© GIZ/Sumi Teufel

Climate change threatens African economies and micro, small and medium-sized enterprises led by men and women along agriculture value chains even though they are by no means responsible for this threat!

While sub-Saharan Africa accounts for less than 4% of global emissions it only receives 5% of the total climate finance outside the OECD.

Although emissions in Africa are low, there’s an urgent need to transition toward climate-smart technologies to tap into the agricultural sector’s potential and adapt to the challenges climate change poses for the sector and food security.

Innovation and investments can make African agriculture and agribusiness climate-resilient and climate-smart by building on African entrepreneurs and their professional organizations.

The Agri-Business Facility for Africa, the African Union Development Agency (AUDA-NEPAD) and the Organisation of African, Caribbean and Pacific States (OACPS) felt this was more than enough reason to set up the two-day online conference end of May.

47 high-level speakers from 34 organizations and companies from Africa, the Asia-Pacific region and the Caribbean had controversial debates and deep dives with a focus on three hot topics:

• Learning out of the boxes
• CO₂ and climate finance
• trAction to make climate-smart agribusiness a reality

© GIZ/Sumi Teufel

Africa and Climate-smart Agribusiness: Opportunities and Gaps

1. Carbon sequestration

Africa has a huge potential to remove greenhouse gases. The opportunities range from financial support through NGOs, professional organizations, and public-private partnerships over increased yields, employment, income and hence independence through agricultural carbon projects.

Carbon credits support alternative livelihood and sustainability. However, the continent is currently not positioned well to implement carbon sequestration and to benefit from carbon financing schemes due to:

• Gaps in technology access
• Problems with land ownership
• Weak understanding of the carbon market’s non-tangible nature
• The long and costly process of participating in carbon sequestration schemes
• Price fluctuations for carbon

2. Data — the new commodity

Focusing on data and information gathering is important to attract funding and the right partners!

Data on impacts, yields and carbon sequestrated, as a service, can generate greater benefits for micro, small and medium-sized enterprises than sales of produce as data represent a new commodity. Therefore, focusing on rural areas and their access to energy and technologies can lead to information and data financing. Data and information can assist investors including micro, small and medium-sized enterprises in assessing climate-related risks, seeing the impacts of their investments and showing proof of concept. Data are an opportunity!

To transform this opportunity into success, regional integration is key to avoiding silos and well-targeted subsidies could kick-start these innovations and scaling.

3. Finance for agriculture

The climate-finance gap for small-scale agriculture is enormous!

USD 10 bn are committed annually but the respective total financial needs are in the order of hundreds of billions per year. Only 1.7% of global climate finance goes to small-scale agriculture in developing countries and only 17% of Green Bonds – the major vehicle for climate financing – are attributed to agriculture. African agriculture is, hence, severely underfunded in mainly three dimensions: Finance for productive purposes, climate finance for adaptation and for removal of GHG!

The necessary small or medium loans are not provided so far because financial mechanisms are designed in boardrooms that are disconnected from the realities on the ground. The immense disconnect between micro, small and medium-sized enterprises and financiers is thus not surprising.

A big part of climate finance comes from the public sector, whereas private sector funding is missing. In the enabling environment that is needed, private and public stakeholders collaborate to invest in value chains. To improve, Africa can learn from Asia and implement a common taxonomy, promotion of collaterals like carbon certificates, fiscal incentives to financial institutions, and private sector involvement. On top, green-washing must be avoided by defining clear technical criteria and establishing transparent monitoring to encourage investments in the sector.

4. Policies that are implemented

Good policies are co-created and piloted before being taken to scale. Conducive policies exist and they need to materialize on the ground.

Regional and national agricultural policies in Africa need revision, for instance regarding a common taxonomy for climate finance, standards in agriculture, access to financial markets, identification methods of rural nonformal enterprises through their organizations, and land (use) rights.

Local and regional value chains must not be neglected as they are key to ensure food security.

5. Knowledge, skills and institutions for empowerment

Altogether, tremendous needs for knowledge, skills, and institutional capacities emerge.

National and regional institutions, national advisory agencies, and cooperation are key to building individual and institutional capacities and skills for the resilience of micro, small and medium-sized enterprises as well as access to carbon markets and finance. To transform data opportunities into impacts and income, we need to:

• Reduce transaction costs
• Build up skills to generate, aggregate and trade data
• Improve risk mitigation and insurance access

Access to learning infrastructure and methodology on climate-smart agribusiness for practical training such as small-scale solar-powered irrigation, conservation agriculture, and water harvesting and distribution needs to be ensured.

Furthermore, training institutions must continue adopting approaches to enhance the understanding of climate change related policies to find opportunities for their graduates.

© GIZ/Sumi Teufel

Collective global action is needed – now!

The conference concluded:

• Faster action geared towards adaptation is possible and needed.
• Focusing more on entrepreneurs for land restoration is becoming even more important to tackle the problem of degraded land in Africa.
• We need to promote women and youth as decisive change agents.
• We need to develop viable market and business models, ensure a positive return to loan and debt financing for nature-based solutions and secure access to finance for micro, small and medium-sized enterprises.
• We must empower agricultural producer organizations to take more control of value chains and to build up skills for resilient production and processing practices.
• We need to provide holistic finance and data solutions including data ownership and ensuring returns on it for micro, small and medium-sized enterprises as owners.
• Fostering direct actions for cooperatives and producers to adapt services in the context of climate change is necessary.
• Micro, small and medium-sized enterprises are NOT too small to be considered – to the contrary: We need to put more trust in African entrepreneurs as important climate change agents and must assist them in increasing their visibility.

Additional information

Recordings are available at ABF (former SSAB-FBS channel) – YouTube

Contact

Annemarie Matthess, Head of Programme (annemarie.matthess@giz.de)
Veronika Kling, Component Lead (veronika.kling@giz.de)
Julika Stauber, Advisor (julika.stauber@giz.de )