Africa developing new tools to build resilience to future drought shocks

Bonn, 23 October 2019 – Droughts have decimated communities and livelihoods in Africa for long.
This year alone, over 45 million people across Africa, mostly in Eastern and Southern Africa, are food insecure due to prolonged droughts.

The Africa Risk Capacity (ARC) and the United Nations Convention to Combat Desertification (UNCCD) announced they will collaborate to support the development of financial tools to help Africa to adapt and become resilient to future drought and other extreme weather events.
The partnership will support African countries in managing the impact of extreme weather events, including drought. It will also seek to leverage private sector resources through the development of new financial instruments that can provide insurance protection and other funding to mitigate these risks.

The announcement was marked by the signing of a Memorandum of Understanding by Ibrahim Thiaw, UNCCD Executive Secretary, and Mohamed Beavogui, ARC Director General, during a two-day technical workshop convened on 22 and 23 October in Bonn, Germany.

The workshop is reviewing the proposed principles and work of the eXtreme Climate Facility (XCF).
XCF is a new financial vehicle aiming to tap into capital market resources to provide financial support to countries affected by extreme weather events.

Technical experts gathered at the workshop are exploring the robustness of the core elements of the XCF. These include the financial products and their underlying index, viable alternative market-based solutions and the partnerships that are essential to deliver both the product and the aims.
The process for the XCF began in March 2014 when the African Union Conference of Ministers of Finance requested the ARC, by decision no. 927(XLVII), at the Seventh AU-ECA Joint Annual Meetings in Abuja, Nigeria, to develop a financing mechanism to enhance Member States’ response to the impacts of increasing climate volatility.

The first Special Report on Climate Change and Land released just three months ago by the authoritative Intergovernmental Panel on Climate Change warns that droughts may increase in frequency and intensity in much of Africa.

“The message is clear. We will see an increasing number of droughts with unprecedented severity, which are exacerbated by climate change. No country or region, rich or poor, is immune to the vagaries of drought. The ARC-led XCF will become an important tool to help African countries to cope effectively with the impacts of drought,” said Ibrahim Thiaw during the ceremony.

“Currently, through the Drought Initiative, the UNCCD is helping 35 of Africa’s 57 countries to create the mechanisms they need to take early action to avert drought disasters. Today, Africa is ramping up preemptive actions as a unified front against future drought and climate-induced disasters in the region,” Thiaw added.

“Reducing the impacts of drought and other natural disasters by helping Member States’ improve climate resilience through innovative mitigation and risk financing instruments are key to our mandate,” said ASG Beavogui. “The Agreement signed today with UNCCD will create a functional synergy in our efforts to help countries better understand their risk profiles, improve knowledge and strengthen capacities for climate adaptation and food security,” Beavogui concluded.
As designed currently, the XCF has a three-point agenda; to connect to private sector financing, to encourage best practice in public policy and to integrate climate science into its functions.

Notes to Editors

A 2-page background note is attached to this press release.

Additional Quotes about the XCF

ASG Mohamed Beavogui, the Director-General of ARC: “Since the inception of the XCF programme in 2014, this is the first Technical Review Forum where the overall end-to-end framework is considered and reviewed. Our guiding principle since the creation of ARC is to interrogate our concepts by subjecting our models to the best available experts in that field. We did this with our drought tool, the African RiskView, which remains the best-in-class to-date for Africa. We are grateful to all our partners and industry experts that have joined us in this process.”

“The World Bank supports countries with climate adaptation measures and is committed to working with countries to strengthen financial resilience against climate and disaster shocks,” said Mr. Miguel NavarroMartin, Manager of Banking Products, World Bank Treasury. “Our focus is on helping countries to protect their fiscal accounts against external risks. The XCF concept being developed by ARC provides an opportunity for African countries to access financial solutions to manage disaster risk and to fund a portfolio of climate resilient investments,” he further stated.

Commending ARC and UNCCD on the initiative, Dr. Astrid Zwick, Head of InsuResilience Secretariat remarked, “The centrality of our collaboration with countries is to enable a more timely and reliable post-disaster response. Critical to this are preparedness and readiness using climate disaster risk finance and insurance solutions. The XCF promises to be one of those instruments that can complement ongoing efforts in countries to avert, minimize and address climate disaster risks by strengthening local adaptive capacity and resilience. We are glad to be part of this process.”