The 2023 African Agri Investment Indaba was held in Cape Town on 18 – 20 November. Our Agribusiness, Food & Beverage delegation included Kirsty Kilner and Rashaad Carrim, as well as Garyn Rapson, who moderated a panel discussion titled: ESG in Agriculture – Constraints or Opportunities?
Some of the key takeaways from the Indaba included:
- Strengthening the agricultural value chain is critical to ensure food security on the continent and globally. Increasing the yields of small-scale farmers and providing access to markets is fundamental to strengthening the primary part of this value chain. Central to this is providing farmers with access to general and innovative financing solutions so as to create economies of scale and increased margins. Currently, agriculture represents 25% of GDP in Africa but only 5% of funding because of the perceived risks and costs associated with the agricultural sector, especially when it comes to the financing of smaller-sized projects. There is a pressing need to bring structure and efficiency in connecting funders and investors with farmers throughout Africa to enable growth in agribusiness given the potential of Africa to improve global food security, with Development Finance Institutions (DFI's) being key in this regard.
- Transformative partnerships are key to moving the agricultural value chain forward and unlocking the potential for Africa to lead the charge toward global food security. Linking up large-scale commercial farmers with small-scale farmers to create mutually beneficial solutions and in particular, to provide mentorship, and share knowledge and technical ability, which will go a long way to improve the capabilities of small-scale farmers. Public/Private partnerships are also key in facilitating the linking of stakeholders in the value chain in an organised and efficient way. Being part of a strong and balanced value chain increases access to funding and the determination of the appropriate funding mechanism. Strong partnerships are critical to increasing climate resilience and ultimately facilitating a speedier increase in food production.
- ESG risks are faced by all businesses along the agricultural value chain, particularly by small-scale farmers. The global food system is one of the major drivers of climate change, biodiversity loss and depletion of freshwater resources. Farmers and companies are increasingly being severely impacted by extreme weather events and the depletion of natural resources. With population growth, these impacts are likely to continue, along with an increasing need for food. The African continent has had to transition from racially and socially unethical practices such as child labour, forced labour, unequal pay, sexual harassment, substance abuse, racism and discrimination. As a result of these risks, there is growing pressure from stakeholders to improve ESG compliance, largely driven by:
- changing consumer and customer preferences for lower carbon footprint products which are ethically sourced, and that are packaged in an environmentally friendly manner;
- new regulations, both in-country and externally (EU, US, and UK) are hard-wiring ESG considerations into law;
- the shift from voluntary to mandatory reporting and disclosure. ESG data is also increasingly being used by financial institutions to assess risk and inform decisions about whether to grant funding to businesses and farmers in the agricultural sector.
Innovative solutions to improve sustainability and introduce impactful initiatives to reduce ESG risks that this industry faces are central to increased food security and the survival of the sector.
- Technological advancements, such as drone technology, AI, and smart apps, are revolutionising the industry by increasing productivity and efficiency. Small scale farmers in particular are at increasing risk of being excluded from access to markets and obtaining funding if they cannot produce the required ESG data that is needed to source funding or demonstrate the carbon footprints associated with their produce.