Investing in Africa’s future: Standard Bank champions climate-smart agriculture

Fact: SA is warming at twice the global average. 

In our country, heatwaves are becoming more frequent, and dry spells last longer, resulting in heat stress in crops and livestock, which reduces yields and productivity. Climate change is also worsening water scarcity and water-related hazards like floods, which wreak havoc on farming and livelihoods.

This vulnerability is underscored by SA’s ranking of 96 out of 182 countries on the Notre Dame Global Adaptation Initiative (ND-GAIN) index, a stark indicator of its susceptibility to climate change and limited preparedness. And this precarious position is mirrored across the African continent, with only Morocco and Tunisia scoring higher, highlighting a widespread danger.

Yet, climate change is not the only existential threat looming over SA and the broader African landscape. A burgeoning population, projected to surge by about 25% to 79-million in SA and a staggering 63% across Africa by 2050, will dramatically escalate the demand for food production.

Worryingly, research suggests that the continent’s current food systems are unsustainable in the face of this population growth and the detrimental impact of climate change, with food production expected to shrink by an estimated 18%.

The bottom line is that our current agricultural system, which heavily relies on rain-fed farming (95% in Sub-Saharan Africa), lacks the infrastructure and technological practices needed to withstand climate shocks.

We are at a critical juncture, and it’s time to move beyond “business as usual” in the agricultural sector and embrace transformative strategies that not only help our farmers mitigate the effects of climate change but also build their resilience against it.

Enter climate-smart agriculture 

Agriculture, ironically, finds itself in a paradoxical position. On one hand, it’s a vital source of livelihoods and food security, but on the other, agriculture is also a contributor to the very greenhouse gas emissions that worsen the environmental challenges it faces. 

For example, conventional tillage practices, widely used in agriculture, significantly disrupt the soil’s structure, leading to the release of stored carbon dioxide (CO²) into the atmosphere. Globally, these soil carbon losses from tillage contribute to the agricultural sector’s overall greenhouse gas footprint, further intensifying the climate-related challenges that threaten crop yields and soil health. Other examples are emissions associated with livestock farming or deforestation; however sustainable practices have been proven to reduce emissions associate with these practices.

In this delicate balance between necessity and consequence, climate-smart agriculture (CSA) emerges not just as a solution but as a transformative pathway to reconcile these competing demands, offering innovative strategies to enhance productivity sustainably and build resilience against a changing climate.   

So, what is CSA? It strives to build sustainable productivity and resilient agricultural systems for the future by addressing three interconnected pillars: 

1. Adapting systems to build resilience to cope with climate change.
2. Mitigating climate change effects by reducing or removing greenhouse gas emissions and increasing carbon sequestration.
3. Productivity is the ultimate outcome, increasing agricultural yields and income (food security).

What does CSA look like in practice? 

CSA practices are extensive and varied. 

Adaptation strategies include cultivating resilient crop varieties that can withstand droughts or floods, and implementing efficient water management techniques such as drip irrigation, rainwater harvesting and soil moisture conservation.

Furthermore, tools like agricultural insurance, weather forecasting, sustainable water storage and integrated pest management empower farmers to strengthen their resilience.

Mitigation strategies include regenerative agriculture through diversified farming systems that not only reduce greenhouse gas emissions by reducing, avoiding, and sequestering CO², but also promote biodiversity.

Enhancing soil health via cover cropping, agroforestry, and no-till farming plays a crucial role in sequestering carbon while simultaneously improving crop resilience.

Precision agriculture leverages technology to optimise water, fertiliser and pesticide use, minimising waste and emissions, while the adoption of renewable energy sources like solar, wind, and hydropower further reduces reliance on fossil fuels.

Innovative approaches like waste-to-energy systems, such as biodigesters converting manure, contribute to a circular economy. 

Additional mitigation efforts include employing energy-efficient equipment, reducing food waste, improving livestock feeding practices, and exploring carbon credit opportunities through methods like biochar application and soil organic carbon enhancement.

A long-term horizon is required to reap CSA benefits 

CSA adoption in Africa remains low at about 30%, and is only slightly higher in SA, at 40%. This presents a significant market opportunity for investment and innovation. A report by the Africa Regenerative Agriculture Study Group estimates that the benefits of CSA regenerative practices in Africa, through improved yields, could boost the GDP of the agricultural sector in Sub-Saharan Africa by a significant 20%.

Studies have demonstrated positive correlations between the sustained implementation of CSA over long-term horizons and enhanced farm-level economic performance and output. 

One study focusing on smallholder maize farmers in Zambia found that farmers who adopted CSA practices achieved higher maize yields and experienced a notable increase in per capita household expenditure, sometimes up to 50%, compared to their non-adopting counterparts.

Another study conducted in SA examined the economic effects of sustainable agricultural practices on small-scale farmers in the Eastern Cape. It revealed that 64% of farmers who adopted these practices experienced improved farm returns, enhanced productivity, and better livelihoods.

CSA promises substantial long-term advantages — including increased profitability due to improved soil health, reduced input costs, and more stable yields despite climate variability as well as attractiveness to sustainability-conscious export markets like the European Union. But it requires significant investment ... and patience. 

According to studies, CSA adoption challenges tend to manifest as a “J-curve”, where initial investments and learning curves upfront lead to a temporary dip in productivity or income (which can span a few years) before the long-term benefits are realised and gain momentum. This is due to an initial decline in productivity as the soil and ecosystem recover from the effects of conventional farming methods. Over time, regenerative practices lead to increased and more sustainable productivity as soil health and biodiversity improve. 

CSA practices support sustainable growth, but they take time. Overcoming the initial hurdles requires ensuring farmers have access to knowledge, technology, and capital, as well as adequate support during the transition, particularly from institutions such as Standard Bank, which understand the critical importance of CSA adoption and embrace the long-term perspective needed to finance CSA projects.

Standard Bank’s role as a CSA enabler

Standard Bank’s commitment to the agricultural sector is informed by over 150 years of experience and driven by the belief that Africa is the growth story of the century.

As the continent’s largest bank with a footprint in 20 Sub-Saharan countries, the bank recognises its role and responsibility in driving Africa’s sustainable growth. In line with this ethos, the Standard Bank Group has committed to achieving net zero CO² emissions across its lending and investing activities by 2050.

That means entrenching net zero transitionary practices into the way the bank works, internally and through partners. It also means leading the transition to climate-smart agriculture throughout the agriculture value chain and supporting its clients in building resilience to climate change while thriving in a low-carbon economy.

Beyond full-service business banking, Standard Bank supports its agri clients through various CSA funding instruments that include:

• Sustainability-linked finance solutions for assets, inventory, working capital, and loans.
• Partnerships with development finance institutions and governments to expand the bank’s capacity to provide blended finance for development projects by sharing risks.
• Green bonds to raise capital for CSA projects. 
• Sales of carbon credits on carbon markets.

Redefining ‘business as usual’

Standard Bank assesses every project on a case-by-case basis and tailors solutions to the specific needs and objectives of its clients, while seeking ways to incentivise and embed CSA practices. 

The bank recently financed SA’s most significant private hydro project in the Eastern Cape. The 362kWp hydro plant is expected to produce about 2.9 GWh in year one, providing sufficient power for two farms. Standard Bank’s feasibility analysis indicates the project will become cash-positive in its third year and yield savings of R9.5m over the 10-year funding period — and with a lifespan of over 30 years, the hydro plant is expected to deliver significant long-term benefits. 

Standard Bank also recently backed a “waterborne” solar plant at a family-owned farm in Mpumalanga. The project can produce up to 1.8 GWh to power the entire estate off-grid when necessary. Beyond the direct advantages of energy independence and the expected cost savings over 30 years, due to the farm’s use of this green energy and low carbon footprint, it will position the farm favourably for market integration with the European Union. This could result in higher prices and increased sales, benefitting the farm and the local community that depends on this agriculture.

Through the bank’s partnership with DFIs, it’s able to provide its clients with cheaper funding that enables the scaling of sustainable initiatives. One such initiative is the recent financing of a groundbreaking solar-powered irrigation project in Botswana. 

The 1MW solar plant, co-financed by the Netherlands-based Agri3 Fund, is being built to power irrigation systems on a new 264-hectare expansion. This development will increase the total irrigated area by 46% to 839 hectares, using 29 irrigation pivots. As a result, the farm expects to reduce its annual electricity expenditure by about 65%, helping to unlock cash flow and increase the number of its permanent employees from 100 to 150 positions.

Standard Bank’s commitment is to keep farmers in business

Standard Bank employs specialists with deep sector expertise who understand the risks and cycles associated with farming. They add extensive value to clients by taking the time to understand their businesses and goals, supporting them in maintaining sustainable and economically viable operations over the long term. 

The bank also believes education is paramount. That’s why we’ve invested in the Sustainability Academy, an online learning platform to enable its clients to learn about CSA and equip them with the knowledge they need on their sustainability journeys.

Interested in learning more? 

Are you ready to find out how Standard Bank can partner with your agribusiness? Reach out to your Standard Bank Relationship Manager or get in touch with one of the bank’s agribusiness sector experts by sending an email to BCBSustainability@standardbank.co.za.

• About the author: Dr Andrea Campher is senior manager of Sustainability and Agribusiness at the Standard Bank Group, where she leads initiatives in climate-smart agriculture across 14 African countries and develops carbon market opportunities. She is certified by PCAF (Partnership for Carbon Accounting Financials) for calculating financed emissions for the bank’s portfolios, furthering her commitment to sustainable finance.

This article was sponsored by Standard Bank.