Sustainable Agriculture 2020 Market Intelligence Report
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Sustainable Agriculture 2020 Market Intelligence Report Sustainable Agriculture: Market Intelligence Report 2020 i
GreenCape
GreenCape is a non-profit organisation that drives the widespread adoption
of economically viable green economy solutions from the Western Cape. We
work with businesses, investors, academia and government to help unlock the
investment and employment potential of green technologies and services, and
to support a transition to a resilient green economy.
Acknowledgements
We thank Inge Kushke, for the time and effort that she has put into compiling
this market intelligence report.
Disclaimer
While every attempt was made to ensure that the information published in this
report is accurate, no responsibility is accepted for any loss or damage to any
person or entity relying on any of the information contained in this report.
Copyright © GreenCape 2020
This document may be downloaded at no charge from www.greencape.co.za.
All rights reserved.
Subscribe to receive e-mail alerts or GreenCape news, events and publications
by registering as a member on our website: www.greencape.co.za
18 Roeland Street, Cape Town, 8001, South Africa
Authors: Inge Kuschke
Editorial and review: Louw Pienaar, Cilnette Pienaar, Lauren Basson
and Nicholas Fordyce
Images: GreenCape, Western Cape Department
of Agriculture and Oranjezicht City Farm
Layout and design: Tamlin Lockhart Art Direction
ii Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 iii
Contents List of figures Executive summary 1 Figure 1: What’s new? 5 South Africa’s land cover and select land use classifications 8 1. Introduction and purpose 6 Figure 2: 2. Sector overview 8 South African agricultural regions 9 2.1. Physical geography and climate 8 Figure 3: 2.1.1. Western Cape agriculture 9 Proportion of agricultural commodities produced in the WC 9 2.2. Overview of the agricultural economy 10 Figure 4: 2.2.1. South African agriculture 10 Agricultural economy and South African sectoral GDP (ZAR billion per quarter) 11 2.2.2. Western Cape agriculture 12 Figure 5: 2.3. Key players 14 South African agricultural GDP and trade balance (ZAR billion per year) 12 2.3.1. Sustainability initiatives and investments by the agricultural industry 15 Figure 6: 2.4. Drivers of sustainable technologies and approaches in agriculture 16 Breakdown of Western Cape exports by value and area planted for fruit & nuts 13 2.4.1. Environment 16 Figure 7: 2.4.2. Industry cost structure 16 Key role players in agriculture 14 2.4.3. Market pressure and readiness 16 Figure 8: 3. Policies and regulations 18 Fruit and wine farm CO2e “hotspots” 21 3.1. South Africa’s agricultural policies and regulations 18 Figure 9: 3.2. Water 20 Undercover farming and its various forms 29 3.2.1. Water policy updates for agriculture 20 Figure 10: 3.3. Carbon Tax 20 Aspects of precision agriculture / smart farming 32 3.3.1. Policy implications 21 Figure 11: 3.4. Land Reform 22 Crops surveyed using FruitLook (average 2014 – 2019) 33 3.4.1. Land reform policy updates 22 Figure 12: 3.5. International regulations 22 Other irrigation management tools used by FruitLook users 35 3.5.1. Synthetic chemical bans 22 Figure 13: 4. Opportunities and barriers 24 Sector communication on new agriculture technology 35 4.1. Market updates for 2019 27 Figure 14: 4.2. Market update for conservation agriculture 29 Western Cape population and South African population share: 2002 – 2018 41 4.2.1. Regenerative agriculture 30 Figure 15: 4.3. Precision agriculture: using remote sensing technologies for resource-efficient farming 31 GreenCape’s focus areas 51 4.3.1. Overview 31 4.3.2. Market size 32 4.3.3. Case study: Fruitlook 33 4.3.4. Local market players providing agricultural remote sensing services 37 4.3.5. Barriers and risks 37 4.4. Urban Agriculture 37 4.4.1. Overview 37 4.4.2. Market size 38 4.4.3. South African market players 42 4.4.4. Barriers to the uptake of urban agriculture 42 5. Funding and incentives 44 5.1. General database web page 44 5.1.1. Green Finance Database 44 5.1.2. Government funding and incentives database 44 5.1.3. Finfind database 44 5.1.4. AlliedCrowds database 44 6. The Western Cape: Africa’s growing greentech hub 46 7. GreenCape’s support to businesses and investors 50 8. References 54 iv Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 v
List of tables List of acronyms and
abbreviations
Table 1: AfCFTA African Continental Free Trade Area
Summary: Investment opportunities in sustainable agriculture for 2019/20 3 agtech Agricultural technology
Table 2: APAP Agricultural Policy and Action Plan
Key policies and legislation 19 CA Conservation Agriculture
Table 3: CCT City of Cape Town
Draft policies in SA agriculture 19 CO2e Carbon Dioxide Equivalent
Table 4: COJ City of Johannesburg
Projected cost of carbon tax for fruit and wine farmers 21 CSA Climate Smart Agriculture
Table 5: DAFF Department of Agriculture Forestry and Fisheries
Market update for renewable energy 27 DEA Department of Environmental Affairs
Table 6: DWS Department of Water and Sanitation
Market update for undercover farming (UF) 28 FAO Food and Agriculture Organisation
Table 7: FIVS International Federation of Wine and Spirits
Uptake of FruitLook over time 33 GHG Greenhouse gas
Table 8: Ha Hectare
Estimated and potential market size for select commodities based on FruitLook 34 IGDP Integrated Growth and Development Plan
Table 9: IPW Integrated Production of Wine
Global market uptake of selected UA components 38 IRP Integrated Resource Plan
JHB Johannesburg
kWH Kilowatt-hour
LRAD Land Redistribution for Agricultural Development
MWp Megawatt peak
NDC Nationally Determined Contribution
NDP National Development Plan
NEMA National Environmental Management Act
NGP New Growth Path
OIV International Organisation of Vine and Wine
PA Precision agriculture
PLAS Proactive Land Acquisition Strategy
SA South Africa
SPLAG Settlement Production Land Acquisition Grant
UA Urban Agriculture
UAV Unmanned Arial Vehicle
UN United Nations
WC Western Cape
WCDoA Western Cape Department of Agriculture
WCWSS Western Cape Water Supply System
WMA Water Management Area
WUA Water Use Association
WWF World Wide Fund for Nature
vi Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 vii
Executive summary
The South African and Western Cape agriculture sectors offer numerous
opportunities for investors, agricultural and green technology manufacturers,
service providers, distributors, and others in the value chain.
Primary agriculture contributed a relatively small These trends, as well as rising input costs of ■ Undercover farming (UF): The potential market The main drivers of these opportunities are:
share of the total GDP (2.6% in 2018) in South conventional inputs, contribute to emerging for low-tech UF in SA is estimated at
Africa (SA), but is significant in terms of providing investment opportunities in: R38 billion, and R1.9 billion in the WC. There ■ rising input costs for energy (particularly
employment and earning foreign exchange. has been a significant increase in UF in the electricity and diesel), fertiliser and pesticides;
However, when taking into account the whole ■ remote sensing technologies for precision WC over the past five years. Shade netting has
agricultural value chain, the sector is estimated agriculture applications (driven specifically increased by 171% from 2013 to 2018 in terms of ■ increasing awareness of sustainable
to contribute about 12% of the national GDP. to improve water efficiency and area under production. The number of tunnel practices and technologies available,
climate adaptation); structures has increased by 55% for the same as well as their benefits;
Water availability is a key driver for the uptake of time period. The market for medium- to
agricultural technology (agtech) in SA. SA is a ■ urban agriculture, with hydroponic production high-tech systems in South Africa is worth ■ climate change, forcing the sector to adopt
semi-arid country, with limited land suitable for specifically still emerging; more than ~R1 billion. UF provides numerous more sustainable practices to increase its
rain-fed agriculture production. This makes water opportunities for suppliers and manufacturers resilience; climate change also exacerbates
a key constraint to agricultural development. ■ undercover farming, which includes low-tech of UF components as well as consultants, water scarcity through increasing evaporation
infrastructure such as shade netting and especially in high-tech UF. and recurrence of droughts;
South Africa, in particular the Western Cape higher-tech controlled environment
(WC), experienced one of the worst droughts on agriculture systems; and ■ Renewable energy: The market for renewable ■ detrimental environmental effects
record from 2014/15 – 2017/18, which resulted in energy in agriculture is estimated to be 90 MW associated with conventional (i.e. traditional)
water restrictions and large economic losses. The ■ well-established investment opportunities in in terms of installed capacity, a market of inputs and practices, specifically pollution
drought, together with other factors such as loss renewable energy and conservation agriculture. between R945 million and 1.5 billion in 2019. and soil degradation, leading to lower
of and diminishing returns on arable land due to production yields, loss of arable land, and
conventional farming practices, climate change, ■ Remote sensing applications for precision ■ Conservation agriculture (CA): The estimated reduced resilience;
and population growth, has put the long-term agriculture: There are emerging opportunities market size for no-till machinery in SA ranges
resilience of the agricultural sector into focus. for companies offering bespoke services in from R136 million to R747 million, based on the ■ decreasing costs of greentech, such as solar
The uptake of sustainable technologies and aerial-data analytics for farmers. The current current uptake of farmers who are practising panels; and
practices are crucial for the continuity of market estimate for irrigated agriculture in the CA. There are further emerging opportunities
the sector. WC is R37.5 million/year. for organisations in regenerative agriculture ■ scarce natural resources (particularly arable
(RA), such as certification bodies, technical land and water) that are primarily affected by
Other important trends in sustainable agriculture ■ Urban agriculture (UA): Specifically consultancies, environmental NPOs, research climate and farming practices.
production include international market pressure hydroponic production is still emerging. A institutions, carbon offset companies, and
for low carbon, environmentally friendly products, conservative estimate for the market of bioproduct manufacturers.
and international regulations on the use of rooftop hydroponic production is R2.59 million
synthetic chemicals. to R3.94 million, based on current installations
by largest market player.
1 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 2
Table 1: Summary: Investment opportunities in sustainable agriculture for 2019/20
Requirement ■ Resource scarcity, Barriers highlighted by Medium Globally, agriculture
Opportunity Key drivers Term Macro environment current players in the to long is the least digitised
& barrier particularly water
availability field includes: term sector (throughout its
■ Rising electricity ■ Strong business case Short to SA was the fastest ■ Global ■ The mind-set change value chain) and thus
tariffs for large (e.g. cold medium grower of solar competitiveness and required by farmers to technology-based
■ Security of energy storage) and term photovoltaic (Solar economies of scale adopt new farm decision-making
supply year-round energy PV) installations in ■ Technological management is still emerging.
Precision
■ Increasing ability to users 2017 globally. An advances in drone, technologies.
agriculture
Renewable feed back into the ■ Seasonal nature estimated 10% of all satellite and ■ A lack of integration Remote sensing
(remote
energy (solar grid of agriculture solar PV installations information between various applications is an
Decreasing cost of production affects are in the agricultural sensing
photovoltaic) ■ communication disciplines. emerging market in
technology the business case sector, and the business applications) technology and ■ The inclusion of the SA’s agriculture sector,
■ Innovative finance case is well known to the Internet of end user in developing with the exception of
options the industry. Things (IoT). software solutions, GPS guidance for
■ Corporate social which results in tractors.
responsibility (CSR) limited understanding
of the end user’s
■ The main driver is ■ High cost of Medium Globally, the uptake of actual needs.
soil degradation equipment to long CA is high, particularly
resulting from ■ Long-term return on term in South America. Only ■ Resource scarcity ■ Enabling municipal Long Urban agriculture
conventional tillage investment when 15% to 20% of ■ Urbanisation support environment, term (UA) growth is the
and subsequently converting from commercial grain ■ Advances in such access to water largest in Asian
Conservation diminishing returns on conventional to farmers and 5% of technology, and space. countries characterised
land, due to factors conservation smallholder farmers in specifically ■ Access to finance for by high-density urban
agriculture
such as decreased practices SA have adopted CA. hydroponic systems technology populations. In
(no-till
moisture-holding ■ Sustainable farm and LED lighting infrastructure particular, vertical
planting capacity and management ■ Consumer ■ Lack of technical farming production,
equipment) biological functions practices such as preferences for locally knowledge as it uses space
crop rotation and produced food ■ Business case not well more efficiently
permanent soil cover Urban ■ Waste minimisation established than flat structures.
play an important role agriculture Commercially
to improve the (hydroponic viable production
business case production) of agricultural produce
in SA’s urban
■ Resource scarcity ■ High capital cost with Low- Greenhouses are well environments is still in
■ Increased yields and limited financing tech established globally. its infancy. Various
quality options systems: SA, as with most factors, such as
■ Providing products ■ High cost of electricity Short to developing countries, spacing, scale, product
out of season affects viability of medium has been very slow to demand and market
■ Climate change controlled term adopt greenhouse access needs to be
■ Technological environment systems technology, and is better understood to
Undercover advances in LED ■ Business case not well High- estimated to be 50 create successful
farming lighting established for tech years behind developed enterprises.
(various high-tech systems systems: European countries
technologies) ■ Lack of technical Long such as the
knowledge term Netherlands.
Low-tech systems such
as netting and tunnels
are growing rapidly,
particularly for high
value export fruits.
3 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 4
1
Introduction and purpose
This market intelligence report (MIR) has been compiled by GreenCape’s
Agriculture Sector Desk. It highlights opportunities for greening agriculture
production and is written for investors, with a focus on new investors
exploring the South African agtech1 market.
What’s new?
1
GreenCape’s Agriculture Sector Desk was The main focus in this MIR is on remote sensing
established in 2014 in partnership with the applications for precision agriculture (PA) and
Western Cape Department of Agriculture urban agriculture (UA). Updates are provided on
(WCDoA). The desk aims to support the the areas explored in detail in the 2019 MIR:
The 2019 Sustainable Agriculture MIR discussed the economic impacts of external factors on the sector, development of sustainable and competitive undercover farming, renewable energy and
particularly the Western Cape drought (2015 – 2018). The industry’s response to the drought was an agricultural value chains through the uptake of conservation agriculture.
important indicator of the level of resilience of the agricultural sector. agricultural technology (agtech) and sustainable
production practices. This is achieved by raising In what follows, there is a sector overview
The 2020 Sustainable Agriculture MIR looks toward longer-term trends and investments for sector awareness of the benefits of agtech uptake (Section 2) that provides a national and provincial
resilience, particularly in the light of climate change scenarios (such as more frequent and severe (i.e. driving demand within agriculture), and economic overview of agriculture with the focus on
weather events), resource scarcity (particularly water), and the global factors (such as synthetic chemical highlighting opportunities for agtech investors, macro-economic trends and key players. This is
bans). These long-term trends include: manufacturers, and service providers followed by an overview of policies and regulations
(i.e. supporting supply). (Section 3) that guide and affect investors in the
■ The movement towards regenerative agriculture production for long-term sustainability of soil health agriculture sector. Key opportunities, trends and
through increasing water-holding capacity, soil carbon, soil organic matter, and microbial activity. This MIR provides updates on key issues and barriers are highlighted (Section 4). The final
■ The emergence of urban agriculture production, particularly hydroponic rooftop production, opportunities identified in previous MIRs, and sections provide information on available finance
resulting from a need for alternative food supply systems due to resource scarcity and urbanisation. highlights new opportunities related to and incentives (Section 5), present the case for the
■ The role of corporate social responsibility (CSR) in sustainable investments in the sector. technologies and practices that: Western Cape as Africa’s emerging greentech hub
(Section 6), and explain GreenCape’s work in the
Another addition to this year’s report is a section on general sustainability initiatives / investments ■ increase input resource efficiency in primary green economy (Section 7).
undertaken by various agricultural industry players to give the reader an understanding of the production;
sustainability environment in SA. ■ benefit the environment, primarily by For assistance, or if you have any questions after
conserving resources, reducing negative reading this MIR, please contact the agriculture
The MIR further investigates key developments for remote sensing applications for precision agriculture impacts such as soil degradation and pollution; team on telephone +27 (0)21 811 0250 or email
by presenting a case study of technology uptake and trends based on FruitLook data. ■ increase resilience to climate change; and agri@greencape.co.za.
■ have the potential to attract international
The MIR also discusses, for the first time, emerging opportunities in urban agriculture in South Africa, investment.
specifically hydroponic production.
For new readers, we advise that you first read the 2019 Agriculture MIR for an in-depth understanding of
established opportunity areas.
caption 1
AgTech represents the application of technology – especially software and hardware technology – to the field of farming.
5 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 6
2
Sector overview
This section provides an overview of the South African and Western
Cape agricultural sectors. It includes an overview of the sector’s structure,
macro-economic trends, key players, and drivers of green technology
and practices in agriculture.
2.1. Physical geography and climate
SA is a resource scarce country and classified as semi-arid. The country’s land cover (in total
54+20+13111
122 million hectares) and select land use classifications are illustrated in Figure 1 below (DAFF 2013a).
54% FOREST, WOODLAND, PLANTATIONS & OTHER
20% GRASSLANDS
13% MINES, BARE & DEGRADED LAND
11% CULTIVATED COMMERCIAL & SUBSISTENCE LAND
1% WATER BODIES AND WETLANDS
1% SETTLEMENTS
87+6+32
88% COMMERCIAL: NON-PIVOT
6% COMMERCIAL: PIVOT
3% COMMERCIAL PERMANENT ORCHARDS
2% COMMERCIAL PERMANENT VINES
2% SUBSISTENCE CROPS
Figure 1: South Africa’s land cover and select land use classifications
Only ~11% of land in SA is considered arable, of which 3% is truly fertile soil. A mere 1% has the right
climate and soil combinations for rain-fed crops. Water availability for irrigation is thus vital for the
sector and the largest limiting factor in production. SA is ranked as the 30th driest country globally.
Water availability is under further pressure from climate change and increased competition due to
population growth.
SA has a wide range of agro-climatic regions, as shown in Figure 2 (FAO 2010). Climatic regions
include Mediterranean, subtropical and semi-desert, enabling the production of a wide range of
agricultural commodities.
© Western Cape Department of Agriculture
7 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 8
Recent years have seen significant increases in Technologies and practices that make the sector
the area under production of high-value export more resilient and sustainable are discussed in
crops. Growth in production area was seen from Section 4 of this report.
the WCDoA’s census data for citrus (35%), berries
(33%), sub-tropical fruits (21%), and nuts (79%) 2.2. Overview of the agricultural
from 2013/14 to 2017/18. This growth is largely due economy
to an increase in consumer demand for healthy This section provides an overview of the
foods, especially by Millennials and Generation Z, agricultural economy in SA and the WC, with a
who are willing to pay a premium for such focus on the sector’s economic contribution,
products (Forbes 2019). value of commodities, and production trends.
2.2.1. South African agriculture
The South African agricultural economy has seen
There has been an exponential decent growth over the past decade, albeit with
rise in the WC in the production of some difficult periods that have stifled growth.
high-value crops between 2013 and Figure 4 below reveals the performance of the
agricultural economy, showing trends for both
2018, in citrus, berries, tropical fruits,
the agricultural gross domestic product (GDP)
and nuts. and net farm income (NFI) in South Africa. The
declines registered between 2015 and 2016 are
mainly attributed to the drought in the summer
rainfall region. The most recent decline in 2018 is
Figure 2: South African agricultural regions Growth in export crops is an important trend in also due to drought conditions experienced in the
terms of sustainable agriculture, as international Western Cape, with the resultant income losses.
market pressure for low-carbon, environment- Several other factors affecting below-average
2.1.1. Western Cape agriculture friendly products is an increasingly important growth in the sector have been caused by animal
Fruit production dominates agricultural production in the WC (see Figure 3), with a large percentage of driver for the uptake of practices and disease outbreaks. For instance, in June 2017,
these considered high value and destined for export markets. Grains in the WC is mostly under dryland technologies that reduce the use of chemicals, Highly Pathogenic Avian Influenza started
51+18+976
production. All fruit production is under irrigation. and a product’s carbon and water footprint. spreading in the South African chicken industry,
Sustainability drivers are further discussed in which ultimately led to the compulsory culling
Section 2.4 of this report. of 70% of all layer birds in the Western Cape.
Crop type Crop (ha)
Grains, oil seeds and lupines 531 806 The long-term resilience of the sector has
51% WINE GRAPES
drawn a lot of attention in recent years,
Vegetables 16 597 18% POME FRUIT
especially in the light of: Although the Western Cape has the
9% STONE FRUIT ■ climate change predictions that the province
Fruit 180 115
9% CITRUS
largest area under irrigation in South
will experience a 50% decrease in rainfall by
Nuts 12 198 7% TABLE GRAPES 2050, as well as more frequent and severe
Africa, it also has the lowest water use
Other 59 669 6% OTHER weather events such as floods and droughts; per area unit showing that efficiency
■ large output and job losses due to the drought measures have already been put in
Total 789 316
(2015 – 2018); and place (WWF, 2018).
■ decreasing return on soil due to conventional
Figure 3: Proportion of agricultural commodities produced in the WC production practices.
It should be noted that although the Western The recent outbreak of foot-and-mouth disease
Cape has the largest area under irrigation (269 in 2019 has led to restrictions on exports and
476 ha) in South Africa, it also has the lowest movement of animals to be sold to abattoirs.
water use per area unit (5 874 m3/ha). This shows Finally, the current policy uncertainty with regard
that efficiency measures have already been put to land ownership and the potential impact of
in place (WWF, 2018). This indicates that there is expropriation without compensation is
awareness of the importance of using water hampering investment in the sector.
efficiently, making it a good investment
destination for efficient irrigation technology.
9 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 10
100 25 Although primary agriculture, including This growth means that the trade balance has
downstream agricultural value-added activities also increased, although imports also expanded
90
known as the agri-processing sector, contributed during the same period.
a relatively small share of the total South African
80 20
economy (2.6%) in 2018, its contribution has since An exciting new development for agricultural
increased to 7%. However, when considering the trade is the African Continental Free Trade Area
Real Net Farm Income (Billions)
Real Agricultural GDP (billions)
70
impact these two sectors have on employment (AfCFTA), which is outlined in the African
and in generating foreign earnings in export Continental Free Trade Agreement. The
60 15
markets, it is clear that the economy is agreement was brokered by the African Union
50
dependent on well-functioning and sustainable (AU) and signed in March 2018 by 44 of the 55 AU
agricultural value chains. Figure 5 elaborates on member states. In terms of the AfCFTA
40 10 the trade performance of agricultural and related agreement, 90% of all traded goods between
products since 2001. South African agricultural African countries will be traded at zero tariffs. It is
30 exports have performed well, growing from expected that this free trade area will unlock new
R48 billion to more than R144 billion in the past opportunities for the South African agricultural
20 5 decade, which is equivalent to an average annual sector to expand existing trade and open up new
growth of 11.5%. market opportunities on the continent.
10
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140
Value of Trade in Rand (billions)
Agricultural GDP Net Farm Income
120
100
22% FINANCE
17% GOVERNMENT 80
15% TRADE
60
10% TRANSPORT
9% OTHER MANUFACTURING
40
8% MINING
6% SOCIAL SERVICES 20
4% AGRI PROCESSING
0
4% CONSTRUCTION
01
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3% AGRICULTURE
2% UTILITIES
Figure 5: South African agricultural GDP and trade balance (ZAR billion per year)
2.2.2. Western Cape agriculture
The agricultural sector in the Western Cape is
Figure 4: Agricultural economy and South African sectoral GDP (ZAR billion per quarter) unique compared to other growing regions in the
The province’s agricultural value of
country, mainly due to the winter rainfall and production contributes to 21% of the
Mediterranean climate. Horticulture and grape country’s total agricultural output,
production is particularly concentrated in this whilst around 44% of all exported
region, of which around 45% gets exported into agricultural goods comes from the
world markets (Hortgro, 2019). The province’s
Western Cape.
agricultural value of production contributes to
21% of the country’s total agricultural output,
whilst around 44% of all exported agricultural
goods comes from the Western Cape. The followed by beverages (19%), and fish and
characteristics of the Western Cape agricultural crustaceans (9%) (Quantec, 2019). In terms of area
sector are illustrated in Figure 6. It aggregates planted, wine grapes still dominate, even though
the exports by value for 2018 on the left, and then there has been a decline in orchards in the past
breaks down the area planted in hectares for several years. Pome and stone fruits make up
crops included under fruit and nuts. Around half around 27%, followed by citrus (9%) and table
of all exports comes from the fruit industry, grapes (7%) (WCDoA, 2018).
11 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 1248+19+109732 50+18+9731
Agricultural exports by value Area planted for fruits & nuts
Important to note is that these exported products ■ Input suppliers produce inputs such as
are highly labour intensive. The income fertiliser, seeds, pesticides, packaging, and
generated from these activities plays a machinery. Suppliers of green technology,
48% FRUIT & NUTS 50% WINE GRAPES
significant role in contributing to the WC such as conservation agriculture equipment
18% BEVERAGES 18% POME FRUIT
economy. In 2018, the agricultural sector and solar PV manufacturers, also belong to
10% OTHER 9% STONE FRUIT
contributed 4.1% to the WC economy, and another this category.
9% FISH & 9% CITRUS 5.7% for value-add under the agri processing ■ Technology suppliers are found across the
CRUSTACEANS 7% TABLE GRAPES sector (Quantec, 2019). These two sectors employ value chain, from inputs, production, harvesting
7% PREPARED 3% OLIVES around 297 000 workers directly on farms and in processing, logistics and waste processing
VEGETABLES 1% EXOTICS manufacturing plants, which translates to 12% of (e.g. bio-digesters and composters).
3% OILSEEDS 1% SUB-TROPICAL the Western Cape labour force (QLFS, 2018). ■ Industry associations are involved in all aspects
2% ANIMAL FODDER 1% BERRIES of the value chain. They support farmers and
2% CEREALS 1% NUTS 2.3. Key players provide them with relevant and reliable
As shown in Figure 7, key players in the agriculture information regarding regulations, logistics,
sector can be divided into six broad categories: cultivar development, etc. They also do or
Figure 6: Breakdown of Western Cape exports by value and area planted for fruit & nuts producers/farmers, input/technology suppliers, support research in various fields, including soil,
industry associations, research/academia, and water, production practices, and cultivars.
labour organisations. SA’s national agriculture ■ Research institutions like universities
department, the Department of Agriculture, Land investigate all aspects of the value chain.
Reform and Rural Development (DALRRD), governs ■ Labour organisations provide support for
the whole industry. employees in the agricultural sector by
■ Producers/farmers produce commodities assisting them in attaining the best possible
and in most cases do their own harvesting, financial and social position in all employment
storage, and transport. positions along the entire value chain.
R&D Inputs Production Harvesting Storage Transport Processing Wholesale, Waste
retail &
exports
Government
Producer
Research institutions
Input
suppliers
Technology suppliers
Industry associations
Labour organisations
Figure 7: Key role players in agriculture
© WCDoA
13 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 14Key role-players for various agtech opportunities ■ The Wide Fund for Nature (WWF) engages with 2.4. Drivers of sustainable ■ Increasing awareness of sustainable
are discussed in detail in Section 4. farmers in the Western Cape, KwaZulu-Natal, technologies and approaches practices and technologies available, as well
Mpumalanga, Limpopo, and southern Cape, in agriculture as their benefits.
2.3.1. Sustainability initiatives and helping them improve land use planning, The key drivers of sustainable technology and ■ The international regulatory environment,
investments by value chain players production efficiency, and responsible farming innovation in the sector are: especially synthetic chemical bans and
This section explores general sustainability practices. This is achieved by developing best stricter environmental regulation (discussed
initiatives undertaken by industry stakeholders. It practice guidelines and standards, and 2.4.1. Environment further in Section 3). This has been the main
aims to illustrate that broader sector role- helping impact sectors understand what ■ Climate change, forcing the sector to adopt driver for the increased uptake of biocontrol3,
players, such as retailers, financiers and sustainable farming entails. more sustainable practices to increase its which is predicted to grow at a significantly
government, are aware of the importance of resilience. Climate change also exacerbates higher compounded annual growth rate
sustainable and resilient production through ■ Blue North’s Confronting Climate Change water scarcity through increasing evaporation (CAGR) compared to conventional pesticides.
actively supporting and/or investing in the (CCC) initiative was developed to support South and recurring drought. It has increased from 2% to approximately 8%
primary sector. These include: African fruit and wine farmers. It is a carbon ■ Scarce natural resources (particularly of the market over the past few years.
■ Woolworth’s Farming for the Future initiative. footprinting project that identifies the risks and arable land and water) that are primarily ■ Corporate social responsibility is playing an
The initiative is about saving water, improving opportunities associated with carbon emissions. affected by climate, farming practices, and increasingly important role in investment
soil quality, and working with nature. The goal The CCC initiative includes an online carbon- population growth. decisions. A recent example of this is Diageo,
is to grow quality produce while minimising footprinting platform, a series of regular ■ Detrimental environmental effects associated one of the world's largest producers of spirits
any negative effect on the environment, and industry engagement workshops, a range of with conventional (i.e. traditional) inputs and beers. It has committed to investing $219
reducing farmers' dependence on chemical commodity-specific industry benchmark and practices, specifically pollution million (R3.2 billion) in upgrades at 11 of its
products. Certification includes assessing the reports, and up-to-date and relevant energy and soil degradation, leading to lower breweries in Africa. This investment will deliver
management of soil minerals and microbes, and emissions-related news and information. production yields, loss of arable land, new solar energy, biomass power, and water
pests, plants, biodiversity, irrigation, and and reduced resilience. recovery initiatives at 11 sites in seven
wastewater. Woolworth’s food business ■ LandCare is a specialised service of the countries, including Kenya, Uganda, Tanzania,
achieves a 20 per cent share in national fresh Western Cape Department of Agriculture’s 2.4.2. Industry cost structure South Africa, Seychelles, Nigeria and Ghana.
produce sales in South Africa (PMA 2017). Farmer Support and Development program. ■ Rising input costs for energy (particularly This is believed to be one of the biggest single
LandCare is involved in multiple projects, electricity and diesel), fertiliser, and pesticides. investments in addressing climate change
■ Nedbank has made various investments into including clearing of alien invasive species, ■ Decreasing costs of cleantech such as issues across multiple sub-Saharan markets.
the sector. Most notably it contributed to: which is crucial for water availability. Alien solar panels. The business stated that it has a responsibility
■ Aerobotics, an aerial imaging and analysis clearing not only improves sustainable water as a local manufacturer and employer in
company that provides early warning use in agriculture, but also creates jobs in rural 2.4.3. Market pressure and readiness Africa to grow its business sustainably.
systems to farmers; areas. To date, an estimated 216 farmers have ■ Market pressure driving stricter regulations,
■ the first commercial floating solar PV benefited from these projects. Another particularly for chemical usage, through
system in Africa on a fruit farm in initiative, FruitLook, is discussed in detail in increasing consumer demand for
South Africa; Section 4 of this report. sustainable products.
■ the bank's recently launched innovative
funding plan to assist farmers with the ■ Stellenbosch Wine Routes2 has signed the
installation of shade netting in orchards for Porto Protocol – a global sustainable initiative
protection against wind, hail, frost, signed by companies across numerous
sunburn, and birds; and industries – in an effort to commit itself to
■ safeguarding critical water source areas, making an accelerated contribution towards
biodiversity hotspots and rural livelihoods. climate change mitigation. The Porto Protocol
Money (R25 million) will be spent in was launched by former US President Barack
partnership with the World Wide Fund for Obama in 2018. Stellenbosch Wine Routes
Nature(WWF), with which they have became the first southern hemisphere wine
collaborated for the past eight years to region to join the ranks of global signatories.
support sustainable farming across SA.
This forms part of the next 5-year plan.
2 3
Stellenbosch Wine Routes represent more than 200 wine and grape producers within the boundaries of the Stellenbosch Wine of Origin Biocontrol is the control of pests by interference with their ecological status, e.g. by introducing a natural enemy or a pathogen into the
classification. environment.
15 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 163
Policies and regulations
South Africa has an extensive and robust range of policies and regulations
governing the country’s agricultural sector.
3.1. South Africa’s agricultural development of the agricultural sector in South
policies and regulations Africa. Support by the DALRRD and DEFF is
This section outlines the main policies governing guided by the vision of a sustainable agricultural
the agriculture sector in SA, as well as key sector that addresses agricultural policy
developments. The Department of Agriculture, distortions of the past, with reformative policies
Land Reform and Rural Development (DALRRD) that create an enabling agricultural sector for
and the Department of Environmental, Forestry the future. South Africa’s agricultural sector
and Fisheries (DEFF) are national entities is governed by a suite of key policies and
responsible for overseeing and supporting the legislation outlined in Table 2 below:
© Western Cape
© GreenCape
Department of Agriculture
17 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 18Table 2: Key policies and legislation A comprehensive list of key policies and 3.3. Carbon Tax
regulations influencing the agricultural sector The South African Carbon Tax Act No.15 of 2019
Name of policy Key objectives can be found on the GreenAgri portal under the came into effect on 1 June 2019. The first phase
Action Plans and Policies section5. of the tax will run until December 2022, with the
■ Elimination of poverty
The National Development second phase running from 2023 to 2030.
Reduction of inequality
3.2. Water
■
Plan 2030 (NDP 2012) Agriculture is not included in the first phase, and
■ Highlighting the importance of agriculture to the green economy
The regulatory landscape of the water sector in it is uncertain as to how (and whether) it will be
The Strategic Plan for the
■ Providing an effective framework to address various challenges 2018 was predominantly influenced by the included in the second phase. The basic tax rate
facing the sector prolonged drought experienced across the is set to be R120/tonne CO2e, with a basic
Department of Agriculture,
■ Setting targets for the departmental programmes from 2012 to 2017 country. The policy updates were characterised allowance of R48/tonne CO2e.
Forestry, and Fisheries ■ Focusing on building a leading, dynamic, united, prosperous and by the need for agricultural water users to reduce
(DAFF 2013) people-centred sector their water consumption, monitor their water From 2022 onwards, farmers could be paying
The Agriculture Integrated ■ Devising plans to develop equitable, productive, competitive, usage, and comply with metering installation both direct and indirect carbon taxes. Direct
Growth and Development profitable and sustainable agriculture, forestry, and fisheries sectors enforcements and reporting requirements emission sources listed in the Act relevant to
Plan (IGDP 2012) ■ Emphasising that the sector needs to benefit all South Africans specified by the National Department of Water agriculture include N2O emissions; urea
and Sanitation (DWS). Water restrictions resulted application; liming; biomass burning; land use
The Agricultural Policy Action ■ A programmatic response to key policy documents, including the in major economic and employment losses in the change; and diesel generators with a combined
Plan (APAP 2014) National Development Plan (NDP) and the New Growth Path (NGP) agricultural sector, which are detailed in the capacity of 10 MW or greater.
2019 Agri MIR.
■ NEMA is the overarching legislative framework for environmental
governance. Core values are reflected through the following principles:
The National Environmental ■ Environmental management must place people and their needs at
3.2.1. Water policy updates for
Management Act 107 of 1998 the forefront of its concern, and serve their physical, psychological, agriculture From 2022 onwards, farmers could
(NEMA 1998) developmental, cultural, and social interests equitably There are still large parts of the province that are be paying both direct and indirect
■ Development must be environmentally, socially, and economically experiencing drought conditions. Many local
carbon taxes. Direct emission
sustainable municipalities have water restrictions in place.
Four other provinces in SA are expected to
sources listed in the Act relevant to
■ The IRP is an electricity infrastructure development plan based on agriculture include N2O emissions;
implement water restrictions: parts of Gauteng,
least-cost electricity supply and demand balance, taking into account
Integrated Resources Plan security of supply and the environment (minimise negative emissions
the North West, Free State and Mpumalanga. Low urea application; liming; biomass
(IRP) 2019 and water usage) dam levels are attributed to high temperatures, burning; land use change; and diesel
■ A detailed analyses of the policy can be found in the 2020 Energy very low rainfall, and high consumption rates. generators with a combined
Services MIR4
capacity of 10 MW or greater.
More detail on water policy and legislation can be
found in the 2020 Water MIR6.
Table 3: Draft policies in SA agriculture
Name of draft policy Key objectives
■ To promote and establish ecologically and economically sustainable
agricultural systems to increase food security
Draft Conservation ■ Recommending government to offer producers with incentives to
Agriculture Policy (2017) adopt conservation agriculture measures, thereby developing
incentive schemes, and that tax rebates are provided to
manufacturers of conservation agriculture equipment
■ To outline the role of climate smart agriculture (CSA) practices in
addressing climate change related vulnerabilities facing the
agricultural sector
Draft Climate Smart
■ Highlighting the importance of integrating mitigation and adaptation
Agriculture Framework
strategies into production systems, and the need for resource
Policy (2018) investment into indigenous knowledge systems
■ To guide government, investors and developmental partners in
integrating CSA within projects and programmes
5
http://www.greenagri.org.za/
4 6
https://greencape.co.za/market-intelligence/ https://greencape.co.za/market-intelligence/
19 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 2048+28+2031
Indirect emission sources listed in the Act relevant to agriculture include, electricity, diesel, petrol and 3.4. Land Reform Empirical data for land
N2O emissions. Figure 8 illustrates typical CO2e contribution of different inputs for commercial fruit and South Africa adopted the White Paper on South reform strategies
wine farms in SA. African Land Policy in 1997 to address the The DAFF together with Statistics South Africa
historical discriminatory injustices in land launched a Farmer Producer/Register Campaign
dispossession during colonialism and apartheid, in September 2018 to gather more information on
which transpired into inequalities in land the country’s smallholder farmers. It would assist
ownership and land use. The White Paper was government in measuring the progress of land
one of the earliest pieces of democratic reform by using the data to inform its strategies.
legislation to emphasise the need for sustainable The Western Cape phase of data collection
use of land. It also introduced the three started in November 2019. It is expected that the
48% ELECTRICITY fundamental components of land reform as entire process will be completed in 2021. The
28% FUEL restitution, redistribution, and tenure reform. census would be conducted in two parts –
20% FERTILIZER Various policies have since been introduced by focusing on commercial farmers in 2019 and
3% AGROCHEMICALS the State to support successful land reform smallholder farmers in 2020. A total of R10 million
1% LAND-USE CHANGE transitions. These include the Land Redistribution has been invested into the census database.
for Agricultural Development (LRAD) programme,
the Proactive Land Acquisition Strategy (PLAS), 3.5. International regulations
and the Settlement Production Land Acquisition Many of SA’s agricultural products are exported
Grant (SPLAG). and as such have to adhere to international
environmental regulations and standards. The
3.4.1. Land reform policy updates wine industry in particular has a well-established
Figure 8: Fruit and wine farm CO2e “hotspots” (Blue North, 2019) There have been some key updates within the certification scheme, namely the Integrated
land reform policy arena during 2019. Production of Wine (IPW), which complies with
international wine industry environmental
Table 4: Projected cost of carbon tax for fruit and wine farmers (Blue North, 2019)
Land expropriation and redistribution sustainability criteria, including the Global Wine
The Joint Constitutional Review Committee (JCRC) Sector Environmental Sustainability Principles as
Electricity Diesel Nitrogen fertiliser
released its final recommendation in which it published by the International Federation of Wine
Consumption per 3 353 kWh 320 L 101 kg advised that Section 25 of the Constitution of and Spirits (FIVS), as well as Guidelines for
bearing ha7 South African should be amended to allow sustainable Viti-viniculture: Production, processing
expropriation of land without compensation as a and packaging of products as published by the
9
Approximate tax rate Indirect: 7.5c/kWh8 Indirect: 10c/L Direct: R48/tonne CO2 legitimate option for land reform. The next steps in International Organisation of Vine and Wine (OIV).
this process are for the Section 25 Ad Hoc
Projected cost per R252/ha R32/ha R59/ha
Committee to initiate and introduce legislation More recent international regulatory
bearing ha
which is expected to be gazetted in December developments are discussed below.
2019. Also, in May 2019, the final report of the
3.3.1. Policy implications Presidential Advisory Panel on Land Reform and 3.5.1. Synthetic chemical bans
The carbon tax is expected to be a key driver in the uptake of technologies and practices that increase Agriculture were released with several detailed China and the European Union (EU) are SA's
resource efficiency and decrease dependence on synthetic fertilizer on farms. This includes precision recommendations. It is expected that many of largest fruit, nut, and wine importers. China’s
agriculture technologies and regenerative agriculture practices, discussed in more detail in Section 4 of these recommendations will be used to inform the increasingly strict environmental compliance
this report. The latter also holds potential for sequestering atmospheric carbon, and can be used to offset finalisation of a comprehensive, far-reaching and requirements and the routine banning of
carbon emissions. transformative land reform programme. mainstay chemical pesticides by the EU will
affect SA’s production input:
In his State of the Nation address, President ■ The EU has implemented a near total ban on
Ramaphosa committed government to neonicotinoids, currently the world’s biggest
accelerating efforts to release public land for insecticide group.
farming and urban settlements, whilst around R4 ■ Switzerland is to vote on a complete synthetic
billion has been allocated to the Land Bank pesticide ban within the next three years.
to support black commercial farmers. ■ France has indicated an intention to phase out
synthetic pesticides in five years.
■ China leads the world in generic pesticide
production and currently produces 90% of the
world’s active ingredients. Thus, any
7
disturbance in supply from China affects the
Average consumption is based on graded datasets contained in the CCC database and reflects a combined average of South African
fruit and wine data. supply and demand equation globally.
8
Estimated indirect carbon tax levy. No official information on the electricity tariff was available at the time of writing.
9
Expected maximum effective carbon tax rate. Nitrogen carbon costs were determined using an emission factor of 12.044 kg CO2/kg N
fertilizer.
21 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 224
Opportunities and
barriers
Renewable energy and conservation agriculture solutions continue to offer
opportunities for investors and businesses in the agriculture sector. Emerging
opportunities with significant growth potential include technologies for
undercover, precision, and urban agriculture. The main market drivers for these
opportunities are climate adaptation and water risk mitigation.
This section starts by providing brief updates ■ precision agriculture (PA), in particular the
on the 2019 MIR for agriculture-related market growing demand for bespoke advisory
opportunities in renewable energy (RE), services. These services have capitalised
conservation agriculture (CA), and undercover on the emerging opportunities in software
farming (UF). development and add value to relatively
mature technology, specifically remote
For a more in-depth analysis of these sensing technology such as sensors, drones
opportunities, including energy efficiency and satellite imaging; and
in agriculture, refer to the 2017 and 2018 ■ urban agriculture (UA), which is in its infancy
Agriculture MIRs. Opportunities are then in South Africa and encompasses different
addressed in more detail for: production technologies. The section will
focus on emerging trends for hydroponic
UA in South Africa.
© Oranjezicht City Farm
© Oranjezicht City Farm
23 Sustainable Agriculture: Market Intelligence Report 2020 Sustainable Agriculture: Market Intelligence Report 2020 24Table 1: Summary of market opportunities (repeated here from page 3)
Requirement Requirement
Opportunity Key drivers Term Macro environment Opportunity Key drivers Term Macro environment
& barrier & barrier
■ Rising electricity ■ Strong business case Short to SA was the fastest ■ Resource scarcity, Barriers highlighted by Medium Globally, agriculture
tariffs for large (e.g. cold medium grower of solar particularly water current players in the to long is the least digitised
■ Security of energy storage) and term photovoltaic (Solar PV) availability field includes: term sector (throughout its
supply year-round installations in 2017 ■ Global ■ The mind-set change value chain) and thus
■ Increasing ability energy users globally. An estimated competitiveness and required by farmers to technology-based
Renewable to feed back into ■ Seasonal nature 10% of all solar PV economies of scale adopt new farm decision-making
energy (solar the grid of agriculture installations are in the Precision ■ Technological management is still emerging.
photovoltaic) ■ Decreasing cost of production affects agricultural sector, and advances in drone, technologies.
agriculture
technology the business case the business case is satellite and ■ A lack of integration Remote sensing
(remote
■ Innovative finance well known to the information between various applications is an
sensing disciplines. emerging market in
options industry. communication
■ Corporate social
applications) technology and ■ The inclusion of the SA’s agriculture sector,
responsibility (CSR) the Internet of end user in developing with the exception of
Things (IoT). software solutions, GPS guidance for
■ The main driver is soil ■ High cost of Medium Globally, the uptake of which results in tractors.
degradation resulting equipment to long CA is high, particularly limited understanding
from conventional ■ Long-term return on term in South America. Only of the end user’s
tillage and investment when 15% to 20% of actual needs.
subsequently converting from commercial grain
diminishing returns on conventional to farmers and 5% of ■ Resource scarcity ■ Enabling municipal Long Urban agriculture
Conservation
land, due to factors conservation smallholder farmers in ■ Urbanisation support environment, term (UA) growth is the
agriculture
such as decreased practices SA have adopted CA. ■ Advances in such access to water largest in Asian
(no-till technology, and space. countries characterised
moisture-holding ■ Sustainable farm
planting capacity and specifically Access to finance for by high-density urban
management ■
equipment) biological functions practices such as hydroponic systems technology populations. In
crop rotation and and LED lighting infrastructure particular, vertical
permanent soil cover ■ Consumer ■ Lack of technical farming production,
play an important role preferences for locally knowledge as it uses space
to improve the produced food ■ Business case not well more efficiently
business case Urban ■ Waste minimisation established than flat structures.
agriculture Commercially
■ Resource scarcity ■ High capital cost with Low- Greenhouses are well (hydroponic viable production
■ Increased yields and limited financing tech established globally. production) of agricultural produce
quality options systems: SA, as with most in SA’s urban
■ Providing products ■ High cost of electricity Short to developing countries, environments is still in
out of season affects viability of medium has been very slow to its infancy. Various
■ Climate change controlled term adopt greenhouse factors, such as
■ Technological environment systems technology, and is spacing, scale, product
Undercover advances in LED ■ Business case not well High- estimated to be 50 demand and market
farming lighting established for tech years behind developed access needs to be
(various high-tech systems systems: European countries better understood to
technologies) ■ Lack of technical Long such as the create successful
knowledge term Netherlands. enterprises.
Low-tech systems such
as netting and tunnels
are growing rapidly,
particularly for high
value export fruits.
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