Agriculture

–
2016
Market Intelligence Report
–
2 Agriculture: Market Intelligence Report 2016
GreenCape
GreenCape is a non-profit organisation that supports and
promotes the green economy - low carbon, resource efficient and
socially inclusive - in the Western Cape, South Africa. We assist
businesses and investors focusing on green technologies and
services to remove barriers to their establishment and growth.

Acknowledgements
We thank Inge Kuschke and Jannie Geyer for the time and effort
that went 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 that may arise out of the reliance of any
person or entity upon any of the information this report contains.

Copyright © GreenCape 2016

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18 Roeland Street, Cape Town, 8001, South Africa

Editorial and review: Cathy Pineo, Leann Cloete-Beets, Maloba Tshehla and Pieter Janse van Vuuren
Images: GreenCape, Western Cape Department of Agriculture
Cover: Western Cape Department of Agriculture
Layout and design: Deep Design

Agriculture: Market Intelligence Report 2016 3

Contents
Acronyms 5
List of figures 6
List of tables 7
Executive summary 8
1. Introduction and purpose 10
2. Sector overview 12
2.1. Physical geography 12
2.2. Economic overview 15
2.2.1. South African agriculture 15
2.2.2. Agriculture commodities in South Africa 16
2.2.3. Production trends in South African agriculture 17
2.2.4. Western Cape agriculture 19
2.3. Key players 20
2.4. Drivers of green technologies and approaches in agriculture 21
2.4.1. Climate change and water scarcity 21
2.4.2. Environmental degradation 22
2.4.3. Market pressure and limited resources 22
2.4.4. Electricity cost and supply 23
3. Policies and regulations 25
3.1. Agriculture 25
3.2. Water 26
3.3. Land reform 26
3.4. Carbon tax 26
4. Opportunities and barriers 27
4.1. Energy efficiency in the Western Cape’s agricultural sector 27
4.2. Solar PV in the Western Cape’s agricultural sector 30
4.3. Conservation agriculture 34
4.4. Precision agriculture 36
4.4.1. Water efficiency 36
4.4.2. The growing market for drone technology in agriculture 39
4.5. Biological control 40
4.6. Bioenergy Biogas from agricultural waste 42
5. Funding and incentives 43
5.1. Manufacturing incentives 46
6. The Western Cape: Africa’s growing greentech hub 47
7. GreenCape’s support to businesses and investors 49
Appendix A: Key role players 51
References 54

4 Agriculture: Market Intelligence Report 2016

List of acronyms
AD Anaerobic Digestion
ARC Agriculture Research Council
CA Conservation Agriculture
CAGR Compound Annual Growth Rate
CCA Customs-controlled area
CSIR Council for Scientific and Industrial Research
DAFF Department of Agriculture, Forestry and Fisheries
DFI Development Finance Institutions
DWA Department of Water Affairs
EE Energy Efficiency
EEPACS Energy Efficient Packhouse and Cold Stores
EIA Environmental Impact Assessment
ETI Employment Tax Incentive
FAO Food and Agriculture Organisation of the United Nations
GDP Gross Domestic Product
GHG Greenhouse Gas
GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit
GW Gigawatt
GWh Gigawatt-hour
Ha Hectares
IDC Industrial Development Corporation
IGDP Integrated Growth and Development Path
IPM Integrated Pest Management
kW Kilowatt
kWh Kilowatt-hour
kWp Kilowatt peak
LED Light-emitting diode
MW Megawatt
MWe Megawatt electric
MWp Megawatt peak
NBI National Business Initiative
NDP National Development Plan
NDVI Normalized Difference Vegetation Index
NERSA National Energy Regulator South Africa
NGP National Growth Path
NWA National Water Act
NWRS2 National Water Resource Strategy 2nd Edition
PA Precision Agriculture
PQRS Power Quality and Renewable Services
PSEE Private Sector Energy Efficiency
PV Photovoltaic
R&D Research and Development
RE Renewable Energy
REIPPP Renewable Energy Independent Power Producer Procurement
RHFA Relatively Homogeneous Farming Areas
ROC Remote Operating Certificate
RPA Remotely Piloted Aircraft

Agriculture: Market Intelligence Report 2016 5

RPAS Remotely Piloted Aircraft System
RPL Remotely Piloted Licence
SSEG Small Scale Embedded Generation
SA South Africa
SANAS South African National Accreditation System
SARS South African Revenue Service
SEBAL Surface Energy Balance Algorithm for Land
SPDAFF Strategic Plan for the Department of Agriculture, Forestry and Fisheries
Stats SA Statistics South Africa
TAI Tax Allowance Incentive
TWh Terawatt-hour
UAV Unmanned Aerial Vehicles
USA United States of America
USD United States Dollar
WC Western Cape
WCDoA Western Cape Department of Agriculture
WCDEA&DP Western Cape Department of Environmental Affairs & Development Planning
WSA Water Services Act
WWF World Wide Fund for Nature
ZAR South African Rand

List of figures
Figure 1
Agricultural production value chain 10
Figure 2
South Africa biomes 12
Figure 3
Broad Relatively Homogenous Farming Areas in the Western Cape 13
Figure 4
Top ten South African commodities in tonnes produced (2012) 16
Figure 5
Top ten South African commodities in production value (2012) 17
Figure 6
Gross value of agriculture production for select commodities 18
Figure 7
Expenditure on certain intermediate products 18
Figure 8
Range of commodities in the Western Cape 19
Figure 9
Increases in the real-term cost of electricity in South Africa 23
Figure 10
Electricity breakdown on the average fruit and vegetable farm 28

6 Agriculture: Market Intelligence Report 2016

Figure 11
Electricity use in cold stores, cooling and drying of fruit 29
Figure 12
The cost of PV over time 31
Figure 13
Percentage of arable land under CA 2011 35
Figure 14
Proportion water use per main economic sector 36
Figure 15
Value of expenditure on dips and sprays over time in South Africa 41
Figure 16
Major market opportunities in the Western Cape (2015 – 2020) 47
Figure 17
GreenCape’s focus areas 50

List of tables
Table 1
Summary of crop / livestock commodities for each agro-climatic zone in the Western Cape 14
Table 2
Number of farms and farm turnover 2007 16
Table 3
Western Cape exports by sector 20
Table 4
Key role players in agriculture 21
Table 5
Arable land cover in South Africa 23
Table 6
Selected acts and plans relevant to the agricultural sector 25
Table 7
Number of agri sector facilities in the Western Cape 30
Table 8
Municipalities (WC) that have PV rules, regulations and tariffs 32
Table 9
Small scale embedded generation (SSEG) residential tariffs 33
Table 10
Potential value of adopting PA 37
Table 11
Possible cost saving and investment feasibility 38
Table 12
Global market for pesticides 40
Table 13
List of funding solutions 43
Table 14
Key role players 51

Agriculture: Market Intelligence Report 2016 7

Executive summary
This agriculture sector market intelligence report
focuses on opportunities for greening primary agriculture
production. It is written for investors, businesses and
farmers and focuses on conservation agriculture, water and
energy efficiency, renewable energy, biological control and
precision agriculture.

The biggest drivers for the uptake of green Pollution and soil degradation affect farmers’
technologies and practices in South African profits over time and reduce their resilience
agriculture are rising input costs, limited natural to external risks such as droughts and climate
resources (particularly arable land and water) change.
and increasing consumer demand for more
sustainable products. A third driver for green technology and
sustainable agricultural practices relates to
Rising input costs involve conventional consumer demand. Even though South Africa’s
products like fertilisers, pesticides, energy demand for pesticide-free products is relatively
(mostly diesel and electricity) and water. The low, pressure from international markets affect
demand for these inputs (and the associated South African exports. In order to participate
cost) are rising in order to increase, or at least globally, growth in green technology and
sustain, yields. Also, the prices of conventional sustainable agricultural practices will need to
products typically exclude the additional cost increase.
of the harmful effects on the environment.
This drives the economic and environmental These challenges, coupled with declining costs
necessity for green technology and sustainable of new technologies, tax and other incentives,
agricultural practices. make it economically feasible for farmers to
adopt certain green technologies, especially
Another green driver concerns arable land and those that improve resource efficiencies. This,
water availability. In the Western Cape, both in turn, creates opportunities for investors and
of these are affected by the climate and the businesses in the green agriculture space.
way land is farmed. Conventional agriculture
often adds to the existing strain on limited
natural resources and results in a decline in
the availability of arable land. Low average
(and irregular) rainfall, exacerbated by climate
change, makes water the biggest limiting factor
to production.

8 Agriculture: Market Intelligence Report 2016

During the course of our engagement with General barriers to the uptake of green
stakeholders in the agriculture and other green technologies and sustainability measures in
economy sectors, a number of opportunities in South African agriculture include:
energy, water and the use of chemical inputs
have been identified. These include: ■■ A lack of awareness about the importance
and benefits of sustainable production and
■■ Alternative energy sources and energy how to go about realising it.
efficiency technologies are becoming more ■■ Regulatory hurdles, for instance, on
affordable and more necessary due to rising timeliness of Environmental Impact
energy costs. Opportunities for farming Assessments (EIAs) and registration of new
operations include solar PV and biogas. products.
■■ Water use efficiency technologies in ■■ Insufficient support for farmers to access
irrigation to address water scarcity and save information and advice on best practice.
electricity used to pump water. ■■ Weak exchange rate and low profit margins
■■ Precision agriculture techniques which make importing technologies too expensive
reduce agricultural inputs – including water for farmers.
and fertiliser – resulting in lower costs and ■■ Lack of funding for R&D – the performance
fewer environmental impacts. of R&D expenditure is also much higher for
■■ Environmentally-friendly alternatives to businesses than for government.
chemical inputs to increase soil health and
biodiversity and to reduce pollution. This
should include attention to opportunities
arising from greater consumer awareness
of harmful effects of chemical inputs and
from stringent environmental regulations by
export markets. Investment opportunities lie
in the research and development (R&D) of
such products.

© GreenCape

Agriculture: Market Intelligence Report 2016 9

1–
Introduction and
purpose
This market intelligence report (MIR) was compiled by
GreenCape’s agriculture sector desk. It is written for
investors, businesses and farmers and focuses on conservation
agriculture, water and energy efficiency, renewable energy,
biological control and precision agriculture.

Agriculture is a new focus area for GreenCape fewer inputs, while simultaneously benefitting
and this report is the result contains some of the environment by conserving resources and
our key insights from 2015 and early 2016. reducing negative impacts such as pollution.
It provides an overview of the agriculture
sector in South Africa and the Western Cape Agricultural production is a highly integrated
Province and our initial insights on barriers and system as can be seen in the typical agriculture-
opportunities in the green agriculture1 space. production value chain in Figure 1 (Boye &
The report focuses on primary agriculture Areand 2012). While investment opportunities
production and highlights opportunities related can be found throughout the value chain, this
to technologies and practices that increase MIR will focus mostly on primary agriculture
production efficiency - producing more with production.

SUPPLY of materials, resources and energy (e.g. chemicals, water, diesel, electricty)

1. Raw Materials 2. Food Processing 3. Distribution 4. Use

Production

Packaging materials

Fertilizer, herbicides
and pesticides Primary Secondary Wholesale
manufacturing Processing Processing
eg. sugar refining, eg. yoghurt, Refrigeration
milling, breakfast cereals, Freezing
Crop slaughtering soft drinks Retail
Cooking
Cattle production,
farming fruits and
vegetables
Consumer
farming
Packaging Packaging

Animal feed

WASTE MANAGEMENT (eg. wastewater, organic residues, packaging residues)

Figure 1: Agricultural-production value chain

1
Green agriculture refers to farm practises and technologies that form part of sustainable agriculture, by ensuring sustainable ecosystem services,
reducing negative externalities and rebuilding ecological resources.

10 Agriculture: Market Intelligence Report 2016

The industry overview in Section 2, below, The section concludes with specific
outlines the South African and Western Cape opportunities and barriers for the greening of
agricultural context by presenting the physical agriculture, namely opportunities in energy
geography and consequently the commodities efficiency, solar PV, conservation agriculture,
that are produced per geographical area. precision agriculture, and biological control, to
We also provide a provincial and national biogas from agricultural waste.
economic overview of agriculture with a focus
on the macro-economic trends and value of The final sections of the report outline funding
commodities in the sector. Key players in the solutions and investment incentives (Section
agriculture sector are considered, followed by 5), present the case for the Western Cape as a
an overview of policies and regulations (Section potential greentech hub for Africa (Section 6)
3) that guide and affect the agriculture sector. and explain in more detail GreenCape’s work
within the green economy (Section 7).
The aim of Section 4 is to present opportunities
and barriers for the greening of agriculture.
It starts by outlining factors that give impetus
to the greening of agriculture. These include
climate change, unsustainable farming
practices, and other aspects that affect land
and water availability in the country and
province.

© Western Cape Department of Agriculture

Agriculture: Market Intelligence Report 2016 11

2–
Sector overview
This section focuses on the South African
and Western Cape agricultural context.

It provides an overview of the physical 2.1. Physical geography

geography, commodities produced per area, South Africa is a semi-arid country. This
macro-economic trends and the value of enables the production of a wide range of
commodities. We discuss key players, followed agricultural commodities. In terms of its
by drivers of green technology and approaches physical geography, the country has a range of
in agriculture that give impetus to investment in geomorphological settings resulting in a great
the green agriculture space. variety of soil and climate conditions. Climatic
regions in South Africa include mediterranean,
subtropical and semi-desert.

Figure 2: South African biomes

12 Agriculture: Market Intelligence Report 2016

Figure 2 (Basson 2015) illustrates the diversity As the Western Cape is a winter rainfall region,
in biomes – the result of the physical landscape its agriculture sector is unique in South Africa.
and variety in rainfall distribution across SA. The province is also known for its production
As a result, the country has a very diverse stability, supported by well-developed
agriculture sector, with a clear regional infrastructure.
distribution of commodities. For instance,
approximately 70% of South Africa’s cereals Figure 3 (Wallace 2015) illustrates the diversity
and 90% of its commercially grown maize is of agro-climatic zones in the Western Cape
mainly rain-fed on the Highveld2 (Blignaut et al which allows for a variety of agricultural
2014). By land surface area, livestock is by far commodities. Table 1 (WCDoA & WCDEA&DP
the largest agricultural sector in South Africa as 2015) provides an overview of crop and
69% of the land surface is suitable for grazing livestock commodities for each agro-climatic
(WWF 2010). Cattle production is practiced zone.
mostly in the eastern areas of the country
where higher rainfall is recorded.

Figure 3: Broad relatively homogenous farming areas in the Western Cape

2
The interior of South Africa is on a high-lying plateau, known as the Highveld. The area has grassland as its predominant vegetation.

Agriculture: Market Intelligence Report 2016 13

Table 1: Summary of crop/livestock commodities for each agro-climatic zone
in the Western Cape

Name Main crops Livestock

Bokkeveld Pome fruit, wheat, stone fruit, Cattle
onions, potatoes
Bo-Langkloof-Outeniqua Pome fruit, hops, wheat, stone Cattle, sheep, goats
fruit, flowers, honeybush
Breede Wine and table grapes, wheat, Broilers, egglaying
stone fruit, pome fruit, olives, chickens
citrus, vegetables, flowers
Cape Town winelands Wine and table grapes, wheat, Broilers, egglaying
stone fruit, vegetables, olives, chickens, pigs
canola, citrus, flowers, berries
Cederberg Rooibos, wheat, citrus, wine Cattle
grapes, stone fruit, vegetables,
potatoes, flowers
Grabouw-Villiersdorp-Franschhoek Pome fruit, wine grapes,
wheat, barley, stone fruit,
flowers, berries
GrootBrak-Plett Wheat, barley, vegetables, Cattle, dairy, egg-laying
nuts, berries, flowers, chickens
honeybush
Hardeveld/Sandveld-north Wheat, wine grapes, rooibos, Cattle, sheep
potatoes, vegetables
Hex Table grapes, citrus
Knersvlakte Wheat, wine and table grapes, Cattle, goats, sheep
rooibos
Koup Olives, vegetables and Cattle, game, goats, sheep
vegetable seed, stone fruit
Little-Karoo Wheat, vegetables, wine Cattle, dairy, goats,
grapes, stone fruit, olives, nuts ostriches, pigs, sheep
Montagu-Barrydale Stone fruit, wheat, barley, wine Sheep
grapes, pome fruit, citrus,
olives, flowers, nuts
MosselBay-Herbertsdale Wheat, barley, canola, flowers Cattle, dairy, ostriches,
pigs, sheep
Nelspoort Olives Cattle, goats, ostriches,
sheep
Olifants irrigation Citrus, wheat, wine & table
grapes, rooibos, tomatoes,
potatoes
Piketberg Pears, fynbos flowers, stone Cattle, sheep
fruit, wheat, citrus, herbs/
essential oils, wine grapes,
Cape rush, rooibos

14 Agriculture: Market Intelligence Report 2016

Rooikaroo-Aurora Wheat, canola, rooibos, table Cattle, sheep
& wine grapes, potatoes,
olives, flowers
Rûens-east Wheat, barley, canola, citrus, Cattle, dairy, ostriches,
olives, herbs/essential oils, pigs, sheep
Cape rush, berries, honeybush
Rûens-west Wheat, barley, canola, wine Cattle, dairy, sheep
grapes, pome fruit, flowers,
vegetables, olives, citrus,
herbs/essential oils, berries
Sandveld-south Wheat, potatoes, rooibos, Cattle, sheep
canola, citrus, flowers
Swartland Wheat, wine and table Cattle, dairy, pigs, sheep
grapes, canola, olives, citrus,
vegetables, stone fruit, berries,
flowers
Tankwa-Vanwyksdorp Wheat, stone fruit, wine & Cattle, dairy, game, goats,
table grapes, vegetables, ostriches, pigs, sheep
olives, nuts

2.2. Economic overview production, small holders and subsistence

This section provides an overview of the farmers make further economic contributions,
agricultural economy in South Africa and the although these are harder to quantify.
Western Cape, with a focus on the sector’s
economic contribution, value of commodities Although the production area for maize, wheat
and production trends. and dairy has decreased over the last 20 years,
production remains relatively constant (Stats
SA 2007). This is mainly due to increased
  2.2.1. South African agriculture use of fuel, irrigation and fertiliser, which is
South Africa’s primary agriculture sector economically unsustainable (due to rising costs
contributes significantly to the country’s and limited availability) and environmentally
economy - approximately R58.2 billion ($6.8 unsustainable (mainly due to depleted soil
billion3) or 2% to Gross Domestic Product (GDP) health). Added to these strains is a highly
in 2012. The sector plays a critical role as an competitive global market. For example,
employer and accounted for approximately wheat can be imported at lower cost than local
7% of formal employment in 2013, of which a producers can supply. South African farmers
significant share is unskilled labour (Department do not benefit from subsidies, and therefore
of Agriculture, Forestry and Fisheries (DAFF) struggle to compete with heavily subsidised
2013b). Elementary workers make up 77% of farmers in other countries. However, there are
the agricultural workforce; of those 22% are numerous tax benefits and incentives for farmers
considered unskilled. The agricultural sector wishing to improve the sustainability of their
is also important for ensuring the country’s operations (these are presented in Section 5).
food security. In addition to commercial-scale

3
USD value calculated by using the average annual exchange rate for 2012 of 8.553:1 (ZAR:USD)

Agriculture: Market Intelligence Report 2016 15

According to the Census of Commercial Table 2: Number of farms and
Agriculture published by Statistics South Africa farm turnover (2007)
(Stats SA) , the number of commercial farms in
South Africa fell by more than 13% from 45 800 Number of farms Annual turnover
in 2002 to 39 900 in 2007 (Table 2 below).
This is a decline of about 30% from an 22 500 < R500 000
estimated 58 000 commercial farms 20 years 12 300 R500 000 - R3 million
ago (Stats SA n.d.). While farm numbers have
2 200 R3 million - R5 million
dropped, average farm size has increased -
farmers have increased production to reach 2 900 >R5 million
better economies of scale. Overall production
increases can largely be attributed to increased
irrigation and synthetic fertiliser use.   2.2.2. Agriculture commodities in
South Africa
– South Africa’s top ten agriculture commodities
Overall production increases
are shown below in Figure 4 in million tonnes
can l argely be attributed to produced (FAO 2012) and Figure 5 (by value)
increased irrigation and (FAO 2012). While maize and sugar cane are
synthetic fertiliser use. the commodities most produced by tonnage,
grapes and meat products are of higher value.
As the only province suited for wine production,
the Western Cape makes an important econom-
ic contribution given the higher value of grapes
on international markets.

Top 10 SA commodities (million tonnes)

Sugar cane (17.3) Maize (11.8)

Milk, whole fresh cow (3.4) Potatoes (2.3)
Wheat (1.9) Grapes (1.8)
Oranges (1.6) Meat indigenous, chicken (1.5)
Apples (0.8) Meat indigenous, cattle (0.8)

Figure 4: Top ten South African commodities in tonnes produced (2012)

16 Agriculture: Market Intelligence Report 2016

Top 10 SA commodities (US$ million)

Meat indigenous, cattle (2.1) Meat indigenous, chicken (2.1)

Maize (1.1) Grapes (1.1)
Milk, whole fresh cow (0.9) Sugar cane (0.6)
Eggs, hen, in shell (0.4) Meat indigenous, sheep (0.4)
Apples (0.3) Potatoes (0.3)

Figure 5: Top ten South African commodities in production value (2012)

  2.2.3. Production trends in South African ■■ Burning fuel (in primary agriculture diesel)
agriculture emits carbon dioxide which pollutes the
atmosphere and contributes to climate
Figure 6 (DAFF 2013a) illustrates the recent and change.
rapid increase in the inflation-adjusted monetary ■■ Synthetic fertiliser can easily leach, pollute
value of selected South African agricultural and eutrophicate the soil. Nitrogen rich
commodities. This increase has largely been the synthetic fertilisers can cause soil acidity
result of: and kill beneficial organisms that aid plant
growth.
■■ Growth of the middle class with concomitant ■■ Over-irrigation increases the salt content of
rise in demand for meat products. surface soil and reduces soil fertility.
■■ Population growth and associated rise in ■■ Chemical pesticides reduce soil health,
food demand. pollute water sources, and are hazardous to
■■ Increase in demand for certain food types, human health. These are discussed in greater
particularly animal products in South Africa detail in Section 4.
and certain horticultural products in Africa.
■■ Price increases of input products, especially Many agricultural practices and technologies
fuel. reduce dependence on harmful inputs, with
associated financial and environmental benefits.
Figure 7 (DAFF 2013a) illustrates that the However, there are barriers to the uptake of
rise in production has been accompanied by these technologies. For example, a shortage
an associated rise in expenditure on inputs. of technical skills in the country means that
Increased yields are correlated with increased most technologies, machinery and implements
use of fuel, fertiliser, irrigation and pesticides, used in farming are imported. With the weak
given that farmers need to keep yields constant exchange rate, procurement of such equipment
to stay profitable. The extensive use of these is expensive especially where market forces
inputs is unsustainable for a number of reasons: have not driven prices down yet.

Agriculture: Market Intelligence Report 2016 17

180000

160000

140000

120000

100000
R million

Total
80000 Field Crops

Horticulture
60000
Animal products

40000

20000

1970 1975 1980 1985 1990 1995 2000 2005 2010

Year

Figure 6: Gross value of agriculture production for select commodities

30000

25000

20000
R million

15000 Total

Fuel

Fertilizer
10000
Dips & Sprays

5000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010

Year

Figure 7: Expenditure on certain intermediate products

18 Agriculture: Market Intelligence Report 2016

It follows that efficient use of resources is In addition to the contribution of primary
essential to the future of the industry in South agriculture, agro-processing (which has been
Africa – on the one hand, for sustainability due identified as a key growth sector for the
to land and water issues and, on the other Western Cape Province) adds further value. If
hand, for profitability due to limited economies the entire agricultural value chain is taken into
of scale. account, the total contribution to GDP is almost
12% (DAFF 2013).
  2.2.4.Western Cape agriculture
Agriculture contributes 2% to the national GDP –
in 2013, of which the Western Cape agricultural If the entire agricultural
sector contributed 22.6% (Basson 2013). The
Western Cape is a key contributor because it value chain is taken
produces high-value export crops such as wine into account , the total
grapes. Figure 8 (Provincial Treasury 2013) contribution to GDP is
illustrates the range of commodities in the
Western Cape. almost 12% (DAFF 2013).

Table 3 (Wesgro 2014) highlights that (1) The drop in the number of farms and increase
agriculture is a very important part of the in farm size mentioned earlier is particularly
Western Cape economy, and (2) the province evident in the Western Cape’s fruit sub-sector,
dominates much of SA’s agricultural export where 30% of the farmers produce as much as
production – especially wine and fruit. These 80% of the fruit (Hortgro 2015). Small-scale and
export markets are a key driver of sustainable emerging farmers are struggling to compete
agricultural practices. and developing an inclusive rural economy is
highly challenging.

5.8%
Gross value added: R14.7 billion (2011) 5.8%
8.7%
Other
(mainly) 11.7%
forestry
& fishing)
Field 1.0%
crops 28.2%
6.9%

Horticulture
Animals 50.5%
39.89%
41.6%

Horticulture

Apples, pears & peaches Wine

Table grapes Potatoes & onions
Citrus Other veggies

Figure 8: Range of commodities in the Western Cape

4
Agro-processing can be defined as processing the raw material or transforming products that originate from agriculture.

Agriculture: Market Intelligence Report 2016 19

Table 3: Western Cape exports by sector

Rank Top 10 exports Value % Growth % Share

2013 2012-2013 SA exports
(ZARbn) 2013
1 Oils petroleum, bituminous, distillates, except crude 8.39 -5.32 59.00
2 Grape wines (including fortified), alcoholic grape 7.80 33.26 98.27
3 Citrus fruit, fresh or dried 6.58 22.70 70.54
4 Apples, pears and quinces, fresh 5.59 53.52 94.34
5 Grapes, fresh or dried 4.02 22.27 80.76
6 Hot-rolled products, iron/steel 3.11 7.47 79.00
7 Liquid, gas centrifuges, filtering, purifying machines 2.01 -6.23 10.75
8 Maize (corn) 1.83 44801.31 29.51
9 Fruit, nut, edible plant parts (not elsewhere 1.60 16.90 90.25
specified), prepared/preserved
10 Liqueur, spirits and undenatured ethyl alcohol 1.28 66.28 90.34
Total export 74.87 16.06 9.49

2.3. Key players ■■ Input suppliers research and produce inputs

Key players in the agriculture sector can be such as fertiliser, seeds, pesticides and
divided into four broad categories: producers, machinery. Suppliers of green technology,
research/academia, input suppliers and like conservation agriculture equipment and
industry associations . solar PV manufacturers also fall into this
category.
Table 4 shows a simplified value chain with key ■■ Industry associations, involved in all
role players involved. aspects of the value chain, support farmers
and provide them with reliable and relevant
■■ Producers/farmers produce commodities information regarding regulations, logistics,
and in most cases do their own harvesting, cultivar development, etc.
storage and transport.
■■ Research institutions like universities The South African Government’s DAFF governs
investigate all aspects of the value chain. the whole industry.

A detailed list of role players can be found in

Appendix A.

20 Agriculture: Market Intelligence Report 2016

Table 4: Key role players in agriculture

R&D Inputs Production Harvesting Storage Transport Processing Wholesale, Waste

retail &
exports
Government
Producer
Research institutions
Input suppliers
Industry associations

2.4. Drivers of green technologies and Africa’s other sectors (such as the energy sector
approaches in agriculture and industrial processes) (Partdrige et al. 2014),
it is the sector most directly affected by climate
change impacts.
A range of factors provide impetus for
a transition to sustainable production in –
South African agriculture. These include Agriculture’s contribution to
water scarcity and climate change,
climate change is rel atively small,
decreasing soil health, the high cost of
energy and other inputs and increasing but it is the sector most directly
food demand. These are coupled with affected by climate change
consumer awareness about pesticide impacts, such as water scarcity
residues, ecosystem degradation,
pollution and declining nutritional value In the case of the Western Cape, climate
in food. models predict a slow-onset drying trend,
with declines and more variability in rainfall
(UCT 2014). The Swartland area provides
  2.4.1. Climate change and water scarcity evidence of this trend. As one of the largest
Climate change and associated water scarcity grain producing areas in the country, the
is a significant driver of greening of agriculture area has experienced year-on-year declines
as it forces the sector to adopt practices and in rainfall and has just experienced one of
technologies that conserve water and improve the driest winters in the past 75 years. Such
soil health for better water retention and climatic effects affect the productivity of local
improved yields. farms and the surrounding rural economy,
exerting pressure on farmers to operate more
Low average (and irregular) rainfall, exacerbated sustainably.
by climate change, result in water shortage,
which is the biggest limiting factor to In addition to climate change impacts, water
production. The Council for Scientific and will become even more scarce because
Industrial Research (CSIR) estimates that by of population growth, urbanisation and
2025 there will be a water deficit in South Africa industrialisation. It is estimated that the
(Talk Radio 2015). While agriculture production Western Cape will experience water-related
in South Africa contributes a relatively small constraints to development as early as 2019
percentage (5%) to the country’s greenhouse (Department of Water Affairs (DWA) 2011).
gas emissions (GHGs) compared to South

Agriculture: Market Intelligence Report 2016 21

  2.4.2. Environmental degradation Table 5 illustrates the shortage of arable land5
Conventional farming methods are for agriculture in South Africa. Notably, 69%
unsustainable, mostly due to their negative of all arable land is suitable for grazing, while
impacts on natural resources and the only 12% is suitable for rain-fed agriculture.
environment: These constraints can be further understood by
comparing South Africa’s arable surface area, in
■■ Chemicals in pesticides reduce biodiversity hectare per person, to other countries’. South
above and below ground (for instance, up Africa has 0.25 hectares of arable land per
to 75% (FOA n.d.) of crop genetic diversity person compared to Russia (0.85), Argentina
has already been lost). Heavy reliance on (0.93) and Australia (2) (World Bank 2013).
chemicals in conventional farming also These countries, therefore, have a competitive
pollutes water, negatively affects other natural edge over South Africa as some commodities,
resources and can be harmful to human such as livestock, wheat and maize production,
health. Studies from the 40s to the 90s overlap.
indicate that widespread increased exposure
to synthetic pesticides greatly reduce trace For agriculture to be sustainable it needs
elements in vegetables. to meet the needs of present and future
■■ Tillage, which is a conventional farming generations, while conserving resources and
method, is the leading cause of soil ensuring profitability. These pressures are
degradation (WWF 2010). According to particularly problematic in light of the need to
the United Nation’s Food and Agriculture double food production by 2050 from 2009
Organisation (FAO) one third of global levels (UN 2009). Consequently, South Africa’s
farmland is degraded (2014). farmers have little choice but to revert to
■■ Fossil fuel burning, as in coal-fired electricity innovative and sustainable farming practices, if
generation and diesel, emits carbon dioxide they are going to remain competitive nationally
that contributes to climate change and and globally, conserve the environment and
pollutes the air. contribute to food security.

2.4.3. Market pressure and limited –

resources South Africa has 0.25
A number of other pressures and hectares of arable l and per
constraints contribute to the necessity for
sustainable agriculture. These include: person compared to Russia
(0.85), Argentina (0.93) and
■■ rising costs and demand for Australia (2)
agricultural inputs: fertiliser, pesticides,
energy (mostly diesel and electricity)
and water
■■ energy shortages
■■ population growth
■■ availability of arable land
■■ consumer demand for sustainably-
produced products.

5
Arable land (in hectares) includes land defined by the FAO as land under temporary crops (double-cropped areas are counted once), temporary
meadows for mowing or for pasture, land under market or kitchen gardens, and land temporarily fallow. Land abandoned as a result of shifting
cultivation is excluded.

22 Agriculture: Market Intelligence Report 2016

Table 5: Arable land cover in South Africa

Suitable for High potential Irrigated crops Suitable for Total

rain-fed crops grazing
Ha (million) 14.4 3.6 1.3 82.8 120
% of total 12 3 1 69 85

  2.4.4. Electricity cost and supply Figure 9 (Chehore 2014) below shows the
The South African agriculture sector consumes real-term rise in the cost of electricity between
approximately 3% of the total electricity 2006/7 and 2013/14. According to the
produced in the country (NERSA 2006). In Department of Energy the rural electricity
the context of rising electricity costs and the tariffs approved by NERSA increased
supply crisis, energy efficiency has become by 12.69% during 2015/16 (2015a). The
increasingly important for all sectors, including business case for investment into energy
agriculture. efficiency is strong and there are considerable
opportunities for suppliers of greentech and
services in this space.
–
The South African agriculture
sector consumes approximately
3% of the total electricity
produced in the country

Real electricity cost, 2006/7 - 2013/14 (June 2013 Rands)

R700,00

R600,00

R500,00

R400,00

R300,00

R200,00

R100,00

R0,00
2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14
Low (150 kWh) R71, 28 R70, 28 R71, 45 R74, 03 R76, 95 R77, 53 R77, 88 R80, 91
Medium (350 kWh) R178, 19 R175, 69 R178, 62 R185, 08 R216, 91 R230, 54 R239, 71 R247, 22
High (450 kWh) R320, 74 R316, 25 R369, 81 R478, 23 R555, 92 R608, 47 R628, 66 R634, 47

Low (150 kWh) Medium (350 kWh) High (450 kWh)

Figure 9: Increases in the real-term cost of electricity in South Africa

Agriculture: Market Intelligence Report 2016 23

For instance, for some farmers, recent load ■■ Cold-chain management: With many
shedding has represented a major challenge. foods going to export markets, cold-chain
Diesel generators have represented a short- management is key to producing quality
term solution, at a cost. Most farms are products. In peak production, processing is
equipped with backup generators, but in recent typically operating full time. Load shedding,
years farmers have been buying bigger units and inconsistencies in load shedding
for more frequent and sustained use. While schedules are particularly disruptive as prior
attempts have been made to manage load to predicted load shedding, equipment
shedding, the uncertainty of schedules can needs to be switched off and the process
harm the industry. For example: halted. This results in losses within the
process, particularly as machines need to be
■■ Dairy industry: The dairy industry needs a cleaned before process can continue.
constant feed of electricity throughout the
year for the heating and cooling processes
of milk. Specific temperatures need to be
maintained for certain periods in order to
ensure milk quality and safety (Mavuso 2015).

© Western Cape Department of Agriculture

24 Agriculture: Market Intelligence Report 2016

3–
Policies and
regulations
With a complex agricultural sector and many commodities
produced in the Western Cape, there is a range of policies
and regul ations that directly and indirectly rel ate to
agriculture.

Many of these have specific relevance to the 3.1. Agriculture

sustainability of the sector as they aim to The DAFF is primarily responsible for legislation
protect natural resources such as land and related to the sector. A number of acts and
water. These are therefore also relevant to policy documents (Table 6) speak to the
suppliers of greentech or green services within conservation of agricultural resources while
the agriculture sector. promoting economic and social development.

Table 6: Selected acts and plans relevant to the agricultural sector

Name Selected objectives/purpose

The Conservation of Agricultural ■■ Controlling use of natural agricultural resources
Resources Act 43 of 1983 ■■ Conservation of soil
■■ Conservation of water sources

■■ Combating weeds and invader plants

The National Development Plan ■■ Elimination of poverty

2030 (NDP 2012) ■■ Reduction of inequality
■■ Highlighting the importance of initiatives that link

agriculture to the green economy

The Agriculture Integrated Growth ■■ Equitable, productive, competitive, profitable and
and Development Plan (IGDP 2012) sustainable agriculture, forestry and fisheries sectors
■■ Emphasises that the sector needs to benefit all

South Africans
The Agriculture Policy Action ■■ A programmatic response to key policy documents
Plan (APAP 2014) including the National Development Plan (NDP) and
the New Growth Path (NGP)
Strategic Plan for the Department ■■ Providing an effective framework to address various
of Agriculture, Forestry and Fisheries challenges facing the sectors
(SPDAFF 2013) ■■ Setting targets for the departmental programmes

from 2012 to 2017

■■ Building a leading, dynamic, united, prosperous and

people-centred sector

Agriculture: Market Intelligence Report 2016 25

3.2. Water This has had some implications for investors,
The following acts regulate the water sector particularly regarding uncertainty in the sector
(DWA 2013): over land rights and fears of unconstitutional
land expropriation.
■■ National Water Act (NWA, Act 36 of 1998)
redefines water rights in South Africa to There are broader implications, such as
stimulate inclusive growth. losses in the sector if arable production land
■■ Water Services Act (WSA, Act 108 of 1997) is given to inexperienced farmers without
defines the role of the Department of Water training. Lengthy distribution processes affect
Affairs as a regulator; the role of water land productivity – original owners may stop
boards as bulk providers, and the role of investing in the land during the process and the
municipalities as service providers. land can become too degraded to be restored.
■■ The National Water Resource Strategy New farmers require adequate support and
2nd Edition (NWRS2 2013) assists in development, not just in cultivation but also
the implementation of the NWA whilst in post-settlement (like market access) which
protecting, developing and controlling water is currently lacking, resulting in unsustainable
resources in a sustainable and equitable farming practices.
manner.
3.4. Carbon tax
More information on water governance issues The South African Government has committed
and investment opportunities in the water to reducing GHG emissions by 34% by 2020
sector can be found in GreenCape’s Water and 42% by 2025. Part of the strategy to drive
Sector Market Intelligence report, which can be this includes a carbon tax. The implementation
downloaded from www.greencape.co.za. of the first phase of the tax (focusing on scope
1 GHG emissions) has been delayed from 2015
3.3. Land reform – 2020 to 2016 – 2021. Primary agriculture will
The White Paper on South African Land mostly be exempted from the carbon tax, but
Policy (1997) addresses the injustices and will still be affected by it indirectly as it filters
land inequalities that came about during through to input costs.
pre-colonial and colonial rule and apartheid.

© Western Cape Department of Agriculture

26 Agriculture: Market Intelligence Report 2016

4–
Opportunities
and barriers
This section focuses on opportunities identified this year
during the course of engagement with stakeholders in the
agriculture and other green economy sectors.

There are opportunities in energy, water and ■■ Lack of support for farmers to help them
the use of chemical inputs: access relevant information and advice on
best practice.
■■ Alternative energy sources and energy ■■ Weak exchange rate and low profit
efficiency technologies are becoming margins mean that importing technologies is
more affordable and more necessary due to too expensive for farmers.
increasing energy costs. Opportunities for ■■ A lack of funding for R&D is another barrier
farming operations covered in this report to the growth of green agriculture. As an
include solar photovoltaic (PV) and biogas. international benchmark, R&D expenditure
■■ Water use efficiency technologies in as a percentage of GDP should be 1% and
irrigation address water scarcity and save is currently <0.8% in SA. Moreover, the
electricity used to pump water. We will focus performance of R&D expenditure is much
on precision agriculture. higher for businesses than government (i.e.
■■ Environmentally friendly alternatives R&D funding is spent to better effect by
to chemical inputs improve soil health, business, compared to government).
enhance biodiversity, reduce pollution,
address consumer concerns about the Specific opportunities and barriers are
harmful effects of chemicals, and adhere discussed below.
to stringent environmental regulations by
export markets. Investment opportunities
lie in the R&D of alternatives to chemical 4.1. Energy efficiency in the Western Cape’s
products. agricultural sector

Before discussing these opportunities in more Due to energy cost and supply issues (as
detail, it is important to briefly consider some discussed in section 2.4.4.), the business case
barriers to the uptake of green technologies for investment into energy efficiency is strong
and sustainability in South African agriculture. and there are considerable opportunities for
These include: suppliers of greentech and services in this
space. Significant energy savings are possible if
■■ A lack of awareness surrounding the farmers consider the advice of an independent
importance and benefits of sustainable third party energy expert6 before investing in
production and what is available (in terms of equipment such as water pumps, piping, or
advice and technologies). motors for irrigation. For instance, the correct
■■ Regulatory hurdles include complicated sizing of motors is particularly important to
processes and delays in obtaining EIA’s, and maximising the potential for efficient energy use.
for the registration of new products.

6
GreenCape has an energy sector desk which is able to provide free information and contact details.

Agriculture: Market Intelligence Report 2016 27

– Along with irrigation pumps, packhouses
The business case for and cold stores are also significant electricity
consumers on farms. In the Western Cape,
investment into energy the fruit subsector relies particularly heavily
efficiency is strong and there on electricity for these facilities. While these
are considerable opportunities facilities do require continuous supplies of
electricity, demand peaks during the fruit
for suppliers of greentech and season, which occurs in the summer months.
services in this space
The main energy saving opportunities within a
In primary agriculture, most electricity is packhouse are related to:
consumed through water pumped for irrigation
as shown in Figure 10 (Stotko 2015) below. ■■ shortening the distance that the fruit must
This is particularly relevant for farms using move within in the facility
irrigation. For example, dairy farms consume ■■ the use of conveyers rather than water to
most electricity during the milking process to move fruit
maintain the correct temperature of the milk. ■■ energy efficient lighting such as LEDs
Houses on an average farm tend to consume
the least amount of electricity and therefore By comparison, electronic inspection and
do not represent the main focus area for many sorting use relatively small amounts of
farmers when it comes to energy efficiency. electricity.
Admittedly, each farm is unique and each case
should be assessed as such.

Electricity breakdown kWh

9
3

14

62

Office, Workshop, Other Manager House

Pumps Irrigation Labourers Cottages
Pumps Lifting Hostels

Figure 10: Electricity breakdown for the average fruit and vegetable farm

28 Agriculture: Market Intelligence Report 2016

Electricity consumptions

1
15

3
2

5
49

25

Compressors Condenser Fans

Extractor Fans Evaporator Fans
Lightning Other
Condenser Pumps

Figure 11: Electricity use in cold stores, cooling and drying of fruit

In cold stores, cooling and drying of fruit The design of a new building is therefore an
represents the major energy demand. important consideration because windows
Compressors, extractor fans and evaporator and doors that seal properly contribute
fans are significant electricity consumers as significantly to energy efficiency. For this
shown in Figure 11 (EEPACS 2012). reason, GreenCape compiled a green building
materials catalogue to assist business owners
Apart from spending electricity on produce, with a list of building materials that are energy
many facilities have additional heating and efficient. This catalogue is available on the
ventilation equipment to provide a suitable GreenCape website.
environment for workers. Traditional equipment
that consists of heaters and fans consume a In the Western Cape there are numerous
significant amount of electricity, usage within agricultural facilities that use electricity
packhouses and cold stores can be reduced (Table 7, Basson 2015). Some have already
by almost 50% by using natural ventilation, implemented certain energy efficiency
enabled and supported by good building and measures, but there is significant potential for
roofing designs (Koos Bouwer Consulting 2014). growth in the rate of uptake within the sector.
Recognising the benefits, most farmers are
already actively looking for expert advice to
improve energy efficiency.

Agriculture: Market Intelligence Report 2016 29

Table 7: Number of agri sector facilities in the Western Cape

Type Number
Abattoirs (red meat) 55
Abattoirs (white meat) 25
Agro processing plants 261
Chicken batteries 57
Chicken broilers 170
Chicken layers 140
Chicken hatcheries 2
Cool chain facilities 21
Dairies 760
Fruit packers 44
Fruit cool chains 29
Homestead 5565
Homestead-labour 13860
Pack houses 613
Piggeries 75
Silos (commercial) 44
Tunnels 853
Total 22574

4.2. Solar PV in the Western Cape’s The increase in solar PV installations across
agricultural sector all sectors has been partly the result of falling
Rising energy costs, uncertainty of supply costs, as illustrated in Figure 12 (Tshehla 2015).
and the impact of load shedding have acted In 2013 the cost of solar panels without battery
as drivers for the agriculture sector to adopt storage was just under R40 000 for a system
renewable energy solutions, especially once of 10kw and smaller. At the current rate of
all energy efficiency opportunities have been installations, the projection shows the cost will
realised. In addition to the South African almost be cut in half by 2018.
Government’s Renewable Energy Independent
Power Producer Procurement (REIPPP)
programme, the agricultural sector has seen
–
an increase in the uptake of renewable energy The agricultural sector
(RE). Some farmers have benefited financially has seen an increase in the
by partnering on land rental agreements with
Independent Power Producers (IPPs) on this
uptake of renewable energy.
programme. Some farmers have benefited
financially by partnering
on land rental agreements
with Independent Power
Producers on this programme

30 Agriculture: Market Intelligence Report 2016

The cost of PV over time

R45 000
R40 000
R35 000
R30 000
R25 000
R20 000
R15 000
R10 000
R5 000
R0
2012 2013 2014 2015 2016 2017 2018 2019
Rooftop Solar PV system
R37 000 R30 000 R25 000 R22 000 R20 000 R17 750
without battery storage (R/kW)
Rooftop Solar PV system
with battery storage (R/kW) R42 500 R34 500 R29 000 R25 000 R23 250 R20 000

Rooftop Solar PV system without battery storage (R/kW)

Rooftop Solar PV system with battery storage (R/kW)

Figure 12: The cost of solar photovoltaic systems over time

Initially, farmers could not feed electricity In some cases the municipality will compensate
back into the grid due to regulatory hurdles. the farmer for the energy fed back to the
Today, farmers who are connected directly to grid at the same price the farmer paid for the
the medium or high voltage Eskom networks electricity (1 for 1) – this is known as “nett
(as opposed to municipalities) are able to metering”. In other words the farmer is selling
sell excess electricity back into the grid in electricity back to the municipality at the price
accordance with Eskom’s Ruraflex or Megaflex the farmer paid for it, which is higher than what
schemes (Eskom 2015). Even so, low voltage the municipality pays Eskom for it.
Eskom networks are still not allowed to feed
electricity back into the national power grid. Farmers who are directly connected to Eskom
will only be able to feed in if they have a
Agricultural customers that receive their medium or high voltage network connection
electricity from the municipality are governed through the Ruraflex or Megaflex schemes,
by specific municipal by-laws and regulations which uses a feed-in tariff and not “nett
regarding small-scale embedded generation. metering”. An example of this structure
In the Western Cape, 10 municipalities allow (although not directly relevant to agriculture)
embedded generation to feed electricity back is the Black River Park complex in the City of
onto their grid. Within these municipalities Cape Town. This is the first system to feed
there are four experimental feed-in tariffs and electricity into the distribution network. It
one NERSA approved tariff (Radmore 2015). is a 1.2 MW system (split into two separate
The municipalities where this is the case are systems to ensure that each is below the City's
highlighted in Table 8. This opens a new door 1 MW size limit) and feeds excess-generated
for renewable energy expansion. electricity into the city’s electricity grid.

Agriculture: Market Intelligence Report 2016 31

Table 8: Municipalities (WC) that have PV rules, regulations and tariffs

Municipality District Seat Allow PV to feed Approved

into the grid PV tariffs
Beaufort West Local Central Karoo Beaufort West Yes Experimental
Municipality tariff
Bergrivier Local West Coast Piketberg Yes No
Municipality
Bitou Local Municipality Eden Plettenberg Bay Unknown Unknown
Breede Valley Local Cape Winelands Worcester Unknown Unknown
Municipality
Cape Agulhas Local Overberg Bredasdorp Unknown Unknown
Municipality
Cederberg Local West Coast Clanwilliam Unknown Unknown
Municipality
City of Cape Town Cape Town Yes Yes
Metropolitan
Drakenstein Local Cape Winelands Paarl Yes Experimental
Municipality tariff
George Local Eden George Yes Experimental
Municipality tariff
Hessequa Local Eden Riversdale No No
Municipality
Kannaland Local Eden Ladismith Unknown Unknown
Municipality
Knysna Local Eden Knysna Unknown Unknown
Municipality
Laingsburg Local Central Karoo Laingsburg No rules No
Municipality
Langeberg Local Cape Winelands Ashton Yes No
Municipality
Matzikama Local West Coast Vredendal No rules In progress
Municipality
Mossel Bay Local Eden Mossel Bay No No
Municipality
Oudtshoorn Local Eden Oudtshoorn Yes In progress
Municipality
Overstrand Local Overberg Hermanus No No
Municipality
Prince Albert Local Central Karoo Prince Albert No rules No
Municipality
Saldanha Bay Local West Coast Vredenburg Yes In progress
Municipality

32 Agriculture: Market Intelligence Report 2016

Stellenbosch Local Cape Winelands Stellenbosch Yes No
Municipality
Swartland Local West Coast Malmesbury Yes Experimental
Municipality tariff
Swellendam Local Overberg Swellendam Unknown Unknown
Municipality
Theewaterskloof Local Overberg Caledon No In progress
Municipality
Witzenberg Local Cape Winelands Ceres No rules No
Municipality

Table 9: Small scale embedded generation residential tariffs

SSEG Residential Tariffs 2015/16 Units Tariff excl VAT Tariff incl VAT
Service charge R/day 11,43 13,03
Energy charge - Consumption c/kWh 95,76 109,17
0 - 600 kWh
Energy charge - Consumption c/kWh 187,63 213,19
600.1 + kWh
Energy charge - Generation c/kWh 56,99 N/A

The City of Cape Town’s small-scale embeddd –

generation (SSEG) conditions are that: In South Africa, more than
■■ the user must be a net-consumer over a year
10% of sol ar PV install ations
■■ embedded generation capacity must be are in the agriculture sector.
< 1MVA
■■ tariffs will be revised every 12 months by the Installations vary from 0.5kW to 500kW and
municipality include various subsectors like poultry, game,
mixed farming, fruit and wine. One of the
The agricultural sector has seen an increase biggest contributors is the installation of
in investment in renewable energy globally, borehole solar pumps. According to the Power
with solar PV leading the way. In South Africa, Quality and Renewable Services (PQRS 2015)
more than 10% of solar PV installations are in roughly 45 000 systems have been installed
the agriculture sector. The rise in large-scale in South Africa to date. If all the systems were
solar installations on farms in the Western Cape combined it would have a project size of
recently indicates that they make business 22 500kW.
sense for farmers.

Agriculture: Market Intelligence Report 2016 33

In particular, the fruit and wine sub sectors of Nedbank also worked with farmers in the
the Western Cape have seen significant uptake industry to try and understand farmers’
of solar PV. Average savings of 27% can be challenges with moving to more sustainable
realised on packhouse or cold store electricity practices. A full report compiled by Nedbank,
bills through installing solar PV (Yell 2014). WWF and the Western Cape Department of
Agriculture will be available later this year.
Furthermore, GreenCape is developing a brief
– overview of the business case for solar PV for
Average savings of 27% can fruit packhouses which will be publicly available
be realised on packhouse or from March 2016.

cold store electricity bills

through installing sol ar PV 4.3. Conservation agriculture
Maintaining soil health is crucial for sustainable
agriculture production. However, conventional
To date, the five largest installations in the tillage is the leading cause of depletion of
Western Cape agri sector have been: soil health. Conventional farming includes a
■■ Ceres Fruit Growers: installed a 1 MWp sequence of soil tillage, such as ploughing and
PV system generating approximately harrowing, mainly for seedbed preparation
1,690 MWh/year, covering 6% of their and weed control. Residue is burned or tilled
annual electricity usage (ESI Africa 2013). back into the soil and either crop rotations or
■■ Rooibos Ltd: installed a 511 kWp solar monoculture is practiced. This is unsustainable,
system generating around 875 MWh/year. because in the long term tillage destroys soil
This will produce 40% of the company’s structure and contributes to a reduction in
electricity with a system lifespan of 25 years fertility and organic matter levels. This results
(Rooibos Limited n.d.). in a need for higher levels of chemical fertiliser
■■ Lourensford Wine Estate: installed a 500 and energy use, with associated financial and
kWp system generating about 750 MWh/ environmental costs.
year, with all electricity used by the estate
(Lourensford 2014). Increasingly, South African farmers are
■■ Arbeidsvreugd Fruit Packers: installed a recognising that as an alternative to
450 kWp system generating 3000 kWh/ conventional agriculture, the long-term benefits
day in summer months, saving 55% on their of Conservation Agriculture (CA) can be
electricity bill in the summer months with a realised through:
payback period of 6 years (Yell 2014).
■■ Stellenpak Fruit Packers: installed a ■■ Minimum mechanical soil disturbance:
420 kWp system which generates 600 MWh/ Achieved by practicing no-till, zero-till or
year. All the electricity is used by the facility; direct seeding. The degree of tillage is
saving of 15% on their electricity bill (Jooste determined by the technology available,
2014). soil characteristics and type of crops being
produced. The benefits include reduced
In 2015 Nedbank introduced a funding model fuel inputs and increased organic matter
to help farmers invest in renewable energy retention and water holding capacity.
technologies and energy efficiency projects. ■■ Diverse rotation: Successively planting
The goal is to match repayment terms to different crops, recognising that there is no
savings in electricity costs over the medium- single crop rotation system suitable for all
term. This allows the farmer to have a shorter production regions. Benefits include fewer
payback period. The loan also offers a 7% diseases, a lower weed burden and greater
rebate to farmers that qualify (Hancock 2015). soil fertility.
■■ Permanent organic soil cover: Protects the
soil from erosion and feeds soil biota.

34 Agriculture: Market Intelligence Report 2016

–
Many farmers recognise that South Africa has excellent conditions for
applying no-tillage technologies with
conservation agriculture adequate infrastructure and the presence
is a viable alternative to of no-till clubs (Derpsch et al. 2010).
conventional agriculture. In the Western Cape, almost all grain
farmers (80%) have no-till machinery.
However, experts at the Western
Having higher soil organic matter and using Cape Department of Agriculture have
nitrogen-fixing crops (legumes) in rotation highlighted that with the right investment,
result in lower fertiliser requirements. In there are significant opportunities for
addition, improved water holding capacity farmers to further lower soil disturbance,
results in greater water efficiency. Given the thereby realising long-term benefits
current drought situation in South Africa, this related to improved crop yields.
means that when it does rain, these soils can
retain water for a longer period of time.
There are opportunities for greentech suppliers
South Africa still lags behind some countries, in the agricultural sector with the trend
as seen in Figure 13 (FAO Aquastat, cited by towards using conservation tillage systems and
Knott 2014), but the practice of conservation equipment. These are:
farming is increasing.
■ No-till planting: This form of tillage is the most
According to Blignaut et al. (2014), 35% of practiced conservation agricultural method in
cultivatable areas were under some sort of South Africa. The planter is fitted with knife-
reduced tillage, and nearly 9% was under point openers (tine planters) and press wheels
no-tillage in 2004. Data presented at the 3rd that to some extent cultivate the soil during
World Congress on Conservation Agriculture in the planting process. Less than 20% of the soil
Nairobi in 2005 showed an area of 300 000 ha should be disturbed. Currently, components
under no-tillage in SA. According to experts, of no-till planters are imported (mostly from
that area grew to 368 000 ha by 2010. Brazil) and then assembled locally to suit South
African conditions. There are only a few local
producers in the Western Cape. The lifetime
of the equipment is 20 – 30 years and little
maintenance is required.

70

60

50

40

30

20

10

0
n
a

na
ce

ia

e
a

ca

na
ay

le

K
il

SA
ad

bi

ny
ai

bw
tin

qu
al

az

U
hi
an

fri
an

ha
gu

hi
Sp
m

Ke
tr

U
an
en

bi
C
Br

ba

C
A
al
Fr

G
Za
ru

us

am
C

Ze
rg

h
m
U

ut
A

Zi

oz
ew

So

M
N

Figure 13: Percentage of arable land under conservation agriculture (2011)

Agriculture: Market Intelligence Report 2016 35

■ Direct seeding: This method is similar to 4.4. Precision agriculture
no-till, but stubble openers can also include Precision Agriculture7 (PA), “satellite farming”
discs and/or coulters that cause more than or “site-specific crop management” is a way of
20% of soil to be disturbed. In South Africa, farming as efficiently as possible in terms of the
this method is used more commonly in heavy use of irrigation water, fertiliser and pesticides.
stubble situations, such as under irrigation. Producers apply exactly what is required in
■ Zero till: Planters are equipped with only production by monitoring certain variables, such
coulters and discs, without knife-point as albedo, leaf-area index and vegetation index
openers that penetrate the soil. Therefore, no on their farms through remote sensing.
mechanical loosening of the soil occurs during
the planting process. However, this method   4.4.1. Water efficiency
has proved unsuitable for most soils of the A need for improved water efficiency is one
Western Cape, due to high stone and gravel of the major drivers for the use of PA. Water
fractions. Nevertheless, there are some farms availability is set to be the single biggest factor
in the Western Cape that have implemented in limiting agriculture production. In the Western
zero-till successfully. This method holds a key Cape, allocations to the sector have already
opportunity for technology improvement. been capped – this means that water efficiency
measures like PA will be crucial for any further
Barriers to the uptake of CA include: (1) high agricultural expansion that requires irrigation.
cost of imported equipment (although local
production is now addressing this barrier to
some extent), (2) a lack of skills to operate new
–
equipment, (3) lack of suitable planters for A need for improved water
local conditions (thick residue), and (4) a delay efficiency is one of the major
between investment and realisation of financial
return through improved yields.
drivers for the use of PA

Proportion water use / Main economic sector

3.3 2.5
4.3
3

60
27

Irrigation Industrial Mining Municipal / Domestic Power Generation Livestock and Nature Conservation

Figure 14: Proportion water use per main economic sector

7
PA involves the observation, impact assessment and timely strategic response to fine-scale variation in causative components of an agricultural
production process. This farming-management concept is based on observing and measuring spatial and temporal characteristics of a number of
crop variables. The goal of PA is to have a management strategy that results in optimisation of returns on inputs, while preserving resources.

36 Agriculture: Market Intelligence Report 2016

Agricultural irrigation accounts for up to 60% of The adoption of PA in South Africa has been
water use in the country (Figure 14, Department relatively slow, mostly due to the cost of
of Water Affairs 2013). In the Western Cape accessing the technology, but also due to a lack
this figure is lower, with 43% of available water of knowledge and skills. However, the potential
resources used for irrigation. value of PA adoption that will result from the
associated cost reductions (and indirect benefits)
has been estimated at R1.2 billion, with the
The global precision farming market associated potential job creation of up to 2400
is estimated to grow at a Compound new jobs (Table 10).
Annual Growth Rate (CAGR) of 13% from
2015 to 2022 to reach over US$6.43
billion by 2022. Farmers, especially in
–
developing countries, are becoming R1.2bn of savings, and the
increasingly aware of the benefits (and, creation of 2400 new jobs
indeed, the growing necessity) of utilising
tools that help them manage their
are possible if South Africa’s
resources more efficiently. farmers adopt precision
agriculture

Table 10: Potential value of adopting precision agriculture8

Market potential (2019) Net new jobs in Western Other positive impacts
Cape (by 2019)
■ Assuming reinvestment of ■ Assuming reinvestment of ■ Increased water efficiency
savings: savings: (results in decreased water
− R450-900 m for WC − 550-2400 new jobs in WC use and/or increased
market − Of these, 300-1500 are production)
− R800-1200 m when unskilled jobs ■ Decreased run-off reduces
considering total impact soil erosion, improves river
on the economy (including water quality, etc.
indirect & induced impacts) ■ Job safeguarding

Although there are strong drivers for using PA, ■■ Farmers’ perceptions that improved water
including rising input costs such as electricity efficiency may result in a reduction to
for pumping, and greater competition for water their allocations, placing future possible
resources, there are also barriers to the uptake expansion at risk.
of PA:

■■ A weakening Rand making imported

technology more expensive.
■■ A shortage of technical skills and knowledge.
■■ Lack of appreciation by some farmers of
the detrimental effects of over and under
irrigation.

8
Assumed 10% energy and water savings reinvested into agricultural crop sectors using 2014 multipliers developed by Conningarth Economists

Agriculture: Market Intelligence Report 2016 37

Case Study: An example of the application satellite imagery (albedo, leaf area index,
of PA in the Western Cape: Spotlight on vegetation index) and meteorological data
Fruitlook (wind, humidity, solar radiation and air
temperature).
FruitLook (Department of Agriculture 2015)
is an open-web portal for fruit and wine- It maps a number of parameters such as
grape growers, created by the Western evapotranspiration, biomass growth, water
Cape Department of Agriculture (WCDoA), deficit and soil moisture. Farmers are thereby
to assist irrigators with optimising water use. able to avoid over or under irrigation which
Rising input costs (especially energy) and results in greater water efficiency and lower
increased competition for water compelled production costs.
the WCDoA to improve water-use efficiency
in terms of agricultural yield per amount of In a recent survey, 60% of respondents
water consumed. reported that FruitLook helped them
manage their water efficiently by reducing
FruitLook is a web-based tool that uses consumption by between 10% and 30%.
satellite-derived information to help farmers This translates to a significant electricity
decide about optimal timing, extent and demand reduction (due to reduced pumping
location of inputs such as water and fertiliser. requirements) and associated cost savings.
Table 11 below shows a hypothetical
It uses the “Surface Energy Balance scenario of possible cost savings to farmers
Algorithm for Land” (SEBAL) model to and feasibility of the venture to investors.
estimate aspects of the hydrological cycle
and quantifies the energy balance using

Table 11: Potential costs and cost savings associated

with the application of precision agriculture

Expected benefits by
1) increasing revenues with 10% (yield); and
2) decreasing costs (water, fuel, fertiliser and chemicals) by 10%:
Wine grapes R4 130/ha
Table grapes R23 590/ha
Deciduous fruit trees R25 160/ha
Future purchasing cost of FruitLook R150/ha
Source: Calculations by Department of Agriculture, Western Cape (2015), based on
10% increase in yield and 10% decrease of water, fuel, fertiliser and chemical costs9

Currently, the service is free of charge and subscription, which means the potential
funded by the WCDoA. Not many farmers for increased uptake of this tool is large.
seem to be aware of this. A mere 10% of FruitLook can be accessed at
relevant land under cultivation is under www.fruitlook.co.za/

9
For more information contact: André Roux, at the Western Cape Department of Agriculture (DAFF 2015).

38 Agriculture: Market Intelligence Report 2016

  4.4.2. The growing market for drone With drone technology now available in South
technology in agriculture Africa, a number of companies are already
No longer limited to military uses, Unmanned entering this new market. While companies
Aerial Vehicles (UAVs, also known as drones) have started developing and building their own
now find applications in various activities within drones designed for local conditions, some
filming, delivering of packages, setting up parts such as motors are still imported from
portable wireless connections in remote areas, China or the USA. One local company, based in
and in the gathering of remotely sensed data Somerset West in the Western Cape, currently
for use in PA (MIT Technology Review 2014). In manufactures drone motors. Drone companies
agriculture, drones can be used for a number can provide customers with either a product or
of applications including aerial mapping, a service. In most cases they will also provide
crop surveying, plant stress detection, and to training and assistance with the licencing
conduct livestock censuses. Given the variety of process, where required.
possible applications, the potential for growth
in the uptake of drone technology in South In South Africa, the agriculture sector
Africa’s agricultural sector is significant. represents a new market for this technology,
and legislation and licencing processes
– have recently (July 2015) been established.
Commercial operators (as opposed to
In agriculture, drones can hobbyists) will need to apply for a Remote
be used for a number of Operating Certificate (ROC), which is valid
applications including aerial for 12 months. The drone must be licenced
as a Remotely Piloted Aircraft (RPA). The pilot
mapping, crop surveying, plant operating the craft must be in possession of a
stress detection, and to conduct licence – Remote Pilots Licence (RPL), as well
livestock censuses as a letter of approval (RLA) for the Remotely
Piloted Aircraft System (RPAS). All further
information on regulations to operate a drone
Internationally, drones have already been
can be found at the Safe Drone website (2015).
successfully deployed in the agricultural
sector to optimise agricultural production
and to minimise input costs by collecting and –
analysing data to enable wiser decision making, The agriculture sector
much like the satellite-derived data in the case presents a new market for
of FruitLook. Drone-derived data is different in
that it enables rapid response from farmers. drone technology with the
For example, orchard farmers are able to detect establishment of legislation
if a certain tree is under stress (before showing and licensing processes
physical signs thereof), how much fertiliser to
use according to tree volume, and how much in 2015
water to use. Livestock farmers, with the use
of a Normalized Difference Vegetation Index
(NDVI) camera, are able to detect unusual body
temperatures, and can attend to the animal in
question before a livestock fatality occurs.

Agriculture: Market Intelligence Report 2016 39

Since the introduction of the regulations Trend analyses by various organisations
in July 2015 there have been a number of show that governments are likely to continue
applications. A breakdown is provided below applying strict safety criteria on synthetic
by Drone News Update (2015): pesticides, and this will result in fewer products
on the market, thereby creating an opportunity
■■ 118 certification registrations for biopesticides companies to help fill the gap,
■■ 10 RPA licenses issued as seen in Table 12 (BCC Research 2014).
■■ 29 RPA letters of approval
■■ 1 RPA maintenance technician application
■■ 72 ROCs –
■■ 10 RPA training organisation applications Partly due to consumer
4 air service licensing applications
demand for organic food,
■■

the global biopesticide

4.5. Biological control market has grew to $53.8bn
Biological control (biocontrol) involves the use
of a pest’s own natural enemies (parasites, in 2013 and is expected
predators and pathogens), whether introduced to reach US$83.7bn by 2019.
or otherwise manipulated, to suppress the pest
population to an acceptable level. The word
“pests” in this sense, includes diseases, insects, The global market for biopesticides was valued
mites, nematodes and weeds and/or invasive at US$54.8 billion in 2013 and is expected to
alien plants. reach US$83.7 billion by 2019, growing at a
CAGR of 6% from 2014 to 2019 (BCC Research
Biopesticides are a sustainable alternative to 2014). Reports attribute the main reason for
synthetic pesticides (the harmful effects of growth in this market to consumer demand for
which were discussed in Section 2.4.2. Despite pesticide-free food. However, in South Africa,
this, global private sector investment in the uptake of biopesticides has been much
synthetic pesticides has increased significantly slower than in developed countries. North
in recent years, and most South African farmers America dominates the market, with a 44%
are dependent on synthetic pesticides for biopesticides use in Canada, Mexico and the
production. Even though local pesticide use United States Europe follows, and is expected
has increased more than five times from 1994 to have the fastest growth due to increasingly
to 2011 (Quinn et al 2011), it is neither a long- stringent environmental regulations. Increasing
term solution for increasing yields on depleted pressure from international markets will affect
soil, nor an incentive for farmers to invest in South African exports, especially in the fruit
agro-ecological practices. and wine industry. This is a potential driver
of growth in the South African biopesticides
market.

Table 12: Global market for pesticides

Global market for pesticides

Type 2003 2004 2005
Synthetic pesticides 27 144 26 600 26 076
Biopesticides 468 562 672
Total 27 612 27 162 26 748

40 Agriculture: Market Intelligence Report 2016

Value of dips & sprays in SA

8 000,0

7 000,0

6 000,0

5 000,0

4 000,0

3 000,0

2 000,0

1 000,0

0,0
1970

1972

1974

1976

1978

1980
1982

1984

1986

1988

1990

1992
1994

1996
1998

2000

2002
2004

2006

2008

2010
Figure 15: Value of expenditure on dips and sprays over time in South Africa

– They are often effective in small quantities and

More stringent environmental decompose quickly, reducing risk of pollution.
regulations in the overseas Perhaps most significantly for farmers, when
used as a component of Integrated Pest
market is a potential driver Management (IPM) programmes, environmental
of growth in South Africa’s impacts can be reduced, while crop yields
biopesticides market remain high. The IPM approach is necessary
because biopesticides have a slow response to
pest outbreaks. IPM therefore uses a mixture of
Figure 1510 (DAFF 2013a) shows a significant biopesticides and synthetic pesticides - which
increase in expenditure on dips and sprays. also address the higher cost and poor stability
of biopesticides (because biopesticides are not
Possible reasons for this are stricter regulations yet fully developed in South Africa).
on what chemicals may be used in production,
resulting in increased prices of chemical input In South Africa, legislative barriers provide
products and farmers increasing their use of an additional obstacle to the uptake of
dips and sprays over the years. biopesticides. The Fertiliser and Farm Feeds,
Agricultural Remedies and Stock Remedies Act
Biopesticides are derived from natural (1947) regulates the registration of fertilisers,
materials (animals, plants, bacteria, and certain stock feeds, agricultural remedies, stock
minerals and can be classified as microbial remedies, sterilising plants and pest control
pesticides, plant incorporated protectants, or operators. The process of registering a new
biochemical pesticides. There are numerous product is very lengthy, resulting in a gap
advantages to their application. They are between R&D and adoption. However, final draft
less toxic than their synthetic counterparts. guidelines on the registration of biopesticides
Generally, biopesticides affect only the target have been developed according to DAFF’s
pest (and closely related organisms). agriculture inputs control annual report.

10
The data in figure 15 shows trends for both dips used for livestock and sprays used in crop production, as data separating these two main
chemical agriculture inputs could not be obtained.

Agriculture: Market Intelligence Report 2016 41

4.6. Bioenergy Also, should a plant fail to produce sufficient
- Biogas from agricultural waste gas to generate electricity, the gas can be
According to a recent study by the Energy combusted for heat.
Research Centre at the University of Cape
Town (Du Preez 2015), the total potential Leading researchers at Stellenbosch University
electricity generation from biogas in South highlight that the biggest opportunity for
Africa is close to 2300 MWe. A key driver biogas production in South Africa is in the
for using waste as a source of energy is the accumulated benefits of multiple decentralised
contribution to energy security and economic small-scale plants on farms. In South Africa,
growth. Employing a waste-to-energy there are as many as 300 biogas plants
approach also diverts waste from landfills. (Department of Energy 2015b), but local
growth potential for the biogas industry is
highlighted by the fact that China has 17
– million plants, and India has 12 million.
The total potential
electricity generation from –
biogas in South Africa is South Africa has 300 biogas
close to 2300 MWe pl ants but there is high
growth potential when
A recent report on the licencing process for considerting that China and
bioenergy projects in South Africa, compiled
by the Deutsche Gesellschaft für Internationale India have 17 million and 12
Zusammenarbeit (GIZ) (Steenkamp 2015) is a million pl ants respectively
valuable document for potential investors in
the bioenergy market. The report analyses the
South African biogas licensing and permitting South Africa’s biggest biogas plant is on a dairy
process, focusing on three existing biogas farm near Darling in the Western Cape. This
facilities and the processes that were followed plant produces 1.5 GWh electricity per year,
to obtain their approvals. It may be useful for and reduced the farm’s electricity bill from R110
scoping, planning and development of other 000 to only R12 000 per month (Creamer 2015).
biogas projects as it highlights weaknesses
and strengths of processes, identifies possible The required capital expenditure (especially
bottlenecks and suggests ways to improve the given a weakening Rand and the fact that
decision-making sequence for biogas projects. much of the equipment is imported into South
Africa) represents an additional barrier to
Biogas from waste has been identified as a the generation of biogas on many farms. By
key opportunity for the agricultural sector. comparison, Germany has roughly 8000 biogas
The sector can supply feedstock for anaerobic plants the size of the one near Darling in the
digestion (AD), such as manure from pigs, Western Cape. This highlights the relative
cattle and chickens. Commercial abattoirs, immaturity – and also the great potential for
cheese factories, breweries, wine estates, growth – of the biogas sector in South Africa.
processing plants, and fruit and vegetable-
packaging plants also have potential feedstock.
In addition to biogas, excess digestate coming
out of the AD plant can be used as fertiliser for
fruit or vegetable fields.

42 Agriculture: Market Intelligence Report 2016

5–
Funding and
incentives
A range of funding solutions are either focused on, or available
to, greentech manufacturers and service companies, as well as
those who use such services. These cover Development Finance
Institutions (DFI), local public and private sector financiers
and investors, and a considerable range of tax incentives.

According to the KPMG Green Tax Index (GTI), The table below demonstrates a wide
South Africa ranks 13th out of 21 countries variety of these funding solutions. It is not
to use tax as an incentive to drive the green exhaustive, but intends to be indicative of
growth agenda (ahead of Australia, Singapore some of the more green-focused funds or
and Finland). Investors and suppliers can incentives available, and provide potential
benefit from understanding the various leads or starting points to explore various
incentive and funding options available to options. Further to those below, the full range
them as well as understanding those available of government investment incentives can be
to their customers or clients, as these can found at www.investmentincentives.co.za.
influence the viability and attractiveness of their
products and projects.

Table 13: List of funding solutions

Funding solution Funding Details

instrument
Development Finance
International Finance Corporation (IFC) Loan, Equity www.ifc.org
European Investment Bank (EIB) Loan Greater than R0.25 million
SouthSouthNorth / DBSA: Grant, Subsidy, www.southsouthnorth.org/sustain-
Sustainable Settlements Facility (SSF) Rebate able-settlements-facility-ssf/
African Development Bank: Grant, Technical Grant for projects with total capital
Sustainable Energy Fund for Africa assistance, Equity investments in the range of USD 30-
200m.
Equity for IPPs with an ideal size of
between 5 and 50 MW and a com-
mitment per project of between USD
10-30m.
United Nations Development Grant Up to USD 50 000
Programme (UNDP):
Global Environmental Facility (GEF)
Renewable Energy and Energy Grant www.reeep.org
Efficiency Partnership (REEEP)

Agriculture: Market Intelligence Report 2016 43

UK Prosperity Fund Programme Grant www.gov.uk/guidance/prosperity-
fund-programme
German Federal Ministry of Grant www.bmub.bund.de/en/topics/
Environment: International Climate climate-energy/climate-initiative/
Initiative (IKI) general-information/
German International Cooperation Feasibility studies Bioenergy
Agency (GIZ)
Public Sector Funding
Western Cape Government: Grant 50% of approved intervention
Cape Capital Fund
Eskom: Integrated Demand Rebate www.eskom.co.za/sites/idm/Pages/
Management Home.aspx
Industrial Development Corporation: Loan, Technical R 1-50 m
Green Energy Efficiency Fund support
Development Bank of South Africa: Grant, Loan Green Cities and Towns; Low Carbon
Green Fund Economy; Environmental & Natural
Resource Management.
dti: Critical Infrastructure Programme Grant 10% to 30% of the total qualifying
(CIP) infrastructural development costs, up
to a maximum of R50 million
dti: MCEP - industrial financing* Loan Pre-and post-dispatch working capital
facility of up to R50m at a fixed interest
rate of 4% over a four-year term
dti: MCEP - production incentive* Grant Up to 25% of the manufacturing
value added
dti: Manufacturing Investment Grant Investment grant of 30% of the
Programme (MIP) investment cost of qualifying assets
for new or expansion projects below
R5 million.
Investment grant of between 15%
to 30% of the investment cost of
qualifying assets for new or expansion
projects above R5 million.
Department of Small Business Grant R0.35 million
Development (DSBD: Co-operative
incentive scheme (CIS)
Municipal Infrastructure Grant (MIG) Grant www.westerncape.gov.za/gener-
al-publication/municipal-infrastruc-
ture-grant
Recycling and Economic Devel- Grant Infrastructure and set-up costs for
opment Initiative of South Africa tyre recycling
(REDISA)
South African National Biodiversity Grant www.sanbi.org/biodiversity-science/
Institute: Global Adaptation Fund state-biodiversity/climate-change-
and-bioadaptation-division
Private Sector Funding
ABSA Loan, Rebate 15% of project
Nedbank Loan www.wwf.org.za/what_we_do/wwf_
nedbank_green_trust/
FNB Loan www.fnb.co.za/home-loans/getting-
a-building-loan.html

44 Agriculture: Market Intelligence Report 2016

Standard Bank Loan www.standardbank.co.za/
standardbank/
Old Mutual Infrastructural, Loan, Equity www.oldmutual.co.za/old-mutual-
Developmental and Environmental investment-group/boutiques/
Assets Managed Fund (IDEAS) alternative-investments/our-
capabilities1/infrastructure/our-
products/ideas-managed-fund
Business Partners Equity, Loan R0.5-30 million
Edge Growth Equity, Loan R1-20 million
Inspired Evolution: Evolution One Loan >R10 million
Fund
Atlantic Asset Management Loan >R15 million
POLYCO Loan Infrastructure for plastics:
high-density polyethylene (PE-HD),
linear/low-density polyethylene PE-
LD/LLLD) and polypropylene (PP)
PETCO Subsidy, Infrastructure for polyethylene
Awareness terephthalate (PET). Category A:
and training, R30m-R40m per annum, Category B:
Equipment R4m per annum.
Tax Rebates
12B accelerate depreciation incentive Tax rebate Accelerated depreciation of
renewable energy investments at a
rate of 50:30:20, as well as certain
machinery, plants, implements,
utensils and articles used in farming
or production of renewable energy11.
12L energy efficiency incentive Tax rebate 95c/kwh deduction on energy saved
12i tax allowance incentive for Tax rebate 35-55% or R550-R900m for
manufacturing investments greenfield projects
35-55% or R350--R550m for
brownfield projects
Capital development Tax rebate Tax deduction for capital expenses
expenditure incurred for farming operations
(including game farming) which focus
on sustainable agriculture.
37B environmental Tax rebate Deduction in respect of
expenditure environmental expenditure for assets
related to environmental treatment
and recycling, waste disposal, and
post-trade environmental expenses.
37C environmental Tax rebate Deduction in respect of
maintenance expenditure environmental conservation and
maintenance.

*Over R5 Billion was originally set aside for this programme and is now fully committed. A new application window will be opened in April 2016
pending availability of funds. All other incentives of the department will continue as normal.

11
This accelerated depreciation concession improves an investment’s cash flow, working to improve the business case for utility scale renewable
energy projects. One suggested amendment to the incentive has been to include the support structures used in renewable energy projects,
qualifying them for accelerated depreciation as well. Currently, the main technology components, such as PV panels or wind turbines, qualify, while
such an amendment would also include components such as mounting structures, wind turbine tower internals and other peripheral components
(The Green Business Guide 2015). The incentive is open to projects of all sizes.

Agriculture: Market Intelligence Report 2016 45

5.1. Manufacturing incentives Other incentives available to investments into a
The dti’s special economic zone (SEZ) designated SEZ will include:
programme aims to increase industrialisation,
economic development and job creation around ■■ 12i Tax Allowance Incentive (TAI)
the country. More specifically, the proposed ■■ One-stop-shop facility within designated SEZ
Upington Solar Corridor SEZ (Northern Cape) area
and Atlantis Greentech SEZ (Western Cape) ■■ SEZ fund for infrastructure development
focus on solar energy generation and greentech within the designated area.
manufacturing respectively. They provide
significant incentives to manufacturers, IPPs, Within Atlantis, the City of Cape Town has
and other players in the relevant value chains. made vast tracts of land available at low cost
for purchase or lease by greentech companies
These development zones make ideal locations through an accelerated land disposal process.
for the manufacturing of components that An application has now also been submitted
contribute towards local content. An example by the Western Cape Provincial Government
of this is the Gestamp Renewable Industry for the entire Atlantis Industrial area to be
(GRI) wind tower manufacturing facility set up declared a Greentech SEZ, a decision on
in Atlantis, Cape Town. Atlantis has also seen which is expected in the first quarter of 2016.
companies such as Skyward Windows and GreenCape’s Atlantis SEZ team can assist with
Kaytech expand to include green product lines, information, and facilitate access to permits,
and local manufacturing of wind tower internals licenses, planning and development approvals,
is expected soon. incentives and finance. It is also worth noting
that the dti has been willing to assure investors
The dti has proposed a number of incentives to that investing prior to SEZ designation will not
attract investors into the proposed SEZs, which disqualify them from receiving benefits once the
include: zone is designated.

■■ Reduced corporate income tax (CIT) rate:

qualifying companies will receive a reduced
corporate tax of 15%, instead of the current
28% headline rate.
■■ Employment Tax Incentive (ETI): aimed at
encouraging employers to hire young and
less-experienced work seekers. It will reduce
the cost to employers of hiring young people
through a cost sharing mechanism with
government.
■■ Building allowance: qualifying companies
will be eligible for an accelerated
depreciation allowance on capital structures
(buildings). This rate will equal 10% per
annum over 10 years.
■■ VAT and customs relief: companies located
within a customs-controlled area (CCA) will
be eligible for VAT and customs relief as per
the relevant legislation (dti, 2015).

46 Agriculture: Market Intelligence Report 2016

6–
The Western Cape:
Africa’s growing
greentech hub
The Western Cape is a world-class investment destination
offering prime locations, modern infrastructure, a skilled
workforce, low operational costs and an abundance of natural
resources. It is a sought-after place to live, with unrivalled
natural beauty, vibrant culture, excellent schools and
universities, and an outstanding quality of life. It is also a
prime location for green business.

The Cape Town area has emerged in the Coupled with these, is a strong and rapidly
last five years as South Africa’s renewable growing market for green technology and
energy and cleantech hub, with a critical mass services in South Africa and the region.
of the leading local and global companies
already present, including numerous original Some of the major market opportunity areas
equipment manufacturers. The province has in the next five years are outlined in the figure
a strong local presence of major professional- below. Notably, on utility-scale wind and
services firms and financiers, as well as a solar projects there is robust South African
supportive government that has made ease of and African demand, with ±R200bn/US$20bn
doing business and the green economy key invested since 2011 and >1GW capacity
priorities. procured per annum.

Renewable energy Energy efficiency

utility scale wind
■■ ■■ industrial
and solar projects ■■ commercial
■■ rooftop solar PV ■■ agricultural
■■ component ■■ government
manufacture ■■ residential

Waste Water
■■ bioenergy ■■ reuse
■■ secondary materials ■■ precision irrigation
■■ value chains ■■ resource recovery
■■ advanced treatment
■■ use efficiency

Figure 16: Major market opportunities in the Western Cape (2015 – 2020)

Agriculture: Market Intelligence Report 2016 47

The province also offers dedicated support for The region’s four universities - University of
businesses and investors focusing on green Cape Town, Stellenbosch University, University
technologies and services, including: of the Western Cape, and the Cape Peninsula
University of Technology - underpin all of this
■■ GreenCape, providing dedicated support with comprehensive R&D capabilities and
and market intelligence to green economy dedicated green economy skills programmes.
sectors.
■■ Wesgro, the Investment and Trade Finally, as discussed in Section 5, the City
promotion agency for the Western Cape. of Cape Town established a greentech
■■ SAREBI, a business incubator providing non- manufacturing hub in Atlantis in 2011 in
financial support to green entrepreneurs. response to the government’s focus on
■■ SARETEC, offering specialised industry- localisation of manufacturing as part of the
related and accredited training for the wind Department of Energy’s Renewable Energy
and solar industries. Independent Power Producer Programme
(REIPPPP). A promising range of investment
incentives are available in the proposed
Atlantis Greentech SEZ, including numerous
financial and non-financial incentives,
discounted electricity and rapid turnaround on
development applications (see Section 5).

© GreenCape

48 Agriculture: Market Intelligence Report 2016

7–
GreenCape’s support
to businesses and
investors
GreenCape is a non-profit organisation that was established
by the Western Cape Government and City of Cape Town
to support the accelerated development of the local green
economy – low carbon, resource efficient and socially
inclusive – and help position the Western Cape as the green
economic hub of Africa.

We assist businesses in this space to remove More about GreenCape’s work in the
barriers to their establishment and growth by agriculture sector
providing our members with: The green economy is a dynamic space and
opportunities may be limited by legislation
■■ free, credible and impartial market and policy, and a lack of credible market
information and insights information, funding and skills. GreenCape’s
■■ access to networks of key players in agriculture team works to understand these
government, industry, finance and academia shifting dynamics to provide useful and relevant
■■ an advocacy platform to help create an support. We provide all our stakeholders with
enabling policy and regulatory environment relevant market information on sustainable
for green business agriculture, with a focus on the Western Cape.

Since inception in 2010, GreenCape has The agriculture team also help farmers reduce
grown to a multi-disciplinary team of over 40 their input costs and environmental impacts
staff members, covering finance, engineering, by providing advice on the uptake of green
environmental science and economics. We technologies, better efficiencies and on
have facilitated and supported R13.7 billion of sustainable farming practises. We also link
investments in renewable energy projects and farmers, investors and suppliers so that farmers
manufacturing. From these investments, more have access to expert advice and the right
than 10 000 jobs have been created. equipment and to help develop the market
for green technologies. For investors and
Our Market Intelligence Reports form part of suppliers that receive support from GreenCape,
a working body of information generated by this means access to a growing market in
sector desks and projects within GreenCape’s the province’s agricultural sector. We also
three main programmes – energy, waste and engage with farmers through means such as
resources. Figure 17 below shows the different the recently launched “GreenAgri” website
focus areas within each of our programmes. (www.greenagri.org.za) that provides essential
information to make informed investment
decisions.

Agriculture: Market Intelligence Report 2016 49

Benefits of becoming a GreenCape member opportunity – through our networking events –
We currently have over 600 members, and to meet and interact with various stakeholders
offer free membership. Becoming a member in the green economy.
of GreenCape will give you access to the
latest information regarding developments in To register as a member, please visit our
the various sectors; access to tools, reports, website, www.greencape.co.za
and project information; and offer you the

1
E N cie n &
ER t
GY
n
ea
Cl
E f fi

6 2

Sustainable
use of natural Our focus
RESOURCES areas

5 3
R e AS T
W
du E
ce
d

1 Renewable Energy 4 Western Cape Industrial Symbiosis

Programme (WISP)
Utility-scale projects, small-scale embedded
generation, and localisation of component Free facilitation service that networks companies
manufacture. to exchange under-utilised resources (materials,
energy, assets, logistics and expertise).
2 Energy Efficiency
5 Water
Energy efficient buildings and equipment, demand
side management and financing contracting models. Water provision and economic development;
greentech opportunities for water use efficiency,
3 Alternative Waste Treatment treatment and reuse.

Municipal decision-making and policy and legislative 6 Agriculture and Bio-Based

tools on alternative waste treatment options; small-scale Value Chains
biogas, recycling and reuse (dry recyclables, construction
and demolition waste). Sustainable agriculture, valorisation of wastes to
high value bio-products, including bio-energy.

Figure 17: GreenCape’s focus areas

50 Agriculture: Market Intelligence Report 2016

Appendix A:
Key role players
Table 14: Key role players

Opportunity Company
Biological control Agro Organics Agriculture
Agro-Hytech
Cannon Pest Control
Eagle Eye
Ecolab Ltd
FruitFly Africa
Conservation agriculture Equalizer
Monosem
Piketberg Implements
Rovic Leers
Valtrac
Energy EnerGworx
MLT Drives
Renenergy
Renewable energy design
Solairedirect
Sustainable Power Solutions
Precision agriculture Aerobotics
Aerovision
Agri-Solutions
Agrista
Crosscape Precision
DFM Software Solutions
Effective Farming Solutions
EnviroMon
IrriCheck
Government departments Agriculture, Forestry and Fisheries
Economic Development and Tourism
Energy
Environmental Affairs and Development Planning
Home Affairs
Human Settlements
Labour
Mineral Resources

Agriculture: Market Intelligence Report 2016 51

Public Works
Rural Development and Land Reform
Science and Technology
Small Business Development
Statistics South Africa
Trade and Industry
Transport
Water and Sanitation
Western Cape Department of Agriculture
Industry associations Agri Western Cape
Bureau for Food and Agricultural Policy (BFAP)
Biodynamic Association of South Africa (BDAASA)
Blue North
Cape Nature
Cape Agency for Sustainable Integrated Development in Rural
Areas (Casidra)
Citrus Growers Association of SA (CGA)
Confronting Climate Change (CCC)
Endangered Wildlife Trust (EWT)
Grain SA
Green Choice Alliance
HORTGRO
Milk Producers Association (MPO)
National Wool Growers Association (NWGA)
National Energy Regulator South Africa (NERSA)
No-Till Association of the Western Cape
No-Till Club of KwaZulu-Natal
Potato SA
Protea Producers Association of SA (PPSA)
Red Meat Abattoir Association (RMAA)
Red Meat Producers Asociation (RPO)
SA Bee Industry Organisation (SABIO)
SA Flower Growers Association (SAFGA)
SA Fruit & Vegetable Canners Association (SAFVCA)
SA Fruit Juice Association (SAFJA)
SA Honeybush Tea Association (SAHTA)

52 Agriculture: Market Intelligence Report 2016

SA Olive Industry Association (SAOLIVE)
SA Olive Industry Association (SAOLIVE)
SA Pork Producers Association (SAPPO)
SA Poultry Association (SAPA)
SA Rooibos Council (SARC)
SA Table Grape Association (SATI)
SA Wine Industry Trust (SAWIT)
Southern African Wildlife Management Association (SAWMA)
South African Milk Processors' Organization (SAMPRO)
South African Mohair Growers Association (SAMGA)
VinPro
Winetech
Research institutions and Agriculture Research Institute (ARC)
universities
Bureau for Food and Agricultural Policy (BFAP)
Blue North
Cape Nature
Cape Peninsula University of Technology (CPUT)
Confronting Climate Change (CCC)
Council for Scientific and Industrial Research (CSIR)
Green Choice Alliance
University of the Western Cape’s Institute for Poverty, Land and
Agrarian Studies (PLAAS)
South African National Biodiversity Institute (SANBI)
Southern African Wildlife Management Association (SAWMA)
University of Cape Town
Stellenbosch University
World Wildlife Fund (WWF)
University of Cape Town
Stellenbosch University
University of the Western Cape
World Wildlife Fund (WWF)

Agriculture: Market Intelligence Report 2016 53

8–
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