Green economy organisation Greencape is drafting policy recommendations around development and support for green small, medium-sized and microenterprises (SMMEs), which is being informed by a support programme the company launched with help from the European Union (EU).
Greencape had earmarked 12 SMMEs to be supported through the Green Outcomes Fund (GOF), which was established by Greencape and the National Treasury’s Jobs Fund.
In turn, the EU delegation in South Africa partnered with the GOF to effect green economic recovery from the Covid-19 crisis.
The GOF incentivises local South African fund managers to increase investment in green SMMEs.
The fund aims to achieve green outcomes, encourage greater capital allocation to green businesses by local fund managers and catalyse increased and higher-quality reporting of green impacts.
Leading a webinar discussion on the company’s policy recommendations and how the 12 SMMEs are getting on, Greencape communications head Cilnette Pienaar says the policy recommendations will, in due course, be presented to Treasury after the EU project has concluded in mid-December.
The fund is still in its first year of implementation, having been launched in January this year.
The EU funds, that have been facilitated through GOF, have assisted these companies in keeping overheads low, buying personal protective equipment, product testing and create additional job opportunities.
Pienaar says South African SMMEs have a central role to play in the long-term growth and development of the South African economy, particularly in achieving the large-scale job creation that is necessary to reduce unemployment.
Given the important role SMMEs have in the economy, it becomes imperative to support sustainable small businesses. Pienaar points out that policy responses put in place now will have long-term effects on the structure, competitiveness and long-term sustainability of the South African economy.
The EU says it recognises SMMEs as the backbone of an economy and where jobs come from.
“We will eventually find a vaccine for Covid-19, but there is no vaccine for climate change or loss of biodiversity; therefore, green economies are needed now,” says head of the EU delegation to South Africa Ambassador Riina Kionka.
Chargé d’Affaire for the EU delegation in South Africa Raul de Luzenberg adds that the EU intends to be climate neutral by 2050 and aims to not leave anyone behind in their pursuit of similar goals.
Ambassador of France to South Africa Aurélien Lechevallier agrees, stating that countries across the world are facing the same threats and that it makes sense to share experiences, successes and failures to meet common commitments such as the Paris Agreement.
He says that France, in particular, sees the crisis as an opportunity to address climate change challenges and to ensure an inclusive transition away from old technologies for all.
France had launched a national recovery plan valued at about £3-billion, which is built on green economy principles in pursuit of social housing, smart mobility, decarbonisation of industry and development of green technology such as biofuels, hydrogen and recycling.
From the Jobs Fund side, technical financial analyst Nazeem Hendricks says the collaboration between the GOF, Greencape and the Jobs Fund will provide the market incentive to invest in the green economy, with these models becoming more crucial to developing long-term sustainable businesses and economies.
As a GOF partner, investment fund CI Ventures senior regional manager Erica Flemming says the fund tends to support SMMEs that make a positive environmental impact, have fewer than 250 employees and generate less than R100-million in revenue a year.
She adds that, most often, CI Ventures provides support funding for early-stage SMMEs active in sustainable food production, restoration of degraded land and protection of conservation; CI Ventures generally makes investments of between R2-million and R8-million in one business.
Investment service Edge Growth Ventures, also a GOF partner, investment principal Shrivar Mohan says it tends to support businesses that prevent harm to the environment, and prefers the renewable energy, waste management, water conservation and management, and sustainable agriculture sectors.
Edge Growth looks to support SMMEs that are majority black-owned and have a business-to-business model, or those with high potential to be a corporate supplier.
Climate change think tank E3G senior associate Jesse Burton says more stakeholders are recognising the integral role that SMMEs play in the economy and how vital it has become to support them, particularly those recovering from Covid-19 impacts at the moment.
She points out that recovery support is often only considered for large corporates to avoid retrenchments, but small businesses account for 70% of the labour force in South Africa and contribute about a third of gross domestic product.
Burton, in agreement with Greencape, believes green SMMEs should be prioritised by government, to enable their long-term growth, in line with international trends of sustainable and environment-friendly economies.
“Green business speaks to global energy and digital economy transitions.”
She further explains that innovative funding models for SMMEs can save their businesses and help them grow, with most SMMEs having reported lower revenue across the country in the past few months and many having ceased operations permanently.
“By supporting green SMMEs, South Africa can address socioeconomic challenges, address Covid-19 impacts and promote general sustainability practices.”
Burton mentions that policy responses now will have long-term impacts on the competitiveness and sustainability of South Africa’s economy, which calls for careful orientation in terms of what it needs to save and support.
She advocates that lessons from green SMMEs can be applied to broader issues. The green SMME model can be widely applied in South Africa’s green transition process.
“We can use the lessons from these kinds of blended financing options and support mechanisms to think about how to rebuild the coal economy in Mpumalanga, for example. People have not come up with solid models for building an economic diversification strategy, which having an SMME-focus can help with.”