Green financing is emerging as a crucial driver of sustainable agriculture in South Africa, with banks and private investors exploring innovative funding models to support eco-friendly initiatives. However, slow adoption, regulatory hurdles, and the complexity of financing greenfield projects remain significant barriers.
These challenges were at the forefront of a recent Hortgro webinar, where industry leaders and experts gathered to discuss sustainability and the role of environmental, social, and governance (ESG) principles in agribusiness.
Moderated by Hortfin chief executive officer Michael Brinkhuis, the session provided insights into integrating sustainability into business strategies while maintaining profitability.
Barriers to green financing
Traditional banks have been hesitant to embrace green financing, often requiring businesses to demonstrate strong cash flow histories before approving loans. Kyle Durham, head of sustainability for FNB commercial, highlighted a critical gap in the local financial ecosystem.
“We are still reliant on international certifiers in the form of ERA and Gold Standard since we have not got a South African certifier as yet. These all add to make it a challenging environment to finance,” he explained.
Despite these challenges, financial institutions are beginning to recognise the long-term value of carbon markets and other green initiatives.
A recurring theme in the discussion was the need for collaboration between government, banks, and private investors to accelerate green financing. Durham emphasised that public-private partnerships (PPPs) can play a transformative role in scaling investments in renewable energy and carbon projects.
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“Private-public partnerships are fundamental to success in the commercial space, particularly with government playing a significant support role with a positive regulatory framework, an open market principle, and the right incentives from a tax perspective,” he said.
Land Bank is also making strides in this space, announcing a new initiative aimed at supporting agribusinesses.
“We will launch the Wine and Spirit Fund in a couple of days’ time. This is a collaboration between the department of agriculture, land reform, the Land Bank, and key industry players in the wine sector,” a spokesperson revealed.
The fund will provide equity contributions of up to R3.5 million for agribusinesses in the sector.
Financial support to farmers
Campher Serfontein, a specialist in organisational transformation and sustainability initiatives, addressed the social aspect of ESG, particularly the role of corporate investment in early childhood education.
“In the past, many of these CSI programmes were focused on benefits to the business, financial benefits like tax benefits. We have also found that there’s a number of businesses out there really focusing on what I would call hard capital committing themselves, their staff to support the programme, and to really buy a sustainable future for our children,” he said.
Ralph Opperman, a relationship manager at Land Bank, elaborated on the bank’s role in green financing, particularly in supporting new-era farmers.
“The bank has made available, for example, a programme which is blended finance. We provide a loan and a grant,” he said. He also referenced the Agro-Energy Fund, which assists farmers in mitigating energy costs and enhancing operational efficiency.
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