $250 million – a sum split across 33 investments.
At the same time, the potential of desert technology is far from well enough understood to be accurately assessed at this stage.
Understanding and acting on these industry trends, Dana is one of the few pioneering platforms in the Mena region to focus exclusively on desert technology solutions for sustainability in arid climates. “We achieve this by focusing on agri-food innovation by offering internal pilots and proof of concept with our network of beta sites and experimental farms, and by identifying solutions specifically geared towards the needs and technological culture of Mena farmers, food producers, and supply chains.
Successful investment in the agribusiness space, and therefore growth of the sector, is directly linked to the availability of technological infrastructure to convert academic research, prototypes and early-stage patents into commercial operations. This is only made possible through field testing and implementation opportunities.
Give the example
This process is not only about effective due diligence, but also sets an example of how private sector entities interested in desert technology should put in place infrastructure to serve the ecosystem and their portfolio.
Another factor contributing to the growth of the desert technology sector is the increase in new environmental standards globally. This trend will become particularly salient for the region with the upcoming COP27 and COP28 to be held in Egypt and Abu Dhabi.
While the GCC’s investment culture has traditionally favored low risk, the maturing regional startup ecosystem and increased private funding have opened up new opportunities for capital-intensive and time-intensive ventures – like most of the technological innovations of the desert. Often having a longer timeline, this is often associated with higher and more stable returns. The growth of the Mena sector is in line with global trends showing the rise of agritech and foodtech everywhere.– TradeArabia Press Service
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