African Union climate insurance agency to disburse $60M for El Niño-driven Southern Africa drought relief

The African Union’s climate insurance agency will disburse $60 million to Malawi, Zambia, Zimbabwe, and Mozambique to mitigate drought impacts driven by El Niño. Though a fraction of needed relief, it aids before broader support arrives. The payout, based on premiums, employs a parametric model triggering compensation based on rainfall patterns.

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By Antony Sguazzin

The African Union’s climate insurance agency will pay out at least $60 million to four southern African nations to help them offset the impact of a drought that’s been driven by the El Niño weather pattern, its director general said. 

Malawi, Zambia, Zimbabwe and Mozambique will receive payments at the end of the harvesting season in a few weeks time, Ibrahima Cheikh Diong, who leads the African Risk Capacity agency, said in an interview in Johannesburg on Tuesday.

The drought has reduced the corn crop by at least three-fifths in Zimbabwe alone, and the insurance payouts will equate to a fraction of what it needed to alleviate the impact. Still, Diong said, the money will be dispersed way before support is forthcoming from the World Bank and other sources, and provide immediate relief while governments mobilize more resources from their own budgets and from donors. 

“In the business of disasters every second counts,” Diong said. “If your money comes too late, it may be too late.”

El Niño is caused by ocean currents that bring dry and hot weather to Southern Africa. Zimbabwe, Malawi and Zambia have declared national state of disasters.

Diong said the amount that each country will receive from the AU agency is yet to be determined and will depend on the premiums they paid. African Risk Capacity operates a parametric insurance model, which triggers drought compensation payments according to the impact of timing, amount and distribution of rainfall. It also provides cover for cyclones and river floods. 

The United Nations Office for the Coordination of Humanitarian Affairs on Tuesday said it is seeking $228.3 million to help Zambia from the impact of the drought, which is experiencing its driest farming season in 40 years. 

Zimbabwe took out partial drought cover with the AU and its payout will be insufficient to cater for nearly 3 million people affected in the country who are at risk of hunger, its Finance Minister Mthuli Ncube, told lawmakers on Monday.

 “We easily need seven to eight times what the insurance amount will be,” he said, without specifying how much it expects to get. “We are thinking of broadening the insurance. That will help reduce the fiscal impact.”

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