How climate change is affecting country risk in East Africa

Waters flood a maize field after a cyclone in Mozambique, an event becoming a more common occurrence affecting East Africa. Photo: Reuters/Mike Hutchings

While Africa is no stranger to droughts, tropical cyclones were once a rarity in sub-Saharan Africa. Since 2000, they seem to have become the norm.

In 2019, tropical cyclone Idai struck Mozambique, causing severe flooding, while also affecting Madagascar, Malawi and Zimbabwe. A month later, Mozambique and Comoros were hit by another, even stronger, record-breaking cyclone.

Mozambique was hit again, along with Madagascar and South Africa, by Eloise in January this year. Around 175,000 people were affected, with more than 8,000 homes destroyed. Relief agencies estimated that about $10 million worth of damage was caused.

That climate change is real, and having an effect today, are undeniable facts, with extreme weather events taking place all too frequently. Undeniable too is the reality that it will have major implications for investors, albeit not all in a negative way given the opportunities created in the drive towards clean energy.

Some of the effects are not that well understood, such as the impact on domestic political stability, although climate change will invariably influence policymaking and all of the other economic risk factors affecting investments, including exchange rates.

This will alter country risk ratings in a region where countries are already considered medium-to-high risk options.

In Euromoney’s global risk rankings of 174 countries, Kenya is placed 73rd, Tanzania 105th, Madagascar 117th, Ethiopia 124th, Mozambique 151st, Eritrea 154th and Somalia 170th based on analysts’ risks assessments.

Climate change will have various effects. It will impact agricultural production, water resources and ecosystems. According to USAid, more than 70% of the East African peoples occupy rural areas and are dependent on farming, despite a rapid rate of urbanization.

High poverty rates and declining agricultural productivity will threaten food security. Climate change will bring increased disease, more pests, crop fungus and bacterial damage, and it will worsen an already under-invested infrastructure, which in turn brings logistical challenges.

Many parts of the region are already experiencing prolonged droughts, causing crop failures and affecting areas that previously were considered free from malaria transmission.

USAid indicates that in Tanzania alone the rising sea level is expected to cost approximately $200 million per year by 2050 in terms of lost land and flood damage. It will have implications too for other coastal territories.

Analysts with expert knowledge of East African countries taking part in Euromoney’s country risk survey were asked for their thoughts on climate risk.

Very few are experts in the science of climate change. Some were therefore reluctant to comment. Others are only just beginning to think more deeply about the topic and its effects. However, as economists and analysts of investor risk, it is a subject they can no longer ignore.

Ethiopia

One contributor who got in touch confidentially readily acknowledges he is no expert in science and meteorology.

He also wished to make the distinction between investing in renewable energy, which offers opportunities, and in infrastructure that is vulnerable to flooding, for example, or in agriculture in arid areas that is becoming riskier.

On Ethiopia, he notes the country has temperate highland areas that are quite fertile, dry lowland areas where pastoralism is important but where droughts are frequent, and hot, humid areas.

World Bank studies show that the Ethiopian climate has been changing since the mid-1980s, but not in a linear way. Some areas (the highlands) are seeing a bit less rainfall and others (the dry lowlands) are seeing more. It is unclear whether this is sufficient to make the dry lowland areas more conducive to agriculture.

Although Ethiopia is prone to periodic droughts, successive governments have become better at managing this, reducing food insecurity, and it is unclear whether these events have become more frequent as a result of climate change.

The current government has stepped up investment in irrigation to expand agricultural output, including in the dry areas.

The other aspect that is talked about is shifting rainfall patterns, which mean that planting and harvest times are not as predictable as they were.

As for power, Ethiopia draws much of it from hydro sources, with supply affected by rainfall variation. The completion of the Grand Ethiopia Renaissance Dam will massively increase Ethiopia's power production and its export potential.

This will help mitigate rainfall variation, along with solar and geothermal projects, and while the undertaking has caused some tension it is hoped that it will help reduce the flooding and alluvial build-up in Sudan.

Although Ethiopia is prone to periodic droughts, successive governments have become better at managing this, minimizing food insecurity 

Ethiopia is likely to see increased movement of people, especially out of the dry lowlands which may become more water stressed. There is a long-term trend of people shifting out of pastoralism in those areas, linked to economic opportunity and the greater enforcement of land rights/access (the competing demands for land from agriculture versus land for grazing). This may lead to some localized disputes.

Ethiopia does not produce any oil and gas, although there may be reserves in parts of the country. The new 10-year plan emphasizes the extractive industries and the government has indicated a willingness to reinvigorate exploration of its hydrocarbons reserves, although it is not clear if these would be commercially viable.

Even so, Ethiopia uses up a lot of scarce foreign exchange on fuel imports. This begs the question as to whether it can transition the rest of its economy to low-carbon in good time, such that the economic incentive to exploit its oil and gas reserves diminishes.

The coffee sector – a big export earner – may require planting in new areas. Ethiopia is also seeking to diversify into avocado exports.

In terms of policymaking, Ethiopia has emphasized its green credentials with low-carbon energy, low car use and investment in electrified railway, and is therefore at the forefront in Africa in developing green growth plans.

The government is focused on managing water throughout the year to boost agricultural productivity. If this works, it could reduce inflationary pressures, and ease its foreign exchange, which in turn would be positive for political stability, although there is a risk that this strategy could increase water stress.

Prime minister Abiy Ahmed has made a name for himself planting trees, as much of Ethiopia was deforested more than 100 years ago, but the big question – alongside the oil and gas issue – is how fast Ethiopia can realistically go in electrifying high-carbon sectors such as transport.

Kenya

According to Olawumi Awolusi, dean of research and professor at the College of Economics and Management, Kampala International University, climate change is already affecting Kenya's agricultural sector, which accounts for around a third of its GDP and is the primary source of sustenance for 60% of the population.

Climate change has contributed to many environmental issues in Kenya, such as deforestation, soil erosion, desertification, water shortage and degraded water quality, flooding, poaching, and domestic and industrial pollution.

“Specifically, in late 2016, when the rains failed, a severe drought hit the arid and semi-arid regions of Kenya, affecting 2.7 million people. Most natural open water sources in Moyale dried up, putting immense pressure on the few available boreholes and dwindling water pans," explains Awolusi.

The impact of climate change on wildlife is also affecting Kenya's tourist industry, since wildlife safaris are a major part of the country's appeal for many visitors. On a local scale, reduced yields of staple crops such as maize and beans are also affecting the local economy.

Awolusi says that over the next five, 10 and 20 years or more, rainfall is expected to be more unpredictable, which will have a negative impact on long-term agricultural, economic and socio-cultural productivity.

“Many studies have predicted decreased yields of the most important staple crops, maize and beans, as well as increased food security problems over the next 40 years.

“In general, future water availability is uncertain. There may be increased rainfall in the rainy season leading to flooding. Some models predict an increase in summer rainfall across East Africa as a whole, while others predict a decrease in summer rainfall in Kenya particularly.”

The increases in temperature and changes in rainfall patterns will also significantly affect population health across Kenya, he says. Warmer temperatures and higher rainfall increase habitat suitability for biting insects and the transmission of vector-borne diseases such as dengue fever, malaria and yellow fever.

Climate change may lead to migration and/or civil conflict over land and water availability, and the prospect of failed crops in Kenya.

Specifically, the arid and semi-arid areas face immense challenges, including drought, hunger, malnutrition and poverty. These have caused wild animals, such as lions and elephants, to wander further in search of water and food. 

Many studies have predicted decreased yields of the most important staple crops, maize and beans, as well as increased food security problems over the next 40 years 

 - Olawumi Awolusi

Lions have then come into conflict with humans when they kill sheep and goats in the villages near the national parks. Elephants have also been known to trample food crops when searching for food and water.

“Climate change is also affecting the traditional way of life of some of the semi-nomadic tribes in Kenya, such as the Samburu. Samburu people keep livestock, such as cattle, goats, sheep and camels," says Awolusi.

“During the dry season, the Samburu men take the animals away from the homestead in search of fresh pasture. Climate change has caused the dry season to begin earlier and extend longer than usual, meaning the men and animals are away from home for even longer periods. This makes it harder for the women and children left behind to feed themselves with the animals gone."

Although Kenya is not a major oil and gas producer, the country relies on agricultural exports as a major source of foreign exchange. According to the Intergovernmental Panel on Climate Change, the vulnerability of Kenya to climate change is driven by a range of factors that include weak adaptive capacity, high dependence on ecosystem goods for livelihoods, and less developed agricultural production systems.

Awolusi refers to a recent report from the Kenya Food Security Steering Group (KFSSG), which found that at least 1.4 million people in the country are facing acute hunger, based on the country's 2020 Short Rains Season Assessments.

Overall, the impact of climate change on political stability and policymaking are considered mild. As a party to the 2015 Paris Agreement (signed on April 22, 2016), Kenya submitted its first nationally determined contributions (NDCs) on December 28, 2016.

“The mitigation contribution is intended to reduce greenhouse gases (GHG) emissions by 30% by 2030. In 2020, Kenya updated the commitment to reduce GHG emissions to 32% by 2030," explains Awolusi. “Kenya also became the ninth party to the Kyoto Protocol by accepting the Doha Amendment, which formalizes commitments for the second commitment period of the Kyoto Protocol (2013-2020).

“Consequently, the nationally determined contributions to the Paris Agreement have become the main instrument for guiding policy responses to climate change in Kenya since 2015. Kenya is therefore committed to transitioning to green energy within a relatively short time frame.”

The government of Kenya has set ambitious plans for both climate change mitigation and adaptation.

Changing the main energy sources to clean and renewable energy – such as solar, wind, geothermal and biomass – is being prioritized and the transport methods are being aligned with environmental requirements to reduce their carbon footprint, says Awolusi.

However, according to the Climate Change Performance Index 2021, Morocco and Egypt appear to be performing better than Kenya in terms of climate protection in Africa. They are aggressively investing in alternative energy sources such as solar and wind, as well as improving irrigation systems.

Somalia

Somalia is being “profoundly impacted by climate change”, says Owais Arshad, global economic sanctions expert at RBC, who quotes a 2013 United Nations Development Programme assessment which found that the median temperature had increased steadily across the country since 1991.

“This has been accompanied with more erratic rainfall patterns, extended periods of drought as well as severe flash floods.”

The Somalian economy and workforce are dependent on agriculture and livestock, both of which are particularly vulnerable to the changing climate.

The impact of this has been profound on communities within the country, where only 1.6% of total land area is cultivated and competition over precious food supplies and water is increasing, he says.

Without adequate climate risk planning, Mogadishu risks becoming engulfed in increasingly pronounced cycles of violence that are ultimately precipitated by climate change 

 - Owais Arshad

“In particular, nomadic pastoral clans have clashed with farmers, while insurgent groups such as Al Shabab have used valuable arable land to extort revenue and consolidate their military gains.”

Arshad notes that migration and internal displacement are increasing, with Somali clans moving away from drought-stricken regions to preserve their livestock. This often results in violence as disparate communities use force to protect territory and resources. He says that this pattern of conflict has become an ingrained part of Somalian politics.

The poor capacity of the government to exert control over its territory worsens the effects of climate change.

“Without adequate climate risk planning, Mogadishu risks becoming engulfed in increasingly pronounced cycles of violence that are ultimately precipitated by climate change,” Arshad warns.

Tanzania

Another expert mentions confidentially that there is a focus on investing in climate-resilient infrastructure in Tanzania because of frequent flooding in Dar es Salaam and other areas.

Ensuring sufficient water supply, notably in the capital Dodoma, has been prioritized, suggesting that climate change will have an impact in terms of the need for mitigation to this challenge.

Tanzania has had a large offshore gas project in the offing for a long time. It was supposed to have started operations with exports of liquefied natural gas taking place around 2017/18, but it was put on hold while the government and investors reviewed the financing and concessions, etc.

The new president, Samia Suluhu Hassan, has recently announced a desire to progress the project. If it happens, according to this expert, it will really help Tanzania – but it isn't enough gas to transform it in the way that oil has, say, the Middle East.

It is seen more as an intermediate fuel, but there is reasonable hope that this will still be viable as other power sources are scaled back or become less economically viable.