Drought doesn’t have to be a killer for African farmers

TODAY, in the African context, we have the financial and technological tools at our disposal to save farming families from losing their income when the rains don’t come and they lose their cattle or crops. People should not have to leave their land, and there is no need for communities and their livestock to die of thirst and starvation.

We can insure farmers, their livestock and the pasture they need to survive. We can provide pre-funded solutions to climate risks. And they work.

Pre-funded relief The Kenyan Livestock Insurance Programme (KLIP) is an example of how insurance can be used to pre-fund drought relief. This programme was born when the Kenyan government recognised that insurance could be geared to keep the animals of nomadic herders alive during periods of drought, thereby keeping the livelihood of their pastoralists intact.

The underlying premise of KLIP is very simple. Rather than waiting for agricultural losses to happen and trying to replace livestock, the government makes sure funds are available to keep livestock alive during a drought.

This type of protection operates on simple principles, but it is backed by some very sophisticated technology, mathematics and logistics. It is scalable, replicable and cost-effective. Most importantly, the technology and insurance techniques mean that funds and drought relief can be delivered quickly.

KLIP uses satellite technology to measure how much vegetation is available in a region and, based on this information, builds an index. Put simply, when a pixel on a satellite photo of a certain region shows up as green, there is enough food. Once the pixel is a shade of yellow, we know there is not enough vegetation, and we pay out a lump sum that can be distributed to the herders to buy feed, water and, if necessary, veterinary services and medicine for their animals. In February this year, 12 000 Kenyan households in six counties received an insurance payment of US$2 million (R26.5m) for this purpose.

KLIP is a one of many insurance techniques designed to provide pre-disaster funding. From an insurance point of view, new techniques such as index-based insurance are cutting-edge.

They allow the insurance industry to provide cost-effective solutions for governments across a wide range of risks – climate risks, pandemics, and even energy and infrastructure risks.

For governments, pre-funded models are infinitely preferable to the alternative wait-and-respond approaches, which are too slow in comparison. In the case of drought, the effects are often only known once animals have been lost and people are facing famine. Unlike the obvious damage of an earthquake or flood, the symptoms of drought are often visible only once there is a sharp increase in displaced populations or unrest.

The effects of malnutrition may surface much later in people’s lives. The financial impact of a drought may be known only once crops fail to arrive at market.

Risk management Strengthening resilience to the risk of drought is all about identifying the risk early. It is also about putting pre-funded strategies in place.

The success of KLIP in Kenya is part of a movement we are seeing across the continent. Governments are exploring how pre-emptive risk management and innovative insurance techniques can improve climate, disaster and pandemic resilience strategies. Another world-leading success is the African Risk Capacity was established in 2013 to help member governments plan for and better manage the financial consequences of disasters.

The programme has paid out millions and become a world-leading model for regional disaster management based on related technological, political and organisational developments.

Government-backed programmes work because of the commitment of a vast range of stakeholders. They require bringing governments together with private insurers and reinsurers.

There is willingness and expertise, and with programmes such as ARC and KLIP we have the necessary track record to help us move ahead, replicate and scale.

Initiatives like this – large or small – contribute to building economic and social resilience in Africa.

Martyn Parker is the chairman of global partnerships at Swiss Re.