Social investing must reconcile helping end unemployment with environmental sustainability

17 May 2023

As the country emerges from the Covid-19 pandemic, leaning into the established hydrocarbon-driven economy would be very tempting. But to make a difference in both carbon reduction and livelihoods, the South African economy will need to be fundamentally reformed.

The global climate is becoming more volatile, posing increasing threats to lives and livelihoods across the globe. Humanity’s culpability in the causes of this volatility is now generally accepted: by emitting carbon dioxide and carbon monoxide (among many other pollutants) at an exponentially industrial scale over the past two centuries, the planet’s overall temperature has slowly been rising, triggering more frequent and increasingly extreme weather events, especially droughts and floods.

South Africa is regarded as the 15th highest emitter of CO2 in the world, largely due to the coal the country uses to manufacture petrol and burns to generate electricity. It has an estimated 3% of the world’s remaining coal reserves (the eighth highest national endowment) — coal is abundant and relatively easy to access.

The country’s dependence on this source of energy means that when the national power utility is forced to implement rolling blackouts, the cost to the economy can top over R4-billion a day. And this is despite the country’s abundant renewable energy resources (sun, wind and sea). Ours is unquestionably a hydrocarbon-led economy and transitioning away from hydrocarbons will take nothing short of a monumental effort.

Resistance to reform

Mineral Resources and Energy Minister Gwede Mantashe was quoted recently as saying that if SA just stopped using coal, we would “create 10 ghost towns overnight”. For a country with an official unemployment rate of 34.5% (and 63.9% for those aged 15-24), the minister appears to be arguing that the bigger risk to lives and livelihoods is not climate change, but rather, efforts to avert it.

Covid-19 lockdowns brought into stark focus just how vulnerable we are as a country. The country was confronted with tens of thousands of households left hungry following extended periods with no access to food or ways to access it. Tshikululu was privileged to work alongside hundreds of development partners, led by the Solidarity Fund, who responded to the challenge by coordinating and mobilising thousands of food parcels and food vouchers to households in need across the country.

Yet, hunger pre-dates Covid-19. While South Africa met the Millennium Development Goal of eradicating childhood malnutrition by 2010, micronutrient hunger remains pervasive, with 27% of children under five years of age in SA stunted. A much-maligned and often overlooked statistic, childhood stunting is entirely preventable and demonstrates just how much work there is still to be done.

As the country emerges from the Covid-19 pandemic, it would be very tempting to lean into the established hydrocarbon-driven economy. To put a foot on the accelerator pedal, to rev up the economy, push it hard to try to make up for lost time and lost livelihoods, and hope that it achieves sustained growth in time, despite the consequential and longer-lasting effects on the climate.

Thus, for South Africa right now, the question is as stark as this: how can ending unemployment be reconciled with environmental sustainability?

To make a difference to both carbon reduction and livelihoods, the South African economy will need to be fundamentally reformed.

New pathways

Now is the time to build local markets (at village or community level) for energy (smaller scale power production centred on renewable energy, embedded generation), local markets for nutritious food (to work more purposefully towards achieving the National Development Plan’s milestone of a third of all fresh produce consumed in SA being produced by smallholder farmers), and local markets for the production and beneficiation of agricultural products (especially alternative fuels, leather, wool, etc).

Addressing inequity and inefficiency in our market will take considerable effort and coordination. In Tshikululu’s experience, a considered social investor can be a catalyst for change.

An analysis of Tshikululu’s own data, reflecting on all our clients’ social investments over the past 24 years, shows that while our clients averaged 17 environment-sector grants per year, the average value of the environment-sector grants were quite modest at R367,828. Over the same period, our clients averaged 10 agricultural livelihoods grants per year, but at a more substantial average value of R996,681.

Across both sectors, the trend has been towards a few bigger grants each year. However, the share of environment-sector grants as a percentage of all grants in a year has remained relatively consistent at 2.2%.

Agricultural livelihoods sector grants have slowly been growing from 0% a year for the first five years, slowly working up to a high of 16% of all grants paid in 2016, back to 2.11% in 2020. We anticipate as we look back at the Covid-19 lockdown period and its aftermath, that there will be a noticeable increase again in the share of grants going to agricultural livelihoods projects.

Nationally, the environment sector has received a relatively constant 3% of all corporate support and corporate social investment expenditure (totalling around R8-billion in 2016) with a third of all corporates contributing to this sector each year.

Food security and agriculture, however, has received a 7% share of the corporate support and CSI expenditure, from between 37% and 41% of corporates over the same period.

Together, support for both sectors averages a mere 10% of annual corporate contributions. The “food security and agriculture” sector saw almost double the number of respondent NPOs involved (16-20%), as those that indicated involvement in the environment sector (8-11%).

This is an encouraging start; however, we argue for much more investment to be made into green livelihoods. And for this investment to be catalytic by design.

Importantly, it is Tshikululu’s experience that such investments have to be market-oriented and demand-led if they are to catalyse impact. Skills training, work experience, mentorship and/or placement initiatives will not produce sustained positive economic returns for participants if the training/placement initiative is not demand-led.

Environment conservation and/or restoration efforts also need to be relevant to the market: they cannot be sustainable in the long term if human livelihoods are not also enabled and sustained.

We contend that social investments targeted at leveraging SA’s natural resources in a sustainable way can and should achieve both positive biodiversity outcomes and improved livelihoods.

Striking a balance

Achieving placement rates upwards of 90% is generally unheard of in the youth development and training space. However, Tshikululu is aware of two separate projects that do this. These are projects that train, intern and place field guides and game rangers in private and public game reserves in southern Africa to assist general biodiversity conservation.

These projects help improve the country’s productivity in the green economy — not only protecting threatened species (especially the rhino and pangolin) but also helping in general biodiversity conservation while also earning significant foreign exchange through tourism. The costs per participant in these initiatives are high, but the return on investment (such as salaries earned by placed participants) exceeds the investment made in their training and placement within three to four years.

There is a farming association that runs a communal farmer development programme in traditional landholding rights areas which empowers communal wool growers to improve the quality and marketing of their wool. Improved agricultural practices, such as responsible grazing, have not only helped ensure healthier rangelands (prevention of dongas) and healthier flocks but have resulted in communal farmers participating more directly in the global wool economy, making a quantifiable contribution (small but growing) to the country’s foreign exchange earnings from exports.

Tshikululu can also point to an initiative to remove alien invasive tree species so as to free up water back into a crucial water catchment area in the Eastern Cape. Here, the felled saplings and trees are being turned into Forest Stewardship Council certified charcoal for sale locally and abroad. While a nascent initiative, it is expected that the revenues from the sale of the “green” charcoal will be sufficient to sustain the clearing work (an almost never-ending task), obviating the need for donor or state funding.

Indeed, because of the focus on green livelihood outcomes, there has to be an uncompromising focus on sustainable business models. If sustainable cash flows can be found, and green outcomes realistically achieved in the process, then the social investment case should be made.

Whether funding these initiatives directly, or through innovative mechanisms such as the Green Outcomes Fund, there are numerous ways a considered social investor can leverage their available funding to drive the SA economy to take up greater numbers of sustainable, green livelihood initiatives. DM/OBP

Graeme Wilkinson is Senior Social Investment Specialist at Tshikululu Social Investments.

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South Africa

Resistance to reform

New pathways

Striking a balance