Africa: How To Make The Business Case for Climate Action in Agriculture

Using innovative ICT tools and working through key partnerships...
11 December 2019

They are the canaries in the climate change coal mine, who will be first to feel the impact of temperature variations, prolonged droughts and excessive rainfall.

But at the same time, they are also an enormous captive business opportunity that is currently going untapped, leaving our entire global food system at the mercy of extreme weather.

The majority of the world's 500 million smallholder farmers are essentially dependent on natural rainfall and stable seasons to produce as much as 80 per cent of food in their region.

And so, as seasons fluctuate, these farmers are in desperate need of climate-smart practices, services and technologies to help maintain and then increase production.

Global demand and labour already exist, with potential returns on investment that go far beyond the bottom line and contribute to the very sustainability of the planet.

So, what is holding back the private sector from investing in climate-smart agriculture?

The first barrier is the lack of understanding of the business opportunities due in part to the perceived high transaction costs of dealing with smallholder farmers.

When CTA launched its flagship project to scale up support for climate-smart solutions in Malawi, Zambia and Zimbabwe, it was important to engage with telecommunications and insurance companies on how they could invest in agriculture through mobile platforms for farmers or index-based insurance in a way that yielded returns.

... this project aims to provide small-scale farmers at risk from climate change with greater access to information and strengthened capacity ...

And the reality is that mobile technology has opened up opportunities for service providers to reach new markets by reducing this transaction cost. Extension services can now reach smallholder farmers with SMS-based real-time weather information, while insurance companies can make pay-outs to farmers instantly using simple mobile banking platforms.

By making these connections, sometimes with companies not normally associated with agriculture, we can identify ever more innovative ways in which the private sector can invest in smallholder farming.

Another barrier holding back the private sector from climate-smart agriculture is the lack of supportive or appropriate policies. While private sector players are prepared to take calculated risks consistent with good investment planning, they are less likely to make blind leaps that occur in an unstable and inconsistent policy environment.

Time and again, we see so many initiatives to help farmers cope with climate change that are publicly funded for a limited period, or public investment directed to urban areas, which misses the rural population entirely.

By aligning public support more closely with clear targeted climate goals for rural farmers and laying the foundations for long-term interventions, private sector investors will have the confidence and assurance to invest.

Finally, the private sector is also held back by limited engagement with farmers around climate action, which remains in its infancy.

strengthened capacity in order to effectively adopt CSA to effectively adopt CSA solutions.

Without a critical mass of farmers who are willing and able to adopt new tools and technologies, companies do not have a business case for investment.

This is why CTA has helped support creative ways of packaging private sector products, through public-private finance mechanisms and accessible, digital technologies to open up access to ICT-driven bundles of adaptation solutions, which can help create a strong and responsive market.

Those of us working in the public sector know we cannot achieve our climate goals and support the world's smallholder farmers alone.

Farmers need evidence of success before adopting a climate-smart product or service, while businesses need evidence of a viable market before investing in the field.

But we also know that with limited incentives, private sector investment will remain limited as well.

Publicly funded organisations and NGOs can be the stopgap that supports both farmers and private sector players to develop the climate-smart agriculture sector.

By unlocking the business opportunities in climate-smart agriculture, everyone wins: the private sector, the smallholder farmers and the rest of the world.

Oluyede Ajayi is Senior Programme Coordinator of the Technical Centre for Agricultural and Rural Cooperation (CTA)

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