South Africa is tackling the climate emergency by supporting small businesses

A bank in South Africa is backing environmental entrepreneurs to find ways to help the country become more resilient to climate change.

S mall and medium-sized enterprises in South Africa that work in areas related to climate change adaptation will soon be able to access USD 225 million in new financing, thanks to a loan by the International Finance Corporation and the Netherlands development bank FMO to FirstRand, a South African bank.  

The funds are earmarked for climate-friendly infrastructure, agriculture and manufacturing initiatives, including energy efficiency and water management. 

South Africa’s economy is highly dependent on climate-sensitive areas, notably agriculture, forestry and tourism – many tourists are attracted by the country’s rich biodiversity, which is under threat from desertification. Droughts are a particular problem for South Africa, which has annual rainfall only just over half of the global average.

Loo Afrique

More efficient use of water will be critical to adaptation, and entrepreneurs can play a vital role. Rori Mpete’s company Loo Afrique, for example, is innovating water-saving designs of toilets and urinals in which a basin for hand-washing is positioned over the toilet bowl, so the waste water from handwashing can be used to flush.  

Mpete told South Africa’s Mail & Guardian how he came up with the idea when his grandmother’s wash basin was broken:  

“It was about my fourth visit to the toilet when I said to myself, ‘I can’t be going around the house just to wash my hands; I might as well wash my hands in the cistern… If I can wash my hands in the cistern, it means I save water. Why can’t all South Africans wash their hands in the cistern?’”  

Loo Afrique is one of the enterprises profiled in a series of case studies by TIPS (Trade & Industrial Policy Strategies), a South African research institution. Another is WIS Group, which provides water management services such as storage, greywater recycling, and innovative leak detection software.

Entrepreneurs with a conscience

Like many new entrepreneurs, WIS Group founder Tshego Mpete was motivated by environmental awareness and social conscience – one reason why backing SMEs could potentially have an outsized impact on climate adaptation. She told News24: “I wanted to make an impact in my continent, I wanted to create something that will outlive me, and I wanted to contribute to society at large… If we all understood how limited water is as a resource, we would all treat it differently.” 

In a 2019 report, Small business development in the climate change adaptation space in South Africa, TIPS identify a range of sectors in which small businesses can potentially make a big impact – including energy-efficient air conditioning, microinsurance products for climate-related risks, and new solutions in irrigation, which accounts for almost two-thirds of water use in the country.

AB Farms

Two students of mechanical engineering at the University of Johannesburg, Mogale Maleka and Tumelo Pule, decided to explore hydroponic farming as a more water-efficient way to irrigate crops but found a problem: hydroponic systems rely on constant electricity, and frequent power outages required the use of generators.

So they designed a new kind of pipe system that can keep hydroponic crops irrigated on as little as four hours of electricity supply per day. Their company, AB Farms, claims their system “allows for farming of green leafy crops using 10 times less space [and] up to 90% less water in a virtually pesticide free environment, virtually anywhere”. 

Easier access to finance

The IFC and FMO loan to FirstRand Bank should make it easier for companies like these to access the finance they need to develop and scale up their climate-resilient solutions. SMEs are the backbone of South Africa’s economy: according to McKinsey they employ at least half of the country’s workers, and many are in urgent need of support having been badly hit by the Covid-19 pandemic.

The IFC will accompany the loan with technical assistance. Adamou Labara, IFC’s Director in South Africa, says: “It is essential to support increased access to green and blue finance to foster a more inclusive, resilient and sustainable response to the growing climate risks to economic development.”

The ideas presented in this article aim to inspire adaptation action – they are the views of the author and do not necessarily reflect those of the Global Center on Adaptation.

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