MANUFACTURERS CORNER
Navigating climate change effects in manufacturing
WATER
is an important input for production in the manufacturing sector, both directly and indirectly, for either creating products and or for cooling equipment used in the production process. According the World Bank, there has been an average decrease in annual rainfall of 1.9 mm per month in Zambia since 1960 and this has had a negative effect on water resources. Rainfall, especially in recent years, has been scarce reducing river flow in most rivers in Zambia. The extreme weather conditions and climate variation have posed a lingering threat to socio-economic development and this may hinder manufacturing sector growth as well.
The effects of climate change will more likely be felt in developing nations such as Zambia, because mitigation and adaptation strategies lag and are not adequately financed. In the Seventh National development plan the estimated loss of annual economic growth in Zambia due to climate change is 0.4% of gross domestic product (GDP) before 2017 and if no actions are taken, rainfall variability alone could lead to a loss of 0.9% of GDP growth over the next decade. With much focus of the effects of climate change on agriculture, livelihoods and other sectors, the effects of climate variation on the manufacturing sector have often gone unnoticed. Thus, the need to highlight the effects of climate change on the manufacturing sector.
The adverse effects of climate change on electricity generation were outlined by the Finance Minister in the 2021 National Budget Speech. The Electricity deficit became more pronounced in 2015– 2016 when reduced rainfall had devastating effects on river flows in Zambia, leading to historical low water levels in the Kariba Dam, which stood at 12% of capacity in January 2016. With Zambia generating about 85% of its electricity from hydro-power stations, lack of water has exacerbated the already existing power deficit, causing ZESCO to effect severe electricity rationing from around 2015.
Power deficits have been one of the major causes of reduction in manufacturing production because electricity is an important component in the production process and is needed to run mechanised plants and equipment. Manufacturers have had to either invest in alternative sources of electricity to cover downtime or reduce production and come out at a loss on both options because their costs increase. Manufacturing sector growth has been on the decline since 2015. Climate change has notably affected rainfall patterns. Floods and droughts have become more pronounced in Zambia. Nonetheless, agriculture remains mainly rainfed in Zambia as costs of setting up irrigation are extremely high for small scale farmers to afford. Manufacturing subsectors like agro-processing are highly dependent on the outputs of agriculture for their forward and backward linkages. Yet because agricultural output has not efficiently been produced, the quality and price of agricultural products remain expensive inputs into the agro-processing industry. Ultimately, making the price of the final manufactured products expensive, consequently failing to compete favourably with imported goods.
In light of reduced water resources because of poor rainfall patterns, how can the Zambian manufacturing sector grow whilst adapting and mitigating the adverse effects of climate change?
Firstly, despite the Government’s significant investment in hydro-power stations, there is still need to diversify sources of energy in the country. Zambia needs to invest more in climate smart technologies which are less susceptible to climate change such as solar or wind power. Diversifying the sources of the country’s energy generation will ensure a more stable energy pool and will reduce overdependence on hydro-power generation which gets affected by low water levels.
Secondly, the Government, needs to regulate water efficiently and effectively as it is a key input in the manufacturing sector both directly and indirectly. This is because there is an increasing demand of water by other sectors, due to an ever-increasing population. The agriculture sector currently accounts for 73% of all water withdrawn from water sources in Zambia, making it the largest sector consuming water. The total industrial water demand in 2020 is estimated to be 474 million cubic metres approximately 14.8%. Industry thus require interventions that will ensure that the needed water is available.
Lastly, the Government needs to invest more in mitigation and adaptation measures in the agriculture sector, as a response to climate change, so that agricultural output is not affected. Having considered that agricultural output is an important input in the agro-processing industry, this then reduces costs of inputs into manufacturing because supply is then not affected.