The case for investing in reducing disaster risk
Africa’s progress towards sustainable development requires that governments, development partners, the private sector, and communities recognize the multiple benefits of investing in disaster risk reduction (DRR). Economic appraisals of disaster risk reduction investment options are becoming common practice globally. The plethora of options available for structural and non-structural disaster risk reduction investment makes it necessary to quantify the costs and benefits associated with investment options, to allow for the transparent evaluation of alternative options.
Investing in disaster risk reduction not only protects lives and assets, but can also yield additional benefits that can enhance the wellbeing and resilience of African countries. Under the program, “Building Disaster Resilience to Natural Hazards in Sub-Saharan African Regions, Countries, and Communities” financed by the European Union, this project endeavored to bridge the knowledge gap and encourage active discussions of future disaster risk reduction investments. By evaluating selected examples of flood and drought risk management options based on both direct and indirect benefits, the project analyzed the costs and possible economic gains of this type of investment in Angola, the United Republic of Tanzania and Zambia.
Benefits of multipurpose dams for flood risk management
Flood is a recurrent hazard in Angola, the United Republic of Tanzania and Zambia, where it is estimated to annually affect on average 25,500, 45,000, and 20,000 people (approximately 0.1%, 0.08%, and 0.11% of the total population) respectively. Multi-purpose dams are typically used for hydropower generation and water storage, but when managed properly, they can provide the added benefit of improved downstream flood regulation.
An ensemble model analysis of water discharges with and without dams was used to estimate how the risk of floods can be mitigated. An analysis of existing multi-purpose dams revealed that annual average losses due to floods could be reduced by approximately US$ 6 million in Angola, US$ 6 million in Tanzania, and roughly US$ 7 million in Zambia.
To understand the economic efficiency of DRR investments, the direct benefit of multi-purpose dams, together with revenues from generated power, can be compared to their construction and maintenance costs. The indicative benefit cost ratio of such investments are estimated to be approximately 1.42 for Angola, 1.44 for Tanzania, and 1.43 for Zambia under a discount rate of 5%, assuming that other negative and positive externalities (such as environmental impact) do not exist, and when dams with similar effectiveness in terms of disaster risk reduction are expanded across these countries.
The indirect benefit showed that compared to the business-as-usual of no disaster risk reduction policy scenario, the construction of additional multiple-purpose dams over the next three decades is also expected to bring a number of co-benefits in the form of enhanced savings and investment, hence economic growth, additional power production, and better access to water (see countryspecific case study for additional information). Combined, these benefits will increase the countries’ respective GDPs. The total growth effects of investment are estimated at 8.5% of GDP for Angola, 8.8% of GDP for Tanzania, and 7.6% of GDP for Zambia.