Climate action for food security in South Africa
South Africa’s agricultural sector urgently needs better access to credit. The sector suffered two straight years of recession in 2015 and 2016, largely due to severe droughts throughout the country, and drought continues to adversely impact agricultural output in the Western Cape. With climate change likely to increase climate volatility, investment by farmers to enhance climate resilience is critical for future food security and the ability of the sector to be an engine of job creation and greater social and economic inclusion.
This is why a new EUR 50m EIB credit line with the Land and Agricultural Development Bank of South Africa (“Land Bank”) is geared towards strengthening the capacity of farmers to prepare, adapt and become resilient to the impacts of a changing climate. As a public institution, Land Bank has a mandate to improve access to finance for farm enterprises that are often starved of credit, not least because of their small size and the risks posed by the weather. Land Bank is committed to supporting all farmers in South Africa, including both established enterprises and new entrants to agriculture from historically disadvantaged backgrounds. The EIB funding will specifically target:
- larger farms as well as food value chain SMEs in areas such as food processing;
- improvements in natural resource management;
- reductions in energy and water usage in food processing;
- strengthened business continuity and resilience; and
- enhanced carbon sequestration and other investments that advance climate change adaption and mitigation.
Key contributions that the EIB is able to make to this project are the long duration of the funding, helping Land Bank to meet the long-term financing needs of its beneficiaries, and our ability to provide finance in South African Rand, helping to absorb currency risks that Land Bank would otherwise face.