Harnessing Mega-Trends for PMCR Growth in South African Agriculture
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.
photo courtesy of Peter Johnston
Harnessing Mega-Trends for PMCR Growth in South African Agriculture
Anton Cartwright and Peter Johnston @Econologic
Efforts to enhance resilience to climate change impacts have become an increasingly important part of business strategy, drawing together notions of risk management, climate change adaptation and transformative development. Resilience efforts require attention to the systemic nature of problems and their root causes and must avoid "fixes that fail" – solutions that address a specific problem but merely pass the risk on to someone else or increase the chances of new and bigger problems emerging. Private companies are rising to the challenge as risk management is moving to the forefront of priorities, migrating from compliance departments to the C-Suite (see Interface carpets and Unilever for reported examples). Progressive CEOs have been aided in embracing resilience thinking by new products, technologies and heightened global awareness.
This global business trend towards sustainability has created new opportunities in South Africa's agricultural sector for start-ups offering precision farming technologies and advice, new soil water monitoring devices, solar-powered pumps, rainwater harvesting systems and cropping and animal husbandry activities that enhance soil carbon. Farms such as Boschendal and Spier have been quick to embrace new conservation agriculture approaches as part of their brand identity and farming practices.
Unlike apartheid's Organised Agriculture, and most development and climate responses since South Africa's democracy in 1994, these initiatives are being tailored and financed by the private sector. They are driven by necessity but also generate a financial return as soils that retain more water and support healthier crops also reduce input costs, and open up new markets.
These 'private markets for climate resilience' (PMCR), nascent as they are, afford many exciting opportunities but have to be further developed if they are to graduate the existing pockets of climate resilience to the South African agricultural sector. If they are to provide more than narrow farming 'fixes', they will need to combine elements beyond the farm gate. In particular, they will need to harness three of the defining mega-trends in South Africa:
- Urbanisation: Two thirds of South Africa's population live in urban areas, and urban populations continue to grow rapidly. Ensuring enough food and water for growing urban populations while retaining the integrity of watersheds and soil quality, will not only drive PMCR, but must also shape market development. In the process, PMCR in South Africa's agricultural sector will have to pay closer attention to socio-economic inequality, social stability and poverty and PMCR will have to enable improvements in these parameters as an essential component of supporting climate resilient agriculture.
- Financialisation: Banks and insurers are an increasingly important part of South African farming and civilian life. The country's finance sector has been quick to enter markets left by the withdrawal of state subsidies in 1996. Aligning financial and insurance incentives with the systemic goal of climate resilience is crucial for PMCR, and requires the pricing-in of new non-tangible assets and liabilities, including greenhouse gas emissions, community support and the integrity of water catchments.
- Big data and ICT: Through advances in information and communications technologies, farmers in South Africa have access to more information and are able to generate more data than ever before. PMCR will depend on this data, and farmers will be required to find ways of sharing their on-farm information without compromising their competitiveness. It is the aggregate data from whole regions and sectors that will enable PMCR to design systemic solutions, including the transport networks that can accommodate shifting production patterns and continued access to food.
Had resilience actions begun in 1994, it might have been possible to address the environmental, social and corporate dimensions of climate resilience discretely and in sequence. However, after twenty four years of relative inaction, time is a luxury we can no longer afford and climate change must now be addressed concomitantly with other global risks. Integrated solutions provide the best solutions, but are only be possible if PMCR emerge quickly and are aligned to the broader social, economic and environmental systems in which agriculture operates. This, in turn, will require PMCR to connect with, and harness, national mega-trends in order to mature and expand. The difficulty in making these connections lies in the need to engage and connect with their complex social and environmental context. Farmers and rural support enterprises can no-longer 'escape to the farm', no matter how appealing as this might appear.
Where PMCR are able expand in a manner aligned with critical mega-trends, they will safeguard food security, improve trade and employment, facilitate better communication and stimulate small business growth, ultimately boosting the myriad value chains that comprise the agricultural sector. Such a scenario would not only go a long way to reducing climate change risks, it would use climate change risk as a catalyst for market reform.
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.