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Finance gaps for local green entrepreneurs need to be addressed

20th July 2022

By: Darren Parker

Creamer Media Contributing Editor Online


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Local green entrepreneurs (LGEs) are faced with a finance gap in South Africa, with many small, medium-sized and microenterprises (SMMEs) operating in the space seeking funding and support and struggling to find it, economic research firm Trade and Industrial Policy Strategies (Tips) sustainable growth researcher Elize Hattingh has noted.

LGEs have the agility to accelerate access to new markets and play a catalytic role in the diffusion and uptake of green innovations, owing to their role as key adopters and testers for radical green innovations in the production and manufacturing of environmental goods, services and technologies – which many established firms view as high-risk and therefore avoid.

Hattingh noted during a July 20 webinar that SMMEs were critical for economic development and job creation, but there should also be acknowledgement of their potential to be vital economic players in driving inclusive and sustainable development.

Such enterprises could play a substantial role in developing inclusive pathways towards sustainability and were, therefore, at the forefront of climate responses and innovations – both in terms of adaptation and mitigation – and environmental sustainability.

This was the sentiment shared by speakers in a July 20 webinar titled 'Unpacking South Africa's Road to Building Back Better, Fairer and Greener', hosted by Tips, in collaboration with the Green Economy Coalition (GEC) and the Delegation of the European Union to South Africa, which sought to address access to inclusive finance for local green entrepreneurs in South Africa.

The webinar aimed to unpack issues surrounding access to inclusive finance for LGEs in South Africa, with the hope of influencing national policymakers and sustainable finance stakeholders, including donors.

Some of the signature policy issues raised during the webinar included sectoral challenges, a lack of risk appetite from funders for early-stage finance, limited access to financial services, financial ecosystem challenges, narrow fit-for-purpose green industry financial products, and a draft SMME and cooperative finance policy that failed to mention how it would support SMMEs in green industries.

The Covid-19 pandemic and associated policy responses have led to increased poverty, inequality and unemployment. Many governments globally have responded through substantial policy packages aimed at mitigating the negative impacts of these policies on households and businesses, and reigniting the economy.

Simultaneously, strong calls for a better, fairer and greener recovery have led many governments to commit additional resources towards the green economy transition.

Hattingh said such green recovery efforts and a just transition to a green and inclusive economy offered an opportunity to develop and implement a shared vision of resilience and sustainability.

However, questions remained regarding the inclusivity and green credentials of recovery packages, with South Africa being no exception.

In the energy sector, female-owned SMMEs sought multimillion-rand funding and land for participation in embedded generation projects, while agricultural SMMEs experienced a severe lack of support for innovation in the green technology space, Hattingh said.

Additionally, a bridge between the informal and formal waste sectors, along with ongoing support, was required to create sustainability. Meanwhile, youth-owned SMMEs in the water sector were seeking participation in purified water access projects, including harvesting and transporting the water. These SMMEs lacked access to the required assets, such as trucks and filtering equipment.

“Green financing should be promoted by including it in policy. We really feel it's very important that policymakers take time to pause and look at how they can make more inclusive finance available in green industries,” Hattingh said.

The webinar was the fourth session in a series called 'The Green Recovery Dialogues', which can all be viewed on demand on the Tips website.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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