Sustainable energy for agricultural production
Sustainable energy for agricultural production
Business Model Description
Provide renewable energy systems that replace expensive grid electricity in the agricultural sector.
Expected Impact
Increase industrial and small-scale farmers' access to reliable and cost effective energy sources and improve food security.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- South Africa: Western Cape
- South Africa: KwaZulu-Natal
- South Africa: Limpopo
- South Africa: Mpumalanga
Sector Classification
Food and Beverage
Development need
To reach its targets for SDG 2 - Zero Hunger, South Africa requires sustainable and resilient food production, equal access to land and technology, and access to markets across the agricultural value chain.(2) Three million households still ran out of money to buy food by the end of 2016, the large majority (90.8%) of whom were black South Africans. Further, there is a lack of nutritious food evidenced by the prevalence of underweight children under 5 years old in South Africa (16% in 2017).(1),(2)
Policy priority
Investments in sustainable agriculture will increasingly play a significant role in securing food sources in responsible ways, reducing climate change and protecting scarce natural resources (particularly arable land and water) for generations to come.(7)
Gender inequalities and marginalization issues
During April 2020, the estimated nominal cost of the National Agricultural Marketing Council's (NAMC’s) 28-item urban food basket increased by 1.5%. This occurred in an environment where women are losing their incomes the most, and when children are at home and not benefitting from the school-feeding scheme.(28)
Investment opportunities introduction
The sector is fairly resilient to economic shocks, has high potential for job creation particularly in emerging and rural farming, has large multipliers due to its extensive links to the rest of the economy, and is important for export led growth.(4)
Food and Agriculture
Development need
South Africa's agricultural sector plays a significant role in food security, job creation, international investment and exports: 95% of local food is produced by 3% of large industrial farms, 5% is produced by small scale farmers.(11) With a significant rise in the cost of energy and insecurity of supply, commercial farmers and agri-businesses are becoming increasingly pressured from export markets and consumers to reduce carbon emissions and to offer low-carbon agricultural products.
Gender inequalities and marginalization issues
37.2% industrial farm workers are women.(9) 70% of smallholder farmers are women.(9) Providing targeted support to current female food producers, especially in the informal agricultural sector, is necessary to prevent them from exiting the sector.(28)
Agricultural Products
Pipeline Opportunity
Sustainable energy for agricultural production
Provide renewable energy systems that replace expensive grid electricity in the agricultural sector.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
The market for renewable energy in agriculture is estimated to be 90 megawatts (MW) in terms of installed capacity, a market of between R945 million and R1.5 billion in 2019.(13)
South Africa recorded the fastest growth solar photovoltaic PV installations in 2017 globally. An estimated 10% of all solar PV installations are in the agricultural sector, and the business case is well known to the industry.(13)
The total installed small-scale embedded generation (SSEG) capacity for solar PV in South Africa in 2019 was 900 megawatt peak (MWp), 10% of which is estimated to be in the agriculture sector.(13)
Indicative Return
15% - 20%
Returns on small-scale installations are expected to be between 11% and 21%, based on stakeholder consultations.(26)
Investment Timeframe
Medium Term (5–10 years)
According to the GreenCape Sustainable Agriculture 2020 Market Intelligence Report, the investment timeframe for investments in renewable energy in agriculture is short to medium term.(13)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Capital - Requires Subsidy
Business - Business Model Unproven
Impact Case
Sustainable Development Need
In recent years, South Africa has experienced a significant rise in the cost of energy (electricity and diesel/petrol) and insecurity of supply as Eskom struggles to keep up with the rising demand.
At the same time, commercial farmers and agri-businesses are becoming increasingly pressured from export markets and consumers to reduce carbon emissions and to offer low-carbon agricultural products.
Detrimental environmental effects associated with conventional farming, and climate change are forcing the sector to adopt more sustainable practices to increase its resilience.(9),(11)
Gender & Marginalisation
37.2% industrial farm workers are women; 70% of smallholder farmers are women (9)
Expected Development Outcome
The uptake of renewable energy in agriculture is driven by opportunities to replace expensive grid electricity (Eskom) with relatively ‘cheap’ alternative energy, and the growing ability to connect and feed into the grid. Specifically, there are solar PV opportunities.(13) Rising input costs for energy (particularly electricity and diesel), fertiliser, and pesticides. Decreasing costs of cleantech such as solar panels.
Investments in renewable energy (such as, solar photovoltaic) in the agricultural sector has the potential to: increase access to a reliable and cost effective source of energy, increase climate smart agriculture and improve food security.
Gender & Marginalisation
Provide targeted support to current female food producers to prevent them from exiting the sector (28)
Primary SDGs addressed
2.4.1 Proportion of agricultural area under productive and sustainable agriculture
N/A
The Agricultural Policy Action Plan (2015–2019), the Integrated Growth and Development Plan (2012), and the Strategic Plan for the Department of Agriculture Forestry and Fisheries (2015–2020) provide the overarching framework for strengthening the government’s commitment to support smallholder producers.(2)
12.2.1 Material footprint, material footprint per capita, and material footprint per GDP
Material footprint per capita (tonnes): 8.5 in 2017. Material footprint index (value): 0.945 in 2017.(29)
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Indirectly impacted stakeholders
Public sector
Outcome Risks
Access to solar installation is conditional on access to finance: There is a risk that lower-income, unbanked segments are left out, thus increasing inequalities in energy access.(25)
Impact Risks
Stakeholder participation risk: Besides racial lines, this may disproportionately affect women, who represent 70% of small-scale farmers.(21)
Impact Classification
What
Sustainable energy technologies in the agrifood sector
Risk
Low risk
Impact Thesis
Increase industrial and small-scale farmers' access to reliable and cost effective energy sources and improve food security.
Enabling Environment
Policy Environment
The Department of Agriculture, Land Reform and Rural Development (DALRRD) and the Department of Environmental, Forestry and Fisheries (DEFF) are national entities responsible for overseeing and supporting the development of the agricultural sector in South Africa. Their mandate is to address agricultural policy distortions of the past, with reformative policies that create an enabling agricultural sector for the future.(13)
Financial Environment
Financial incentives: A range of general and sector-funding solutions and incentives is available to investors, manufacturers and service companies. Several available databases are: GreenCape Finance Desk database (15); Green Finance Database (14); government funding and incentives database (16); Finfind database (17); AlliedCrowds database (18).
Fiscal incentives: 12L Tax Incentive under the Income Tax Act No. 58 of 1962 (Income Tax Act) provides a tax allowance for businesses to implement energy efficiency savings. Energy efficiency savings allow for a tax deduction of 95 cents per kilowatt hour saved on energy consumption.
Other incentives: In the Western Cape, 22/25 municipalities allow small-scale embedded generation (SSEG) tariffs when feeding into the grid.(13)
Regulatory Environment
National Environmental Management Act 107 of 1998 (NEMA 1998): This Act is the overarching legislative framework for environmental governance.
South African Carbon Tax Act No.15 of 2019: Under this Act, farmers could be paying both direct and indirect carbon taxes from 2022 onwards.
Marketplace Participants
Private Sector
All Power, All Solar Renewable Energy Solutions, Fountain Green Energy, Genesis Eco-energy, JLinx, Power Africa and SBS Solar
Government
Western Cape Department of Agriculture, Department of Trade and Industry, Technology Innovation Agency (TIA)
Multilaterals
InvestSA One Stop Shop, Wesgro,
Non-Profit
Wide Fund for Nature (WWF), Blue North’s Confronting Climate Change (CCC), South African National Energy Development Institute (SANEDI), GreenCape, South African Renewable Energy Business Incubator, South African Renewable Energy Technology Centre
Target Locations
South Africa: Western Cape
South Africa: KwaZulu-Natal
South Africa: Limpopo
South Africa: Mpumalanga
References
- (1) South African Government (2019). South Africa Voluntary National Review: Empowering people and ensuring inclusiveness and equality. https://sustainabledevelopment.un.org/content/documents/23402RSA_Voluntary_National_Review_Report___The_Final_24_July_2019.pdf
- (2) Statistics South Africa (2019). Sustainable Development Goals: Country Report 2019 - South Africa. http://www.statssa.gov.za/MDG/SDGs_Country_Report_2019_South_Africa.pdf
- (3) Statistics South Africa (2019). Towards measuring the extent of food security in South Africa. http://www.statssa.gov.za/publications/03-00-14/03-00-142017.pdf
- (4) Business for South Africa (2020). Post COVID-19: A new inclusive economic future for South Africa – Delivering an accelerated economic recovery strategy.
- (5) Deloitte (2020). How COVID-19 has affected South African Grocery Retail Consumer Sentiment: Consumer insights pre- and during lockdown. https://www2.deloitte.com/content/dam/Deloitte/za/Documents/za_Deloitte_BrandsEye_Consumer-Sentiment-report_May%202020.pdf
- (6) Nakedi, L. (2020). Project Steering Committee Meeting. April 30 2020.
- (7) Kushke, I.(2020). Sustainable Agriculture Market Intelligence Report. https://www.greencape.co.za/assets/AGRICULTURE_MARKET_INTELLIGENCE_REPORT_WEB.pdf
- (8) International Labour Organization (2015). Farm Workers’ Living and Working Conditions in South Africa: key trends, emergent issues, and underlying and structural problems. https://www.ilo.org/wcmsp5/groups/public/---africa/documents/publication/wcms_385959.pdf
- (9) Solidaridad (2019). Linking women farmers to high-value markets in South Africa. https://www.solidaridadnetwork.org/solidaridad-stories/linking-women-farmers-to-high-value-markets
- (10) Institute for Race Relations (2016). From land to farming: bringing land reform down to earth.
- (11) World Wide Fund for Nature (2017). Supporting smallholder farmers to adopt sustainable land use and production practices factsheet. http://awsassets.wwf.org.za/downloads/WWF_Smallholders_Fact_Sheet_D6_FINAL_6Jun17.pdf
- (12) World Wide Fund for Nature (2015). Reconnecting South Africa’s food systems to its ecosystems. https://wwfafrica.awsassets.panda.org/downloads/wwf006_ffl_report_low_res.pdf?13821/farming-facts-and-futures
- (13) GreenCape (2020). Sustainable Agriculture Market Intelligence Report. https://www.greencape.co.za/assets/AGRICULTURE_MARKET_INTELLIGENCE_REPORT_WEB.pdf
- (14) GreenCape (2020). Green Finance databases. https://www.greencape.co.za/content/focusarea/green-finance-databases
- (15) GreenCape (2020). GreenCape Finance database. https://www.greencape.co.za/assets/Uploads/GreenCape-Finance-Database-v6.xlsx
- (16) GreenCape (2020). Government Funding and Incentive Booklet. https://www.greencape.co.za/assets/Uploads/Government-Funding-and-Incentive-Booklet.pdf
- (17) FinFind (2020). FinFind. http://www.finfindeasy.co.za/
- (18) AlliedCrowds (2020). AlliedCrowds. https://alliedcrowds.com/
- (19) Western Cape Government (2018). State of Environment Outlook Report for the Western Cape Province Land. https://www.westerncape.gov.za/eadp/files/atoms/files/03_Land.pdf
- (20) Food and Agriculture Organization of the United Nations (2018). Investing in Sustainable Energy Technologies in The Agri-food Sector. http://www.fao.org/3/i9077en/I9077EN.pdf
- (21) Flammini, A., Bracco, S., Sims, R., Cooke, J. and Elia, A. (2018). Costs and Benefits of Clean Energy Technologies in the Milk, Vegetable and Rice Value Chains. http://www.fao.org/3/i8017en/I8017EN.pdf
- (22) Western Cape Government (2018). Renewable Energy Case Study. https://www.greenagri.org.za/assets/documents-/SmartAgri/Case-Studies/RENEWABLE-ENERGY.pdf
- (23) Sims, R., Flammini, A., Puri, M. and Bracco, S. (2015). Opportunities For Agri-Food Chains To Become Energy-Smart. http://www.fao.org/3/a-i5125e.pdf
- (25) Masiwa, D. (2020). Affordable solar energy to propel large and small-scale farmers. Food for Mzansi. https://www.foodformzansi.co.za/affordable-solar-energy-to-propel-large-and-small-scale-farmers/
- (26) Interview with Jack Radmore, GreenCape, 27 July 2020.
- (28) United Nations Development Programme (2020). South Africa Report 2020: Covid-19 Rapid Emergency Needs Assessment for the Most Vulnerable Groups. https://www.za.undp.org/content/south_africa/en/home/library/rapid-emergency-needs-assessment.html
- (29) United Nations Development Programme (2020). Human Development Report 2020. https://www.ng.undp.org/content/nigeria/en/home/library/human_development/the-2020-human-development-report.html