Don’t get Watson Matsa started on farmers and banks, as we did. By the swimming pool at Somerset Westview Hotel in Nairobi, he talks about each with the conviction of a person who has spent sufficient time inside a financial institution to know why banks don’t perceive farmers.
It is a Friday night, July 26. Around us, Nairobi is warming up for the weekend. There is espresso on one desk, tea on one other, and from time to time somebody reaches into their pocket for a cigarette. Matsa, in the meantime, is speaking about soil, rainfall, and credit score scores.
The founding father of eSusFarm Africa wasn’t all the time an agriculture man. He studied economics and accounting at Rhodes University in South Africa and later labored in credit score analytics at FNB. Finance was supposed to be the factor. Then an concept he encountered at college received him pondering: info unlocks capital. His drawback with that concept was Africa. What occurs when the knowledge wanted to unlock capital merely isn’t there?
That query ultimately led him to smallholder farmers and eSusFarm Africa.
Matsa nonetheless talks like a banker—danger, underwriting, money flows—however more and more thinks like a farmer. Banks, he says, are constructed across the neatness of a wage arriving each month. Farmers earn seasonally, save for the surprising, and wait. Perhaps, he suggests, farmers will not be the issue. Banking is just too inflexible.
He misses one factor about his outdated life.
“The SMS that comes on the 24th of the month,” he says, laughing about what he misses most from company life. “The SMS saying the money has arrived—on time. A good credit score. Being able to plan trips with my family.”
Now, there’s payroll to fear about, farmers to persuade, and a continent’s monetary assumptions to problem.
This interview has been edited for size and readability.
You grew up fascinated by monetary techniques, not farming. How did a banker find yourself spending his days fascinated about soil, climate, and smallholder farmers?
It goes again to when I used to be learning at Rhodes University. I used to be double-majoring in economics and accounting, and there was one e-book that actually had me in a chokehold. It mentioned that info unlocks capital, and that capital markets have sufficient info to achieve this.
I assumed: in Africa, that’s not true. There isn’t sufficient info flowing pretty for capital to movement.
Initially, I used to be fascinated about small companies: how will we get information on them that may facilitate capital flows? I took the concept to my co-founder, who has a PhD in agricultural economics. He mentioned, “What if this applies to agriculture? Money isn’t flowing to small farmers because there isn’t enough information.”
I requested him what information we would want. He mentioned soil, local weather, farmer-reported, and crop info. Those are a number of the pillars you want when assessing danger. You can take a look at the soil and say: this farmer wants a sure fertiliser, so let’s finance that. You can take a look at the climate and decide that the farmer wants insurance coverage.
We started mapping the information factors that have an effect on monetary choices.
I additionally labored at FNB within the credit score analytics house as a undertaking supervisor on initiatives aimed toward enhancing credit score scoring. That helped me perceive how banks assume.
Take ongoing danger administration: even when I vet and qualify you for a mortgage, I nonetheless want to monitor you till it’s repaid. That form of ongoing risk-management system doesn’t actually exist for smallholder farmers.
We took on the duty of constructing it.
If we spoke to your youthful self in South Africa, what profession would he swear he’d by no means find yourself pursuing?
I all the time wished to be in finance. It’s my ability set; it’s my factor.
I’d advise my youthful self not to pursue something unrelated to STEM—science, know-how, engineering, or arithmetic. When we have been rising up, the query was: how do you set meals on the desk? STEM was the place loads of employment was taking place.
For me, arithmetic may imply accounting, economics, or banking. Engineering was a great house. Technology was a great house. Science was a great house.
I nonetheless assume STEM is essential in Africa. We’re nonetheless making an attempt to grasp how we compete in science, know-how, engineering, and arithmetic.
You’ve lived in boardrooms and on farms. Which world has taught you extra about human behaviour?
They’ve taught me completely different sides of human behaviour.
The boardroom taught me about governance and the way to implement insurance policies and procedures in order that, when you’re doing one thing, you possibly can replicate it.
The floor taught me that interpersonal relationships are extra essential than virtually anything. You could also be a sensible man, however if you happen to don’t know the way to relate to the particular person reverse you and talk in a straightforward, easy, and articulate means, you gained’t get their buy-in.
The floor taught me how to simplify complicated ideas. On one aspect, I’m very technical. The different aspect is: how do you talk that technicality so that somebody with a Grade Seven schooling can perceive what you’re saying and the worth you’re bringing?
It has made me a significantly better communicator. Working on the bottom has additionally taught me empathy and the way to relate to folks. Those expertise switch again into the boardroom.
You usually describe finance as infrastructure. What’s one lesson from banking that agriculture desperately wants, and one factor banking may be taught from farmers?
One factor banking may be taught from farmers is that incomes aren’t earned in the identical means.
Banking tries to construction issues round very inflexible guidelines: you receives a commission month-to-month, so I’ll cost you month-to-month. Farming is seasonal. You obtain cash after which have to protect it for a for much longer interval till the subsequent tranche is available in.
Banking has been too inflexible. Income flows aren’t all the time month-to-month. They might be each day, weekly or each 4 months. Banks want to begin adapting to folks’s earnings cycles moderately than dictating them.
Farmers additionally perceive how to use cash prudently as a result of they’re always making ready for eventualities. It could possibly be a climate occasion or a illness outbreak. They develop a resilient mindset round preserving money to allow them to survive these occasions.
That’s one thing banking can be taught from farming.
People usually assume farmers are poor as a result of they lack cash. Do you assume the larger drawback is that monetary techniques have by no means actually been designed for them?
Absolutely. The monetary system was designed round salaried folks—month-to-month earners.
But farmers and folks within the casual financial system can earn each day. They are micro each day earners. You is probably not incomes $2,000 each month, however you may be incomes $20 a day.
Small farmers and small companies are incomes cash, however they’re incomes smaller quantities persistently.
If banks understood this higher, they might faucet into this class of each day earners moderately than focusing virtually completely on month-to-month earners.
The monetary system has been designed round formal employment moderately than folks’s precise earnings potential and incomes patterns.
Every founder has one assembly that modified every little thing. Which dialog altered the course of eSusFarm greater than any funding spherical ever may?
We all the time wished to get into finance, however we didn’t know the place to begin. Was it credit score? Was it insurance coverage?
Then we had a dialog with Benny van Rooy, the previous CEO of Grobank. He mentioned, “Watson, you’ve got enough data, and I like calling you a data company. But what you need to understand is that banks can’t lend if there is no insurance.”
That dialog was the start of our understanding that banks come after insurance coverage; they don’t come earlier than.
Banks need assurance. If you can’t guarantee a financial institution of some stability in earnings, you’re going to wrestle to unlock finance.
Farmers are largely an unsecured portfolio, so insurance coverage—or assurance—turns into essential. The assurance comes from information; the insurance coverage comes from underwriting. Without these two issues, banking gained’t are available.
That perception modified the way in which we considered penetrating the market.
Your platform combines AI, cellular cash, blockchain, and insurance coverage. How do you cease your self from falling in love with know-how as a substitute of the issue you’re making an attempt to remedy?
For us, it has all the time been about not letting the small farmer fall behind.
The again finish of the system might be refined. It can use AI, blockchain, credit score scoring and insurance coverage. But we nonetheless ensure that the supply mannequin can come via one thing so simple as USSD, so it’s accessible via a tool the farmer already has.
We’ve discovered that even if you happen to’ve received complicated know-how within the background, you continue to have to ship it merely on the final mile.
We don’t permit know-how to override the mission of supporting the farmer. Technology is there to assist us do this higher.
If I spent per week shadowing you, what would shock me most? Would I discover you writing code, negotiating partnerships, visiting farms, or worrying about payroll?
Everything.
But you’d in all probability see loads of partnership work. We have a partnership-led development technique. We imagine in embedding our know-how inside current techniques.
People ask me, “Where is your app?” I inform them we don’t need to construct an app. We need to be concerned in what persons are already utilizing.
If you’re in Kenya and utilizing cellular cash, let me present the answer via that ecosystem. If you’re utilizing WhatsApp, let me present the answer on WhatsApp.
We have MTN as a companion. We have Sanlam as an insurance coverage companion. We even have Microsoft as a know-how companion serving to us scale.
Building standalone apps and techniques doesn’t all the time make sense. I’d moderately combine our know-how into current infrastructure with a captive market than go door-to-door to purchase each person ourselves.
The second factor you’d see me worrying about is payroll. As we increase into extra nations, we want bigger groups, and funding in Africa stays restricted.
What we’ve discovered is that many African buyers need to spend money on profitability, whereas American buyers are sometimes extra keen to spend money on know-how for the long run earlier than profitability. They’re keen to lose cash within the brief time period to bounce the subsequent curve.
That impacts us. We have to discover capital elsewhere, together with grants, to assist us construct for that future.
When was the final time a farmer challenged an assumption you’d made and compelled you to rethink the enterprise?
We assumed farmers would willingly report details about their operations.
We constructed know-how to accumulate info, and a part of it relied on farmers’ self-reporting. We thought they might do it as a result of they understood that reporting was essential to entry finance.
That was one of many greatest classes we discovered: many farmers don’t perceive why they want to report. They don’t essentially care about reporting.
We name a few of them “sceptical survivors”. These are farmers between roughly 45 and 65 who’ve been farming for years. They’ve taken their youngsters to faculty via farming. They haven’t any urge for food for a 35-year-old Watson coming to inform them to report info when there’s no clear incentive.
Why ought to I report? If I report, what’s the speedy profit?
We’ve had to join reporting immediately to finance. The extra info you present, the higher we are able to monitor and perceive your danger. Then we are able to rating that danger and doubtlessly finance it.
We had to create an incentive construction for farmers to begin reporting.
Founders usually say they “empower” communities. Was there a second when you realised the group was really empowering you?
Yes.
We’ve profiled about 380,000 smallholder farmers throughout Uganda, South Africa, Zimbabwe, and Eswatini. From that pool, we had about 20,000 smallholder farmers actively utilizing our resolution.
What we didn’t predict was that these 20,000 farmers would turn into our ambassadors of their communities.
The farmers we’d met and educated in particular person started onboarding hundreds of others via phrase of mouth.
It taught us one thing essential about rural communities: phrase of mouth is extremely highly effective.
Start with a small group and be sure to do a rattling good job with that group. They’ll inform the remainder of the group, and different folks will comply with.
That’s additionally how the know-how can scale. Don’t fear about making an attempt to get all 380,000 folks your self. Get the 20,000 proper, they usually’ll assist carry the remaining.
You left the predictability of banking for entrepreneurship. What luxurious out of your company life do you continue to secretly miss?
The SMS that comes on the twenty fourth of the month.
That SMS says the cash has arrived on time. A great credit score rating. Being ready to plan journeys with my household.
I can’t plan like that now as a result of I’m reinvesting no matter cash I get into this child. I miss the predictability of earnings.
What I don’t miss is the ceiling on how a lot I may earn.
What I like now could be that there’s no ceiling. It’s an open canvas. If we work onerous sufficient, do the suitable issues, and execute the suitable technique, the incomes potential can turn into larger than I may ever have imagined.
What’s essentially the most uncomfortable reality you’ve discovered about African agriculture that buyers and policymakers not often acknowledge?
They misunderstand the multiplier impact of agriculture.
We’ve analysed this and located {that a} single farmer who does nicely can create jobs all through the worth chain.
Think a few farmer shopping for the suitable seed. The seed supplier might have to rent somebody due to elevated demand. Then there are transporters. There’s the fertiliser firm. When manufacturing will increase, you want extra staff and maybe tractors.
When the crop is prepared to be harvested, you want folks to achieve this. Then it wants to be packaged, transported, exported, or distributed. Eventually, it reaches outlets and the tip shopper.
The multiplier impact of agriculture in Africa is gigantic. One profitable farmer on one hectare can create jobs throughout the worth chain.
Policymakers and buyers don’t totally perceive that. Not specializing in agriculture in Africa is nearly a sin, given its financial multiplier impact. There are only a few sectors able to creating jobs throughout so many various elements of the financial system.
Imagine you’re appointed Finance Minister for a day—not Agriculture Minister. What’s the primary monetary rule you’d change to make farming a genuinely enticing enterprise for younger Africans?
One of my desires is definitely to turn into AU president, so I’ve considered these items so much.
If I have been Finance Minister, I would supply higher financing options for younger folks—a mix of grants and debt—and direct that financing in the direction of crops that may substitute imports.
If your nation has an enormous rice import invoice, finance younger folks to develop rice.
If we’re importing 1,000,000 tonnes of rice and wish to cut back the import invoice, let’s finance younger farmers to produce a part of what we import.
I’d focus closely on import substitution and financing younger folks to produce in these worth chains. It would assist us turn into extra self-sustaining in areas the place we at the moment rely closely on imports.
What a part of success worries you most: the expectations, the visibility, the duty, or one thing else totally?
Visibility is an enormous one for me.
Even as an organisation, we’re an embedded resolution. We like working within the background.
Too a lot visibility brings too many eyes and may create enemies. I strive not to be too seen personally. The firm might be seen, however I don’t essentially want to be.
I believe Africans are nonetheless getting used to seeing success tales from inside our personal communities, and typically success can appeal to jealousy. For now, I’d moderately preserve myself away from an excessive amount of of that.
So visibility might be the factor that worries me most.
Complete this sentence: “The biggest lie we’ve told ourselves about African agriculture is…”
That there’s more cash than you possibly can ever think about—and that it’s straightforward to get.
There is cash in agriculture, however it’s not what folks assume. It takes time. It’s not quick. Agriculture is a sluggish trade.
It’s completely different from the monetary sector I come from, the place you possibly can launch a lending product and doubtlessly purchase clients in a short time.
In agriculture, you could have to exit and prepare folks. Then folks have to perceive the product. Eventually, the earnings begins coming in.
There’s an enormous quantity of coaching and alter administration which have to occur earlier than the cash is available in. That means you want a for much longer runway. You have to sink cash into the enterprise earlier than you see outcomes.
But when the volumes ultimately come, they’ll are available big chunks.
We’ve performed case research the place farming one hectare can contain about $3,000. Multiply that throughout 1,000,000 folks, and also you’re speaking about some huge cash.
The quantum might be huge. But unlocking it requires studying, coaching, and ecosystem growth.
Plenty of buyers, financiers, and bankers don’t perceive that. You have to make investments closely in coaching and alter administration earlier than you see the outcomes.
Finally, in case your youngsters requested, “What exactly were you trying to fix?” what reply would you give that has nothing to do with AI, blockchain, or fintech?
My son really requested me this.
I instructed him, “I help make food. You’re eating today, aren’t you?”
He mentioned, “Yes.”
I requested him, “Where does the food come from?”
He mentioned, “I don’t know, Dad.”
I instructed him, “It comes from a farmer. If there are no farmers, you don’t have food. So I’m trying to help farmers make more food so that you can eat.”
That’s what I instructed my youngster, and it’s in all probability the best means I can clarify what I’m making an attempt to do.
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