A John Deere 60-Horsepower tractor ready for transportation to Luwero
Farmers now have another option to drive their agricultural mechanization programs at a cheaper cost following the introduction of online tractor-hire services in the country.
The Pay-As-You-Go tractor financing model targets younger persons who may find it hard to either buy a tractor and its accessories or even hire one from the open market. Under the partnership between Heifer International, an agriculture promotion NGO and Hello Tractor, an online financing platform, beneficiaries in different parts of the country will be able to access John Deere tractors as and when they need them.
Tractors will be supplied to prospective owners under hire purchase terms with Heifer providing for the purchase, and the money can be recovered over agreed periods of time from the owners. The plan also enables farmers to hire the tractors from the owners, at a time when they need them, either for ploughing, planting, or harvesting and will return the equipment after the need is done.
Hello tractor offers software and tracking devices that allow farmers to book tractor services from local tractor owners via a mobile phone app. The mobile phone app, a US 1-million-dollar investment, according to the proprietors, helps the farmers, hire agents, and the tractor owner to meet.
“These purchases could make tractors accessible to thousands of smallholder farmers via the increasingly popular Hello Tractor leasing platform, sometimes referred to as Uber tractors,” Hello Tractor Chief Operating Officer, Folu Okunade says.
Heifer International says the program, “PAYG, Tractor Financing for Increased Agricultural Productivity in Uganda”, has already attracted the participation of youths in Dokolo, Kiboga, Amuria, Luwero, and Ngora districts.
According to the Food and Agriculture Organisation, FAO, there are about 200 tractors for every 100 square kilometers of agricultural land, but in sub-Saharan Africa, there are only about 27. Okunadu says this is a big deficit in the mechanization drive, and it is even worse for Uganda.
This is illustrative of a mechanization deficit that has a significant impact on farm productivity and local economies in a region where most people depend on smallholder farming for income. Hello Tractor is one of many new agri-tech start-ups emerging across the continent that are finding business opportunities in addressing this and other farming challenges.
“However, while private equity groups and large impact investors have provided more than 5 billion dollars for tech startups in Africa, very little of that has gone to young agri-tech entrepreneurs,” he says. William Matovu, the Heifer International Uganda Country Director indicated that Heifer International’s partnership with Hello tractor will generate new jobs, with each tractor providing a minimum directly generate four jobs.
These are the tractor owner, tractor operator, booking agent, and tractor mechanic, on top of accessing mechanized services easily. William Matovu, the Heifer International Country Manager is hopeful that this sharing system will help increase the active time of tractors, unlike the current situation where many tractors sit idle for most of the year.
John Otim, a farmer and tractor owner in Dokolo District says it costs Shillings 70,000 to 90,000 to plough an acre of land, depending on the location or terrain. The tractor’s total cost is 40,000 dollars or about 150 million Shillings, which is far beyond the reach of small and medium-scale farmers in Uganda.
The idea by Hello Tractor and Heifer Uganda is that the tractors can be acquired by cooperative societies or farmer groups, who can then charge reasonable fares from their members or other farmers, for the tractor services.
However, the offer of the higher purchase is also open to individual farmers. Okunade says according to the model they used to determine the viability, the tractor can be paid for in three to five years.
Some farmer group leaders expressed fear that it is hard for them to get financial services because of the nature of their services, and if they make losses in the course of paying for the services of tractors, they could run into problems.
This is because the payment for the hire services, for example, is expected to be got out of harvest revenues. However, John Makosya, a senior consortium officer at Agro-Consortium Uganda, assured them that that can be covered by insurance, which they help farmers to access.