El Niño in Southern Africa: Building Resilience
TO the average person in Southern Africa, El Niño has become a term synonymous with suffering. It can bring some of the most excruciating periods of intense heat and sunlight whilst its counterpart – La Niña, delivers massive floods. While in 2010 the region experienced intense rainfall, this time around during the prime farming season of 2015/2016, high temperatures and very limited rainfall were the order of the day. This has given birth to a cocktail of events that are proving to be a nightmare that the inhabitants of the region wish they could wake up from, sooner rather than later.
For starters, the world’s largest man-made lake – Lake Kariba, which sits on the border of Zambia and Zimbabwe and is used for hydro-electricity generation was only 21% full (as at 7 April 2016) versus a value of 48% at the same time the year before .This by itself has massive repercussions for the economies of these two countries. Zambian copper mines for example are heavily dependent on electricity since copper is refined via electrolysis. Apart from the deficiency of electricity and its negative impact on the economy, the lack of rainfall resulted in extensive crop failure across the region. Southern African countries have already started implementing export controls on grain and are making preparations to import maize from countries like Brazil.
For time immemorial, mankind has been bombarded by all kinds of natural hazards that Mother Nature could think of. We owe most of our resilience, to the investment that has been made towards understanding how the world functions. Regardless of this, we will still continue to seek answers to what drives earthquake activity, tsunamis, hurricanes, cyclones and so on. Indeed, a lot is already known about El Niño activity and its sister La Niña, however many countries in the world remain exposed to the effects of this phenomenon. We already know that El Niño occurs roughly every 7 years (at the least)but research is not yet conclusive on how climate change will affect the intensity and frequency of this phenomenon. We need to build upon this knowledge in order to devise solutions that will shield those remote African communitieswhich strive on subsistence agriculture or those who make a living out of fishing and thus live in low lying plains. We need to build resilience.
Risk management at a continental level
Risk has a way of announcing its imminent arrival – the field of risk management aims to identify those warning shots and take appropriate action before the risk crystallises. Financial institutions usually strive to hold capital to survive those so called 1 in 200years financial shocks. Developing nations however, are struggling to handle a 1 in 7years event. Humanitarian aid, while very useful, is definitely not the answer in itself. There is a need to make use of every tool at our disposal. The state of affairs in Southern Africa is a wake up call on the need to make use of risk modelling techniques at the national level to identify areas of vulnerability against natural hazards. Risk (Catastrophe) modelling has a place in policy making and how governments distribute resources for infrastructural development. Currently, if we exclude South Africa, 70% of Sub-Saharan Africa’s energy comes from hydro-electricity and there are plans to roll out even more hydro projects as soon as funding becomes available – isn’t this creating a concentration risk by compounding our dependence on precipitation that is becoming ever so erratic?
Insurance also has a role to play in our quest for resilience. If perennial risks such as earthquakes in California or Japan, floods in northern England and tornados in the tornado alley of the US can be insured, then we surely can insure against the risks brought about by El Niño. Catastrophe modelling has acted as a catalyst to allow the transfer of these risks into the international capital market and the same needs to be done for El Niño.
A change in community behaviour is also needed in the face of changing climatic conditions. Most African rural communities follow set customs and traditions that are handed down from generation to generation. This means that even in the face of global warming, many still prefer to farm the same crops that their forefathers sowed – turning a blind eye to drought resistant crops.
The problem of natural hazards is here to stay. El Niño is just one incarnation of that problem. The good news is that our understanding of these natural phenomena is growing by the day. With that understanding, we should be able to develop ways to cope with our environment. We should produce better models to price that risk, facilitating insurance initiatives and to also assist countries in disaster preparedness, vulnerability assessments and resource allocation.
Thomas Sithole is an actuarial analyst specialising in Enterprise Risk Management. . thomas.bluecroftsolutions.com
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