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Producers who previously struggled to gain access to finance, could soon gain easier access to loans thanks to the minority stake that commercial bank, Absa, just obtained in the agritech start-up company, Khula!
“This transaction will allow Absa Agribusiness to go into the future, because we’re now able to bring third-party information into a credit decision,” said Abrie Rautenbach, adding that the AgriBusiness team was excited that new solutions could be found to finance clients in a new way. Currently Absa is still using old ways of financing clients and while this could still work, new financing opportunities can be unlocked through this transaction.
“Absa’s core business has always been to open transactional accounts, with an element of funding where it was a requirement,” Rautenbach added. “However, through this minority stake acquirement it is now possible to bring a data-based financial history from outside the bank into consideration for the financing process.”
Khula!’s platforms not only keep track of the produce a farmer sells, but it also provides traceability (records of inputs bought on the platform). Rautenbach says this means that the bank might use this information when deciding on the type of financing it could potentially provide to a farmer.
An ecosystem approach
“The decision to add Absa to our capitalisation table is a very strategic and long-term decision. We are aligned in our interests and how we see the industry transforming over the next few years,” said Karidas Tshintholo, chief executive officer at Khula!.
Tshintsholo added that the two parties have been strategic partners for several years, but the fact that the bank now owned equity would benefit both parties. “Not only will this step allow us to experiment with greater offerings, but we (Khula!) will be able to increase our scale, making it easier to move our business to other countries, because Absa is part of a bigger, global bank.”
Tshintsholo believed Khula! stood apart from its competitors since it wasn’t just a single platform application. “We’ve built different ecosystems which all interlink. This works perfectly in the agricultural sector where everything is so interlinked that it is difficult to solve problems in isolation.”
There are three layers to the Khula ecosystem:
- Khula! Input Marketplace, where farmers can buy 5 000 inputs from 300 local and international suppliers. This will either be delivered on the farm or at Khula!’s distribution points.
- Khula Trader, where farmers can sell their produce directly to bulk buyers, retailers or intermediaries.
- The third tier is financing, where farmers are directly linked to financiers or funders.
Khula! won the MTN App of the Year in 2018 and was selected the winner of the KPMG Private Enterprise Tech Innovator in Africa competition in 2021. Khula! currently has over 7 000 active users.
Growing a partnership over years
Since 2018 Absa and Khula! have collaborated to introduce a standardised payment gateway that are facilitating the transactions on the app. Absa has also supported Khula! with enterprise development funding and has worked closely with its leadership since the company’s inception.
Kgalaletso Tlhoaele, head of Absa Enterprise Development, said Absa immediately saw potential in Khula!’s innovative approach. “We knew this would have a great impact on the way in which agriculture operates, particularly small scale farmers who are on their way to becoming commercial farmers. This allows them to enjoy benefits similar to that of established farmers.”
“When we initially met with the founding members of Khula! we were amazed at their ideas, energy and commitment to make Khula! work. This made it easy to buy into their vision and support them from an enterprise development perspective. We are very proud of the progress and growth of the business.” – Susan Marais, Plaas Media
