Study: Africa’s agriculturally dependent nations facing highest costs of climate change – key agri-commodities at risk

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Climate change may deal a significant blow to the economies of countries most reliant on farming, according to new research, which identifies Sub-Saharan Africa as the region facing the highest risk. The Climate Change Exposure Index (CCEI) released by risk analytics firm Verisk Maplecroft reveals that the physical risks posed by climate change are ‘high’ or ‘extreme’ in 85% of the world’s most agriculturally-dependent countries, leaving their economies vulnerable to shocks and company supply chains open to disruption.

Using the latest climate models, Verisk Maplecroft has assessed physical exposure to climate change, including shifting temperature and rainfall patterns and climate extremes such as drought, down to a 22km² resolution globally. The research identifies changing weather patterns across Sub-Saharan Africa over the next three decades as a significant threat to the reliability of growing conditions and the yields of economically vital exports of agri-commodities.

The region is home to 17 of the 20 countries most economically reliant on agriculture; these nations are among the least well placed to financially weather repeated disruptions to harvests. Agriculture represents over 30% of national GDP (gross domestic product) in many African countries, including Sierra Leone, Liberia, Central African Republic, Guinea-Bissau, Burundi and Rwanda, all of which are rated ‘extreme risk’ in the CCEI.

Central America faces greatest physical threats, but African economies most at risk

Key data emerging from the research bring to light the global extent of the physical risks posed by climate change: On average, 16.7% of GDP is derived from agriculture in countries categorised as ‘high’ or ‘extreme risk’ in the CCEI - almost double that of countries rated ‘medium’ or ‘low risk.’ Africa remains the region set to bear the economic brunt from the impacts on agriculture.

Agriculture comprises 31% (US$235 billion) of the economy in East Africa and 22% (US$333 billion) of the West African economy – both regions are rated ‘high risk’ Central Africa is categorised as ‘extreme risk’, while agriculture represents 18% (US$96 billion) of the region’s economy Central America faces the greatest physical threat from climate change, with every country categorised as ‘extreme risk’ Europe is among the regions least exposed, with 63% of countries sitting in the ‘low risk’ category of the index According to Verisk Maplecroft, crops in ‘high’ and ‘extreme risk’ countries are likely to suffer more variable yields as climate patterns shift, posing a direct threat to economies that are heavily reliant on exports of agri-commodities. These include Ethiopia, where coffee is the biggest export and represents 19% of total export value, equating to US$800 million.

Agri-commodities represent vital sources of revenue in many other African countries: tea exports in Kenya tally US$1.2 billion a year, constituting 22% of the nation’s total exports; cashew nuts in Guinea-Bissau make up 72% of its total exports and are worth around US$180 million per annum; cotton is the biggest export in Mali, totalling US$370 million each year and comprising 43% of total exports; and tobacco exports in Malawi contribute US$560 million to the national economy and represent 47% of its total exports.

Fluctuations in output would have significant implications for local and regional economies and the millions of smallholder farmers reliant on these crops, in addition to creating significant sourcing challenges for western food and beverage retailers.

Climate impacts driving market volatility, posing risks to company supply chains

Outside of national economic implications, climate change is introducing greater volatility into global commodity markets. Extended droughts and extreme weather in recent months have pushed up the price for key agri-commodities. Droughts in Vietnam and Brazil, which account for almost a third of global coffee exports, have raised prices of the commodity by 20%. Meanwhile, the world’s leading exporter of black tea – Kenya – is suffering from on-going dry conditions associated with an emerging La Nina, with growing concern that production may be hit.

The concentration of commodity production in certain countries heightens the risk at the base of supply chains. Coffee production is under particular threat from climate change, with 94% of global production located in countries rated at ‘high’ or ‘extreme risk’ in the CCEI. Shifting seasonal rainfall patterns, along with an increasing prevalence of pests and disease, means companies may have to revisit their supply chain strategies. A significant proportion of other key commodities are produced in countries considered ‘high’ or ‘extreme risk’ in the CCEI including: sugar (63% of global production), palm oil (99%), cassava (90%) and bananas (56%).

Verisk Maplecroft’s latest research comes on the back of the UN climate talks in Morocco, where international funding for climate-resilient agricultural development in Africa was a key theme. “For the agricultural sector, successfully adapting to climate change requires robust data on how weather patterns will change; crop diversification crops; and improvements in water management practices,” states Dr Richard Hewston, Principal Environmental Analyst at Verisk Maplecroft. “With developed countries committing to a climate fund of $100 billion a year from 2020, proactive companies can facilitate adaptation at the local level, while simultaneously building resilience in their supply chains.”