Economies worst placed to cope with knock-on effects of drought

Many African economies, which largely rely on agricultural revenue, are the least equipped to deal with the devastating impact of regular drought, economists have said. About 43 percent of Africa's land surface is arid and low rainfall is considered a normal fact of life. However, drought, which used to occur on average every five to six years, has been happening more frequently over the last 12 years. It is the single most important natural hazard in terms of shattered livelihoods, starvation, deaths and nutrition-related diseases on the continent. While drought occurs all over the world, seven out of the 10 most vulnerable countries -- Somalia, Sudan, Ethiopia, Uganda, Chad, Mauritania and Mozambique -- are in Africa. Droughts in the early 1970s, 1980s, the beginning of the 1990s and 2001 affected some 50 million Africans. Between 1980 and 2000, drought killed more than two million people in just three countries: Ethiopia, Sudan and Mozambique. Almost one million of them died in Ethiopia's famine of 1984. Beyond the human cost, drought in Africa causes economic losses of tens of millions of dollars and can reverse years of national development gains. The crushing impact is much greater for pastoralists or subsistence farmers, who together make up some 69 percent of Kenya’s workforce and 83 percent of Ethiopia’s, according to the United Nations Food and Agriculture Organisation (FAO). Worthless livestock The current drought across northern Kenya, southern Ethiopia and southwest Somalia has caused market prices for livestock to collapse. In Wajir, a Kenyan provincial capital 650 km northeast of Nairobi, the cost of an adult cow has fallen from 7,000 Kenya shillings (US $96) to 800 shillings ($11). Camels fetch less than 5,000 shillings ($68), down from 20,000 shillings ($274). Herdsmen, whose whole livelihoods are tied up in their animals, have seen the value of their entire worldly assets stripped, thanks to the drought. "I have walked for three days to bring these animals here, and now I have to sell them at whatever price I am offered because they will not be strong enough to walk back again," said Hussein Aden, 25, who had led his family's last four camels to Wajir market. The effects of drought are "insidious" due to their "'creeping nature", according to Eric Patrick of the Drylands Development Centre of the UN Development Programme (UNDP). "Human mortality is simply the end state of this process," Patrick wrote in a February 2005 discussion paper presented at a conference in Nairobi, the Kenyan capital, on the economic impact of drought. Staple prices soar During a drought crisis, the local economy in affected areas collapses first, when people have few savings or assets to help them through. Prices for staples like maize soar - for example, in March, in the Juba region of Somalia, 1 kg of maize cost US 25 cents, 70 percent higher than four months earlier, said Nicholas Haan, chief technical advisor for the UN’s Food Security Analysis Unit (FSAU). Sorghum prices have jumped 66 percent since November and are their highest in the 10 years FSAU has been operating in Somalia. The situation is the same across northern Kenya, aid agencies report. Households have adopted a number of consumption coping strategies in response to their decreased purchasing power, including reducing how much and how often they eat (once a day instead of three times); switching to lower-quality, cheaper cereals; seeking gifts of food; and relying on relatives, social support and humanitarian assistance. Without money from their livestock to buy essentials like maize, tea, sugar and soap, herdsmen also turn to traders for credit. In good times, this is rarely a problem, but when debtors have little chance to pay back what they owe, shopkeepers cut off credit lines. Across some parts of northern Kenya, locals have reported that even the shops had closed. "During lean periods, the shops would bail us out with credit," Mohamed Ali, a resident of Dambas in Wajir district, where 98 percent of the population currently relies on food aid, told British aid organisation Oxfam. "But now nearly all the shops have been run down by giving too much credit and not receiving any payment back. I don't know how we'll get through this period. So many people are on the brink." Marginalised communities Countries with economies that are relatively simple and predominantly agricultural suffer most under drought conditions. The effect of drought increases their balance of trade deficits, donor and food aid dependency, urban migration of poor people and the costs of service provision and welfare. The regions of Kenya and Ethiopia that are most severely affected by the current drought lie far from their capitals, and their populations historically have been seen as having only peripheral importance to the national economy. Investment in these regions is limited, forcing more people to live below the poverty line. Governments have been accused of reacting slower than they would if a region with greater economic importance faced the same problems. "It is nonsense to say that these areas do not contribute to the economy," said Douglas Keatinge, spokesman of Oxfam. In 2002, the latest year for which figures are available, 10 percent of Kenya's gross domestic product (GDP) came from its trade in livestock. It is expected a similar slice of each year’s national earnings in other countries in the region comes from the same trade, which is now likely to be severely curtailed, impacting a country’s overall earnings. "The governments know that, and they have policies and planned policies - like Kenya's Arid Lands Development Policy -- but they just need to be implemented properly. It is incumbent on governments to address the needs for basic services in these regions, so populations are better placed to deal with drought when it comes," said Keatinge. Kenya's government is now a key player in the overall response to the country's food crisis. Behind the United States, it is the second biggest donor to the food appeal launched to tackle the drought's effects, having spent $52.5 million from its own budget to feed those in need. Diversify to survive In countries such as South Africa, whose economies Eric Patrick of UNDP described as "intermediate" or semi-industrialised, the impacts of drought are better absorbed by a more complex and diversified economy. Similarly, in mineral-exporting countries such as Botswana and Namibia, the impacts are cushioned by the mining sectors of the economy, which are not linked to weather-dependent agricultural sectors. Furthermore, because fewer people earn their livings purely from agriculture, fewer are affected when drought strikes. Kenya's economy, however, is largely driven by exports of tea, coffee, flowers and packaged vegetables, and on tourism. All these sectors have been affected. The Kenya Tea Board reported in February 2006 that the expected yield for that month was likely to be 50 percent less than the same period a year before. Seven private tea factories have temporarily closed, waiting for the rains to come. James Finlay Ltd has sent all but 2,700 of its 13,000 employees home on early annual leave, and the remaining staff is working six hours a day instead of 12. The shortage has sent prices at the Mombasa tea auction to record highs, yet the price gains are not nearly enough to offset the loss in sales. The Tea Board of Kenya warned late in February that the drought could cost the country $111 million in revenue in 2006. If it does not rain soon, that may be a conservative estimate. Irrigation for flower farms, which earn Kenya some $225 million a year, is putting further strain on limited water resources. Tourism sector Wildlife in game parks is also struggling to survive, with KWS reporting the deaths of 100 hippos in various reserves and the risk of an anthrax outbreak in northern regions, where rare Grevy's zebra are dying in increasing numbers. Kenya’s tourism industry is the country’s fourth highest earner in terms of foreign currency, bringing $682 million into the economy in 2005, or 14 percent of GDP. If the country’s famous game parks empty of animals, the tourist numbers could drop, putting the livelihoods of hotel staff, tour guides, vehicle mechanics and thousands of other employees at huge risk. Drought in Tanzania has slashed power generation in the country's six hydropower stations to less than one-third of their usual output, forcing electricity rationing to be extended. More than two-thirds of Tanzania's total generation capacity is hydroelectric, meaning power rationing affects businesses nationwide, as they are forced to turn to expensive diesel generators to maintain their production. "This situation is not just bad, it is scary,” President Jakaya Kikwete told an energy conference in Dar es Salaam in February. Knock-on effects In many countries, the frequency, duration and severity of drought can have significant impact on the GDP and reverse many apparently unrelated investments in national development. Drought in a simple or intermediate economy can have a particularly significant impact on the economy, both directly and through knock-on effects. For example, the 1990-1991 drought in Zimbabwe resulted in a 45 percent drop in national agricultural production, 62 percent in the stock market, 9 percent in manufacturing output and 1 percent in the GDP. The 1999-2001 drought in Kenya cost the economy some $2.5 billion. As a proportion of the national economy, this figure is a very significant loss and can best be thought of as foregone development -- for example, in roads, schools and hospitals not being built. "It is also 10 percent of your population without food and facing starvation -- that is going to challenge any economy," said Oxfam's Keatinge. A worldwide survey of drought-prone societies by UNDP revealed that the way countries manage the risk of drought depends partly on their level of economic development. The study found a very high inverse correlation between the GNP and human mortality in the face of drought. Developed economies Most of the human fatalities from drought and related disasters are experienced in developing countries, while developed countries record only economic losses that are easily absorbed by their larger economies. Drought in African countries, like Kenya, Somalia and Ethiopia, may cause major human suffering and loss of life, whilst a drought of a similar severity elsewhere would have only an economic impact. For example, the drought of 1988 in the US caused an estimated damage of $40 billion due to direct and knock-on effects on the economy. The size of the US economy was sufficient to absorb this shock. An African country with a simple agricultural economy would have struggled to bounce back. Analysts have already warned that the eastern Africa nations currently suffering from prolonged drought might not be able to recover. It could take a herdsman who has lost 120 cows, an average herd, 15 years to recoup his losses, given fair prices and average rains, Oxfam calculated. "Pastoralism is a viable livelihood and makes an important contribution to the Kenyan economy. But there is an urgent need for improved development and economic policies in drought affected areas," said Paul Smith-Lomas, Oxfam’s regional director. Development projects, however, are taking a back seat to the more pressing need of keeping people alive. Money spent on emergency relief essentially comes from the same pot as that which would be used for development, said FSAU’s Nicholas Haan. "It is very difficult to pinpoint the figures, but it is fair to say the amount of money appealed for to alleviate the effects of the drought dwarf those which are routinely needed for development, for rangeland rehabilitation, educational programmes, diversification of livestock, teaching improved fishing techniques," Haan said. "If we had those medium- to long-term programmes in place, the resilience of the population and the regional economy to deal with the shock of drought would be that much stronger," he said. "But without the development there, these people are as weak as they have ever been in the face of these challenges."