An Africa solution to dealing with drought - CNBC Africa

An Africa solution to dealing with drought

Southern Africa

by Tendai Dube 0

Africa solving issues of drought through insurance. Photo: Pixabay

As Southern Africa grapples with one of the worst droughts faced in years, African Risk Capacity is an option a country could use to insure itself against the natural disaster.

The African Risk Capacity is a specialised agency of the African Union designed to assist member states resist and recover from the havoc of natural disasters through a weather insurance mechanism.

"This has come about because of the experience we have had on the continent as we see increasing volatile changes in weather patterns, floods and droughts and climate change impacts - we have seen a lot of loss of life and livelihood, livestock, farmers losing everything,” said Ngozi Okonjo-Iweala, Governing Board Chair of the African Risk Capacity.

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"I am very proud that the African Union, with the support of the world food programme, The Rockefeller Foundation, The UK, Swedish and German government came together and said we want to develop a solution to this problem so that we don't have to wait for others - an agency that would sell weather based insurance to countries - a sort of public-private partnership,” she said.

Okonjo-Iweala explains that countries would purchase insurance against a crisis like drought for example and if the Africa Risk View system (a sophisticated database) sends an alert that the country has experienced a drought at the severity that warrants payment - it is then paid out within two to three weeks the country gets the money.

Africa has found solutions for its own problems, coming to the rescue of countries like Senegal, Mauritania and Niger when they were faced with natural disasters, but as Africa has limited resources financially would this plan of insurance be affordable and sustainable?

"I am not saying it is cheap but it is affordable - as of now we have 32 countries on the continent that are signatories and out of those, seven have actually purchased insurance."

"You pay depending on how many people you want to insure in the country, what geographical areas and so on, you can pay anywhere up to 3 million dollars per year but get pay outs that are multiple times that, for example for the three countries we paid out 26 million dollars - we covered 1.3 million people with this money," said Okonjo-Iweala.

She explains that it was able to disperse money for emergency food for cattle feed, saving lives and livestock. "We didn't wait months for the UN to raise money for us, we solved our own problems."

Right now with the seven countries as signatories, ARC has 178 million dollars in coverage and it wants to increase that to 1.5 billion dollars with 30 countries by 2020.

Okonjo-Iweala touched on how parts of Southern Africa are experiencing droughts, such as Zimbabwe, parts of Lesotho, and parts of South Africa.

“I think Zimbabwe is a signatory and they have actually done much of the work, if they had already paid for the insurance we would have been able to disperse money to them now - now they are waiting for an appeal for the UN and other agencies to bring money - but if it had just spent the 3 million, we might have been able to disperse multiples of that to them to start taking care of the people who are suffering.”

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