Research on SME resilience has highlighted global opportunities for South African companies that benefit from the European Green Deal.

Following an EU-funded project to support the resilience of green SMEs during the early stages of the COVID-19 pandemic, GreenCape has partnered with Wesgro, TIPS, Tralac, Trade Advisory and the International Cleantech Network to support Local green SMEs so that they can continue to forge international relationships to secure business opportunities despite travel restrictions, supply chain disruptions and a strict lockdown.

A set of interventions was developed, including an in-depth review of the opportunities presented by the European Green Deal for local green SMEs that have been able to adapt their business models to trade without travel.

A series of papers have been published, detailing information on accessing global cleantech opportunities in a virtual world; driving resilience in promoting trade; an explanation of the context, challenges and opportunities for South African SMEs operating in the green economy through the EU Green Deal; an action plan for the circular economy and an explanation of the carbon border adjustment mechanism.

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Trudi Makhaya, Special Economic Advisor to President Cyril Ramaphosa, said: “As the world tackles climate change, conserves biodiversity and embraces more sustainable forms of production, the green economy is emerging as a major driver. growth. With COP26 on the horizon, South Africa continues to advocate for a just transition that benefits everyone, including communities at risk of being left behind

“It is also important that we support green industrialization in key sectors such as renewable energy, green mobility and green hydrogen, and ensure that MSMEs are included in these new value chains. The EU Green Deal opens an important market for MSMEs in the green economy.

Impact of the European Green Agreement on SADC

The report on the European Green Deal stresses that South African exports will have to adapt if they are to ensure their long-term competitiveness. The carbon border adjustment mechanism is specifically developed in the study and the potential opportunities for expanding trade in the EU are also highlighted.

The European Green Deal (EGD) is a set of political initiatives of the European Commission (EC) whose overall objective is to make Europe climate neutral by 2050 and affects various sectors, including energy, land, biodiversity, clean air, food and sustainable buildings.

The Carbon Frontier Adjustment Mechanism (CBAM) is one of EGD’s flagship initiatives. It aims to mitigate carbon leakage and will mirror the EU’s Emissions Trading System (ETS) by applying an equivalent regime to imports. It will enter into force in January 2023 and will initially apply to direct emissions from the steel, cement, fertilizer, aluminum and power generation sectors.

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“The EGD and its specific policies, regulations and measures will have an impact on the EU’s trade relations with its partners in third countries. The Southern African Development Community (SADC) EPA group is no exception and the impact will vary by country and specific product. The EU SADC-EU EPA is an important agreement that determines how the EU and SADC EPA countries (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland) trade.

“Given that South Africa is the EU’s largest trading partner, it will therefore be the most affected if any changes are made to trade requirements or regulations. Agricultural products, motor vehicles, critical raw material inputs, primary resources and carbon-intensive packaging, among others, will be affected, ”reads the European Green Deal report.

Modification of the conditions of the end-use request

“EGD aims to expand the business applications of breakthrough green technology innovations and create corresponding markets to gain an advantage over its competitors in the United States and China. African countries will struggle to adopt these emerging green technologies, some of which are still expensive. “

Tightening chemical and pesticide control standards will require investment from chemical and agricultural exporters, while weak national organic certification structures may limit market opportunities among more concerned consumers. environment.

Heavy industry will be affected by changing end-use demand conditions for a range of mined products, while restrictions on scrap exports could exacerbate pre-existing shortages for steel producers.

The leather and wine industries can be affected by the carbon-intensive aspects of their supply chain, with the pressure on the wine industry focused on efforts to increase bulk shipments, which erodes the incomes of small producers.

The automotive value chain remains at high risk until a clear path is mapped for the transition to electric vehicle (EV) manufacturing, with midsize automotive component suppliers particularly at risk.

The lagging investment will have a decisive effect

Technological risks include cases of incompatibility between green approaches adopted in the EU and South Africa, and more fundamental changes in the structure of some value chains. Late investments in green production techniques can pose risks to sectors such as steel and glass, the latter also impacting beverage exporters.

The lack of bio-waste control and classification systems may impact upstream suppliers such as agriculture and downstream adopters in the chemicals sector, while the pulp and paper sector may need adapt to the changing expectations of pulp mills acting as multi-exit biorefineries.

Electrical engineering companies will continue to be constrained by the stagnation of South Africa’s renewable energy supply program, while producers of traditional automotive components may face declining supply opportunities as the supply chain continues. Value contracts around the primary production of electronics at original equipment manufacturers (OEMs).

You can find all the reports on the GreenCape website and learn more about what can be done to mitigate risk and turn constraints into opportunities.

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