Southern Africa already suffers from the effects of climate change, with business-as-usual (BAU) scenarios projecting a rise of 4°C in regional mean temperatures within the 21st century and a significantly increased prevalence of extreme weather events. In light of insufficient adaptation funds and policy frameworks, however, governments in Southern Africa require support from the private sector to strengthen adaptive capacities among the region’s citizens. Adaptation SMEs – enterprises that provide climate change adaptation products and services – can provide this support.
Opportunities and challenges for adaptation SMEs
This study examines the characteristics of adaptation SMEs and investigates adaptation market opportunities and challenges that impact these enterprises in the three Southern African countries Botswana, Malawi, and Zambia.
Adaptation SMEs can take a key role in climate change adaptation through their functions as:
Agents in strengthening the adaptive capacity of their target groups through the provision of adaptation products and services,
Providers of climate adaptation information,
Locally rooted partners in multi-stakeholder adaptation programmes and
Customers of adaptation products and/or services.
Despite these functions, adaptation SMEs only receive marginal recognition by policy actors, climate action practitioners and academia. In Southern Africa, adaptation SMEs have substantial opportunities to significantly contribute to the region’s economic development and resilience to climate change. These opportunities, however, can only be harnessed if recognition and support shift towards adaptation SMEs and their challenges.
Adaptation SMEs’ growth and scale opportunities are largely based on the fact that they cater to target groups (rural, less affluent, smallholder-dominated communities) that are vastly un- or underserved by public and large-scale private actors. These communities are disproportionately hit by the effects of climate change (due to their limited resources and adaptive capacities), rendering support through adaptation SMEs all the more relevant and adaptation solutions highly demanded. With a lack of direct competitors, these enterprises have the potential to gain market shares rapidly.
Adaptation SMEs, however, face several considerable hurdles that they need to overcome to scale successfully. They are critically underserved by financial institutions and largely overlooked by policy-makers – resulting in non-existent financial products and a fabric of policies that either disregard adaptation SMEs or inhibit their operations. COVID has further exacerbated the previously low purchasing power of adaptation SMEs’ primary clientele. The political measures set in motion to contain the virus’ spread have further led to raw material and machinery supply disruptions, affecting many adaptation SMEs sourcing production inputs or technical equipment from other countries.
Based on SEED’s experience with supporting over 1000 eco-inclusive SMEs in 38 countries that are part of the SEED enterprise database and in-depth interviews with eleven aspiring adaptation entrepreneurs across the energy and climate-smart agriculture sectors, this study finds substantial opportunities for adaptation SMEs to scale and sustainably grow their operations, but also several considerable challenges that threaten adaptation SMEs’ success in Southern Africa.
Who is this study aimed at?
The report expands the still-nascent body of case study-based literature on adaptation entrepreneurship, and is thus suited for academia and practitioners active in this field. It is the first one to identify opportunities for successful adaptation entrepreneurship as well as barriers to growth and scale in the region. It aims at current and future Southern African adaptation entrepreneurs, potential investors, national financial institutions, and policymakers seeking to support adaptation SMEs. The study, furthermore, urges international players of climate action to consider adaptation entrepreneurship as an important, cost-effective and sustainable tool for successful climate change adaptation.