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Surprise! Esoko’s Agricultural Market Prices Are Private Sector Failures

By Wayan Vota on January 4, 2018

esoko market prices

We’ve all heard of Esoko, the ICTforAg company specializing in market prices for farmers. Starting in Ghana in 2007, then expanding across West Africa and beyond, it quickly became a donor-darling by promising an African ICT success story with:

  • Market prices that could alleviate smallholder farmer poverty.
  • Technology that could bridge systematic transportation failures.
  • A private-sector for-profit model that didn’t rely on donor grants.

I personally remember a leading USAID expert on ICTforAg solutions singing Esoko’s praises as a sustainable business. She was adamant that we needed more Esoko-type companies that could succeed as private businesses and less donor-supported projects that focused on public goods.

Guess what: Esoko was never financially sustainable!

That is why I was shocked to read Hillary Miller-Wise share the real truth behind Esoko’s financial position in a recent NextBillion post:

The flagship product – market prices – was losing money. The costs of Esoko’s model for market price collection, which entailed enumerators in the field, was too high for the scale that Esoko had achieved, even though many considered Esoko to be the leading example of a scaled m-agri solution.

In fact, Esoko’s original business proposition to share market prices, ag tips and weather forecasts was such a financial loss that at the end of 2016, Esoko stopped selling those products as stand-alone services.

This reminds me of the largest lie in ICT4D: fishermen using mobile phones for market prices.

Esoko is no longer. Welcome Tulaa and Insyt

Luckily for Esoko, they were able to “pivot” and survive by breaking the company into two separate businesses:

  • One team started doing mobile data collection contracts to support UNICEF and Ghanaian government ministries, which led to the survey company, Insyt.
  • Another team developed financial services to help farmers save and borrow for inputs, in addition to selling their crops, which led to the m-commerce business, Tulaa.

Esoko Networks Ltd. is now a holding company with shares in both businesses, but there are no business activities under the Esoko brand.

We should all be more like Esoko

While it may bring faint satisfaction to learn that a donor-darling didn’t make it, we should be cautious in our celebrations. Esoko has multiple reports showing its effectiveness, and yet it lasted just a decade in development, while other organizations, with much less empirical evidence of success, have survived for decades.

Obviously, our industry has perverse incentives that reward success unevenly.

In addition, Esoko does show that African-based ICT companies can compete, innovate, and survive on a global level. Expect more and better ones to be coming for a larger share of development dollars in the future.

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Written by
Wayan Vota is a digital development entrepreneur and the co-founder of ICTworks. He also co-founded ICT4Djobs, ICT4Drinks, Technology Salon, JadedAid, MERL Tech, ICTforAg, Kurante, OLPC News and a few other things.
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15 Comments to “Surprise! Esoko’s Agricultural Market Prices Are Private Sector Failures”

  1. Isabelle Duston says:

    Esoko’s conversion is a private sector success, which is worth celebrating. The team learned new skills and gained a better understanding of the market’s need through the initial endeavor, and then evolves. In the private sector winning does not necesseraly means achieving the initial goals. In the non profit sector the flexibility to adapt and change the goals does not exist.

    • Wayan Vota says:

      There is a reason I quoted “pivot” – the business euphemism for “well that idea failed, what else can we try?” We should all be more flexible in our business models, but I dislike the efforts to minimize the reality of failure.

  2. Mark Davies says:

    Just a few clarifications… Esoko only got about 20% in donor grant financing over the years… most income was generated through private equity investment and sales. Yes, it’s true we weren’t profitable, but that’s because we continued to invest and expand into new products and new markets.. Twitter and Amazon are other examples where long-play private sector companies invest in the future and evolve. Esoko could have been profitable selling content packages like prices to development programs and organizations… but our model had always been to avoid them as a client base and have direct retail sales to agric businesses and individual farmers. This is a choice any service provider weighs when serving the agric industry in Africa.

    Esoko’s still alive and still selling content packages, but is now expanding (through sibling companies) to input financing solutions because the solution for agriculture in all markets is complex and holistic… looking at supporting inputs (I regard information as an input) AND the output market. This is probably too much for any one private sector play — and why governments take on agric subsidies in developed markets to de-risk the model for farmers (USA/Europe).

    I think the bigger lesson here is how do we improve the story-telling in the Sector (Wayan, you’re an inspiration in this regard). Everyone’s looking to tell a good story in Africa and this can often end up being more damaging than helpful. We’ve always tried to be honest in the Esoko story. My personal feeling is that real transparency and targeted/suitable services will only emerge when we can truly shift the market from Washington to rural communities. Services go where the money is… as rural communities build wealth and find ways to pay, then the market will bend to serve them more appropriately.

    Mark (Esoko Founder)

    • Wayan Vota says:

      Mark, thanks for more of the backstory.

      Question: How much of those sales were to donor-supported programs? I get that you didn’t seek support directly from USAID, et all, though my understanding is that much of your sales were to organizations that themselves were donor supported (ie. programs like MISTOWA).

      • Mark DaviesM says:

        yes, almost all sales were to donor-supported programs. This was our great disappointment in the end. The reason we couldn’t get farmers to pay directly was complex… there were clearly impacts. But it just never seemed enough to trigger a kind of viral adoption at village level. Ability to pay, literacy, access to markets, economic motivation… a mix of anthropology and economic to deconstruct it all. I don’t see it so much as a pivot. I think this is relatively normal for private sector in complex/challenging environments. I wouldn’t see prices (which was never our only or original product — but we were always type-cast that way) as a failure… it was one component of a complex value-proposition that we continue to offer today. My sense is that Esoko is realizing that single service plays won’t work, at least not now, and you’ve got to somehow build out an open architecture to connect communities with multiple services. At some point the ecosystem will exist, and then prices etc. will be viable standalone services.. but not when you have to acquire the customers, build the technology, create the content etc etc. This is the great challenge facing all service providers today… you’ve got to do everything. This makes it mostly unsustainable. More mature markets allow service providers to be more targeted and specialized, and ultimately profitable.

        • Wayan Vota says:

          “yes, almost all sales were to donor-supported programs. ”

          Mark, this is a key point that frustrated me greatly with USAID staff in particular, who always held up Esoko as the model we should all emulate. They would always say “see, Esoko doesn’t take AID money, and does development” conveniently forgetting that Esoko was still donor-funded, just “washed” through their implementing partners, who added 20-40% to the cost in the process.

          And fully agree that this is disappointing to everyone involved. Like I said in the post, incentives are perverse – for farmers and those trying to help them.

    • Wayan Vota says:

      Personally, I don’t differentiate client sales and pre-IPO investor sales as revenue streams. Both are selling something (service, hope). Facebook pre-IPO, is a great case for the former. They only really started focusing on ad revenue after IPO

      Amazon is a good example of what I think you’re talking about. They invest almost all revenues back into the company’s services, so they only show a tiny (if any) profit, but their revenue is stunning, and could become massive profit the day they stopped investing.

    • Awuni Henry says:

      Well articulated!

  3. Wayan Vota says:

    Interesting… Hillary Miller-Wise has updated her post along the lines of Mark’s comments above:

    “Market prices, for which Esoko was probably best known, were working in Ghana but the product was losing money at a corporate level. The costs of Esoko’s model for market price collection in some markets were too high for the scale that Esoko had achieved at the corporate level. While the subsidiary in Ghana achieved profitability, the overall company was still operating at a loss driven largely by expansion into new markets and technologies.”

    • Mark DaviesM says:

      actually Hillary updated soon it after the original post when others in the company were able to contribute. Esoko is alive and well as a company, but has scaled back its ambitions geographically (focusing on Ghana where the service was most mature and profitable) and focused on growing out its sibling products/companies. At some point the mix of services was so complex, it just made sense to split the companies/brands.

  4. My name is Daniel, CEO of Esoko Ghana and I would like to reiterate some of the points made here. As Mark, our founder pointed out, Esoko is still running and selling market prices alongside the new products that have emerged along our journey. One of such products is Insyt -an off-grid mobile data collection service.The Esoko brand is not retired and has largely being successful in Ghana and the broader West African sub-region delivering key services including market prices.
    Market prices and its associated rural market enumeration services constitute just about 10% of our cost and it’s wrong to attribute the below target financial performance at the group level to the setting up and dissemination of market prices.
    Even here, Esoko Ghana as an entity within the Esoko group has been profitable and it’s still profitable to date. Esoko has spent over ten years successfully innovating at the forefront of mobile agriculture solutions for smallholder farmers across Africa and we will continue to listen to the market, particularly , the smallholder farmers that we seek to serve . Our journey thus far, although has been bumpy at times have largely being successful and it’s important our partners and all those who seek to report on our challenges do so with a balanced view of the context and all variables.

  5. Nes Barring says:

    A ‘revolutionary’ startup that is touted as one that will change the smallholder farmer lives for 10 solid years fails spectacularly and you are here praising that. In its place, 2 other companies are started that will hopefully go for some other ten years (with millions of dollars in grants and private equity from social impact investors) before definitely sinking. These companies are founded by professional development aid bounty hunters who live off donor aid, grants and socent capital. Please stop glorifying deceit.

  6. Pivoting is a very successful private sector approach that works on a discovery and re-align approach with an underlying design thinking frame. This stuff is what is driving start-ups and making some of them competitive. eSoko seems to have appreciated this and was the evaluation done in Silicon Savanah (or Valley if you like) it was going to be a case study on how to succeed and the title of this would have been very different! Anyway thanks for reporting the success of eSoko albeit under a heading that makes sense only to the non-profit sector (though there seems to be disagreement there as well).

  7. ‘You have to kiss a lot of frogs before one turns into a princess’

    The failure rate in new buisnesses is especially high. And even higher in using new technology coupled with a totally new business model.

    We should be grateful to Mark Davies & the Esoko team for being brave enough to try, and for generating important lessons that increasethe likehood of successes going forward.

    As part of Grow Asia’s on-going Digital Learning series we had Amit Mehra to make a presentation on RML, one of the very few commercially successful digital applications specially targeted on supplying the information needs of small scale farmers. And with over 3 million subscribers.

    The purpose was to learn from someone’s who had made a success out of digital farming information. Specially to learn from him on what he had learned, what had worked, and what were the mistakes that others following a similar path need to avoid.

    I have been following RML closely from its inception in India in 2007, when as a World Bank agriculturist in South Asia, I commissioned a study of the effect on farmers of receiving 4 daily SMS messages. This had shown that when farmers we selling to visiting traders at the farm gate, having prices information lifted their prices by between about 8 and 9%.

    I have set out below what were my personal take aways as to the success factors, the mistakes to avoid.

    One serial investor in digital businesses, Bill Goss, did a presentation in TED talks on what were his distilled learnings as to critical success factors. Top of the list was timing.

    RML was in many ways ahead of the wave, initially working with SMS messages to feature phones. But where able to hang on long enough for two important factors to come to their rescue. The first was the rise of the smart phone, very much reducing the unit cost of information delivery. And secondly, the emergence of a cadre of younger, more technologically savvy farmers who valued information, and were prepared to pay for it. For new entrant to the market, the technology and the tech savviness of farmers is now so much more advanced.

    The second was a more universal truth. The single common theme in all successful people is…. persistence, or sometimes expressed as ‘grit’. RML was no overnight success. It took about 8 years before it started covering costs. In the meantime, staff and managers had to take salary cuts, there was an on-going stream of challenges, disappointments and cashflow crisis to deal with. But they did not give up.

    The third lesson was their concentration from the very beginning to find out what their customer really wanted. Rather than being focused on the technology. This taught them that local weather forecasts, technical information, timed to match the stage in the crop cycle, and market information were all key asks. But only for the crops, locations, and markets that they specifically ask for. A process which continues today, with constant refinements of their operations, content, and bringing in new products, and information to the farming community. All in the light of feedback loops that the company have in place.

    Amit, in his talks highlighted many lessons. The importance of aiming to get the business model right before attempting to go to scale. The criticality of understanding the unit costs. How being frugal in the early years is important in giving more breathing space before the next tranche of funding materialises. The importance of stickiness, i.e. to enable farmers to get into the habit of using his application and RML’s information sources. And what a dangerous distraction for his core business were all the accolades and awards that RML received in the early years. And, ultimately, the value of selling the application and its information services through other businesses. For whom better informed and more professional farmers would underpin their business model. An example being agricultural banks providing the RML services for its loanees.

    A great learning event, in the continuing Grow Asia digital learning series.

  8. Wayan Vota says:

    Esoko announces restructuring to focus on m-commerce and data collection

    Esoko, a pioneering social enterprise in the field of mobile agriculture, is pleased to announce that it has restructured the company and spun-off its m-commerce and data collection businesses into two new companies. This new structure allows for greater focus and growth in divergent products developed by Esoko.

    Tulaa, the new mobile commerce business, enables farmers to access inputs, finance, information and markets in a virtual marketplace. Incubated inside of Esoko and launched in Ghana in 2016 and Kenya in 2017, the solution uses mobile technology and mobile money to enable farmers to save and borrow to purchase inputs, receive tailored agronomic advice, and market their crops at harvest time. Headquartered in Kenya, Tulaa will focus on growing its market share in Ghana and Kenya initially and eventually expanding into other markets. Tulaa is led by Hillary Miller-Wise, the former CEO of Esoko Networks Ltd.

    Insyt offers tablet-based data collection services to agencies seeking to target and serve rural communities. With powerful off-grid technology, and a well established methodology for deploying teams in the most remote communities, Insyt helps organizations convert from paper, thus reducing cost, time and errors in targeting beneficiaries and clients. Insyt focuses on social protection services and agricultural programs, and includes additional services such as payments, biometric verification and content delivery. Inyst is based in Ghana serving all of West Africa, and led by Daniel Asare-Kyei, the former MD of Esoko Ghana.

    “The Board of Esoko Networks is excited about the new direction as it will allow the two companies to focus and grow,” said Charlotte Ward, Chairman of the Board of Esoko Networks. “We know that both companies will thrive going forward.”

    Esoko Networks Ltd. will continue to support both Insyt and Tulaa as a shareholder.