Investing in Sustainable Agriculture
The Woke Money can play a significant role in unlocking the agricultural sector's developmental potential, and its many socio-economic multiplier effects.
In a previous edition of the Woke Money newsletter I spoke about how agriculture is a great ESG-aligned investment opportunity. I reflected on how the continent has a large and growing population, with demand for food expected to increase significantly in the coming years. Companies that are working to increase crop yields and improve food security through sustainable farming practices (sustainable agriculture) will be a good fit for ESG investors.
Sustainable agriculture refers to a form of farming that is environmentally responsible, economically viable, and socially just. This type of agriculture seeks to balance the needs of the environment, the economy, and society, ensuring that the land remains productive for future generations. In South Africa, sustainable agriculture is becoming increasingly important as the country faces challenges such as declining soil fertility, water scarcity, and the effects of climate change.
Farmers do not read about climate change, they feel it. - Wandile Sihlobo.
One of the key practices of sustainable agriculture in South Africa is the use of conservation tillage, which helps to reduce soil erosion and conserve soil moisture. This involves reducing or eliminating tillage, which is the process of breaking up the soil in preparation for planting, and instead using cover crops or crop rotation to maintain soil fertility. Conservation tillage can also help to reduce the use of synthetic fertilizers, which can have negative environmental impacts, and to promote biodiversity by encouraging the growth of beneficial insects and other organisms.
In South Africa, the government has been working to promote sustainable agriculture through various initiatives, such as the Integrated Production of Fruits and Vegetables project, which provides support to small-scale farmers in the form of training and technical assistance. The government has also established a number of research institutions, such as the Agricultural Research Council, which are focused on developing new technologies and best practices for sustainable agriculture.
In addition to government initiatives, there are a number of private organizations in South Africa that are working to promote sustainable agriculture, including NGOs, community-based organizations, and social enterprises. For example, the Wildlife and Environmental Society of South Africa is working to promote agroforestry, while the Permaculture Research Institute of South Africa is focused on developing and promoting sustainable farming practices, such as the use of natural pest control and the integration of livestock and crops.
A key challenge facing sustainable agriculture in South Africa is the need to find ways to scale up sustainable practices in order to have a greater impact. This requires not only providing support to individual farmers, but also addressing broader systemic issues, such as land reform, access to finance, and the availability of markets. To address these challenges, the government and private organizations are working to develop partnerships and collaborations that can help to scale up sustainable agriculture across the country.
Whether we overcome the many challenges facing sustainable agriculture will be important to the growth of the sector, not only in South Africa, but on the continent as a whole. For the first episode of the Woke Money Podcast (to be published with next week’s newsletter - 20th of February 2023), I spoke to Wandile Sihlobo. Wandile is the Chief Economist at the Agricultural Business Chamber. In our chat he stresses the importance of the sector to our economy.
People would say it's a small share of GDP - 2.5%. But if you look into the backward and forward linkages of that, and then, that takes the number to 9% of our economy. Which is really quite significant when you think about those. But also in employment. It's an important sector because you have about roughly 862,000 South Africans in the primary sector. You think about agro-processing, it's roughly around about 450,000 people that are there. So you you speaking about the substantive part of the [economy].
Agriculture is an important sector, and where the Woke Money can play a significant role in unlocking its developmental potential and its many socio-economic multiplier effects. Untapped business opportunities are about in Africa’s agricultural sector and sustainable agricultural practices are going a long way in demystifying many of the sustainability-related risks associated with it, especially in primary production.
Traditionally an impact investing category, investments made in sustainable agriculture have remained relatively low compared to other impact investment categories like; sustainable energy, affordable housing, and health. As the world population grows at an alarming rate, and as we raise more people out of poverty, there is not only a higher demand for food, but higher priced foods like meat and dairy products. But as the average age of farmers rises, and output gains of the “green revolution” have reached their maximum, we are forced to seek smarter solutions to safely and sustainably produce more agricultural output to feed the world.
According to the Sustainable Agriculture Market Intelligence Report, published by Green Cape (2022), sustainable agriculture has a bright future for various key market opportunities for entrepreneurs in the sector and investors. Opportunities related to technologies and practices that will increase input resource efficiency in primary production, benefit the environment, increase resilience to climate change and attract international investments.
