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Climate Finance: Advancing the agricultural transformation agenda

OPEDS By Nancy Phoebe Rapando | November 30th 2020 at 03:45:00 GMT +0300
Cane transport, an emerging business opportunity for SMEs in the Kenyan sugar belt.

Africa’s agricultural transformation demands that more countries go beyond increasing productivity to addressing the negative impacts of climate change on the agricultural sector.

In Kenya, efforts to transform the agriculture sector have resulted in key reforms targeting high potential industrial crops, such as sugarcane, tea, cotton, and coffee, among others.

The sugar sector is an incredibly important sector with untapped potential for growth that is capable of improving the livelihoods of locals. That notwithstanding, production of agricultural commodities, such as, sugarcane, continues to suffer as a result of challenges related to extreme economic and climatic shifts - creating uncertainty for the sector.

Based on our 50 years’ supply chain experience, Solidaridad recognizes that building a sustainable sector requires multi-stakeholder approaches, adoption of innovative technologies, and deploying good agricultural practices.

Such practices include climate smart practices such as water and waste management, investment in flood protection, resilient crop varieties, sustainable soil management, and new infrastructures.

Similarly, access to finance, resources, and technologies, are critical for a climate-resilient and low-carbon agriculture sector.

Kenya as a country has made strategic strides in addressing the impact of climate change in agriculture through various frameworks (for example, Kenya Climate Smart Agriculture Strategy, 2017-2026).

These frameworks recognize the agriculture sector's contribution to the national Gross Domestic Product (GDP), but also its vulnerability to the adverse effects of climate change and climate variability.

More strategic steps are however needed if Kenya is to realize significant gains and opportunities in addressing climate change and particularly, achieving net-zero emissions as required by the Paris Agreement.

Implementing partners are diligently working with public and private sector actors to leverage on global experience to link best practices and technologies from Brazil, India and South Africa to support business cases and promote an enabling market for the agriculture sector in Kenya.

At Solidaridad, we are focused on supporting natural resource management and reduced greenhouse gases in key sectors, such as the sugar sector.

Importantly, the Kenya Agriculture Sector Growth and Transformation Strategy (ASTGS) recognizes the role of the private sector as a driver of and investor in agricultural transformation.

It highlights private finance as a critical missing link needed to bridge the infrastructure investment gap in the agriculture sector.  However, this can only be fulfilled if governments provide an enabling framework that facilitates private investment.

Climate finance is critical for bridging the existing financing gaps in Kenya’s agriculture sector.

KCB Group’s accreditation with the Green Climate Fund is poised to benefit agricultural industries (such as the sugar sector) that struggle to attract traditional financing. This is anticipated to catalyze action towards adaptation and accelerate creation of new low-carbon technology markets.

Worth noting, public finance alone cannot support the transformation of the already struggling sectors towards a climate-resilient and low-carbon future.

Moreover, resources allocated to this sector by governments in African countries remain inadequate to support prioritization of technology and infrastructure.

On the other hand, grants are designed in most cases to address capacity building and awareness creation. KCB is therefore well positioned to contribute to a paradigm shift that catalyzes impact at scale and contributes to Kenya’s green economy agenda.

The Green Climate Fund financing envisions a blended finance model that leverages on government support, private sector engagement, and implementing partners, such as Solidaridad.

Blended finance under such partnership structures would help de-risk and facilitate access to private investment for acquisition of climate resilient and low carbon technologies that would otherwise be unattainable - for example, promoting waste-to-energy from sugarcane products.

Climate finance therefore serves as a powerful tool with the ability to increase participation of SMEs in the sugar sector, as it promotes local SME inclusion through the provision of capital investments required for technology-based transitioning. This is even more appropriate at this time when SMEs in Kenya are facing disruption in global supply chains and liquidity crisis that has been further exacerbated by the global Covid-19 crisis.

The accreditation of the KCB Group under the Green Climate Fund platform will help shorten the pathway to climate finance access and strengthen Kenya’s capacity to develop a variety of locally-driven solutions.

It also shifts financial flows towards a low-carbon, climate-resilient agriculture sector and enables Kenya to catalyze much needed financing to scale up climate action.

As the first local private financial institution to be accredited in Kenya, KCB will play a major role in strengthening other institutions both private and public in addressing key barriers to accessing climate finance.

To increase the number of actors in the climate space, governments and non-state actors need to scale up technical support towards the design of bankable projects.

Businesses, governments and non-governmental organizations will therefore need to work together and facilitate increased flows of knowledge, insights, resources, and finance towards climate-sensitive sectors like the agriculture sector.

Nancy Phoebe Rapando is the Regional Climate and Landscapes Innovation Advisor, Solidaridad East and Central Africa

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