PMCR: Do existing climate innovations in South Africa comprise private markets for climate resilience? Not yet!
At the core of the Private Markets for Climate Resilience (PMCR) project is an enterprise-oriented market approach focused on the identification of climate resilience-enhancing products and services provided by the private sector. National teams across 6 countries have documented businesses and investments across 13 sectors, identifying knowledge services, innovative technologies, and pioneering approaches to data management, and good practices.
This is part of a series of short articles from the national teams intended to share with the broader PROADAPT audience their unique perspectives on both the challenges and opportunities confronting businesses in the face of climate change. (repost via PROADAPT)
Do existing climate innovations in South Africa comprise private markets for climate resilience? Not yet!
Anton Cartwright and Peter Johnston @Econologic
If humanity is going to survive 21st century climate change, then private markets - those complex institutions that marshal the supply of goods and services in response to people’s needs and wants - will have to begin delivering climate resilience.
Farmers in South Africa have long been exposed to weather variability but now find themselves incurring losses caused by perturbed climates. The response has seen farmers procuring (and sometimes providing for themselves) solutions that help them adapt to both new stresses and the intensification of old stresses. Many of the on-farm efforts rely on the farmers’ own initiative, and are effectively ‘hidden’ from banks, insurers and governments. Our research in the Private Markets for Climate Resilience project has revealed farmers in the South African wine and maize industries applying a range of innovations, including the use of satellite and drone technologies, the application of drought resistant maize cultivars and vine rootstocks, active soil management, and adjustments to the planting and harvesting process to accommodate climate impacts.
Collectively, the efforts would appear at first glance to have the makings of private markets for climate resilience. However, on deeper investigation it is clear that while the piece-meal efforts are each impressive in their own right, they do not yet add up to a market. Understanding ‘why’, is important for efforts that seek to mature the climate resilience market, and requires insight into markets themselves.
Not Quite Yet a Market…
We might expect the “rules of the game” that comprise markets (North, 1994, p. 361) to respond spontaneously to ensure less damage from changing climates. However as Mariana Mazzucato most recently has reminded us, all durable markets involve more than willing buyers and sellers trying to get ahead in the game: they depend also on public goods (in most instances provided by the State) including reliable information, trust, regulators that mediate the abuse of power, and codes of conduct that can be enforced when transgressed.
When state-coordinated and financed commercial agriculture was dismantled in 1996, so too were many of the public goods that had supported the expansion of South Africa’s agricultural sector. Progressive farmers pressed on, finding their own markets, doing their own research and creating their own extension and support services. While this laissez-faire system worked for a while, the need for short-term profits resulted in environmental degradation, a dearth of publicly available research on issues beyond the farm gate, and fragmented responses to risks such as fire, pests and drought.
If there is hope for climate resilience markets, it is because the worst drought in over 100 years has disrupted the current system, necessitating a more systemic response and reinforcing the need for new partnerships: academics have intensified their interaction with farmers, government officials and media outlets are providing more considered climate communication, and more systemic responses such as conservation farming practices are being implemented. Similarly, insurance companies, unable to underwrite all risk in the changing environment, have sought new partnerships with both government and with farmers.
It is off the back of these collaborative and programmatic efforts that existing initiatives might cohere, and the private sector can seek new markets and long-term opportunities. Consultancies such as Blue North have already emerged advising not only how much fertiliser to apply to maximise yields but how whole farming enterprises can be aligned to the underlying environment on which it depends. The precision farming programme, Fruitlook, reported a 21% increase in clients in the six months from August 2016, and is now supported by the provincial Department of Agriculture.
The intuitive appeal of resilience thinking lies in the ability to look beyond a single goal such as profit maximisation, and address entire systems. Private markets for climate resilience are crucial to surviving climate change but will have to go beyond the current fragmented efforts of desperate farmers. To succeed, multi-actor partnerships will be critical not only in scaling up the technologies and behaviour change required by climate resilient markets, but also in contributing to the trust, information, partnerships and oversight necessary for these markets to flourish.
Private Markets for Climate Resilience (PMCR)
Private Markets for Climate Resilience is an assessment of risks and opportunities for companies and investors. This project, established by the PROADAPT program in the Inter-American Development Bank in collaboration with the Nordic Development Fund, is the first major investment by Climate Finance Institutions to systematically evaluate the potential market for climate resilience solutions in the private sector. Focusing on transport and agriculture, this initiative seeks to examine current best practices and investigate the opportunities in this emerging sector by identifying the leaders that will shape the emerging market, highlighting products, services, tools and innovative processes, creating an information platform with emerging opportunities for investment, and identifying companies that are candidates for investment.
For more information about the PROADAPT Program, please contact Svante Persson, PROADAPT Program Coordinator at the Inter-American Development Bank, or Leena Klossner at the Nordic Development Fund, the main funders of the private markets work.