Agricultural Risk Management Seminar 27-28 June 2018 | Lusaka, - - PowerPoint PPT Presentation

Agricultural Risk Management Seminar

27-28 June 2018 | Lusaka, Zambia

Capacity Development

A Report of findings by IBRD . IDA/The World Bank Group (2018)

Presented by Dr. Nalishebo Meebelo PARM Country Liaison Officer (Zambia)

Increasing Agriculture Resilience through Better Risk Management in Zambia

Twangale Park Hotel Lilayi Zambia

Attribution

Braimoh, Ademola; Mwanakasale, Alex; Chapoto, Antony; Rubaiza, Rhoda; Chisanga, Brian; Mubanga, Ngao; Samboko, Paul; Giertz, Asa; and Obuya, Grace. Increasing Agriculture Reselience through Better Risk management in

• Zambia. World Bank Washington DC. License: Creative

Commons Attribution CC BY 3.0 IGO.

Outline of Presentation

• Background/Context
• Zambia’s Agriculture Sector
• Data and Methodology
• Agriculture Risk Assessment
• Impacts of Risks on the Agriculture Sector
• Risk Prioritization and Management
• PARM next steps

Background/Context

• Following the rising food prices in 2008
• Multi-donor Food Price Crisis Response (FPCR) Trust Fund set up to:
• Provide grant funding to low income countries negatively affected

by the impact

• Support govts design sustainable policies and implement

mitigation measures

• Help to curb market distortion
• With support of FPCR Trust Fund + the Multi-donor Trust Fund on Risk

Management

• WB conducted a study tilted Increasing Agriculture Resilience through

Better Risk Management in Zambia

• 3 components
• Strengthening agriculture policies
• Agriculture sector risk assessment (ASRA)
• Knowledge exchange and dissemination
• This ASRA report:
• Is a combination of component 1 and 2 above;
• Complements 3 key ongoing WB technical support operations:

PROCIDA; CSIP; and, ZIFLP

Background/Context I

• Objectives of ASR Assessment/Report
• Analyze principle risks facing Zambian agriculture

sector

• Identify pathways for managing these risks
• Definition of Risk
• Risk - Possibility that an adverse development will
• ccur that negatively affects the performance of

farms or the larger agricultural supply chain

• In ARM – Risks – “uncertain events that have the

probability to cause losses”

• Risk Events – a major factor contributing to a decline

in Zambia’s agriculture GDP (8.2% - 2011 to 2015; 5.3% - 2015, El Nino and Fall Armyworm)

Background/Context II

• There is a variance between agriculture subsectors and regions
• In terms of severity and frequency of impacts due to agr. risk;

and effect on food security, rural livelihoods and the broader economy

• Principle risks under Crop agriculture identified:
• Drought, floods and price volatility
• Principle risks under Livestock identified:
• Drought and outbreaks of animal disease
• Tailored-made risk management systems will effectively limit

consequences of the above risks, and others

• Useful categories under Agriculture Risk noted:
• Production; Market and Enabling Environment Risks

Background/Context III

Production Risks

• Drought – is most significant risk facing Zambia (e.g. El Nino

1990; Drought 1992 etc., leading to major production losses of

• approx. $154m, La Nina)
• Excess rainfall and floods – (e.g. 2002 - 68% fall in cotton

production; 1/3 fall in groundnut and maize prodn) – $100m

• Severe droughts on average occur once every 20 years;

smaller and localized droughts and dry spells average once every 5 years

• Smallholder reliance on rainfed agriculture has increased

exposure to frequent weather shocks and ability to cope with them

• Pests and Diseases also cause significant losses (e.g. Fall army

worm, maize stock borer; cassava mosaic (Luapula, Central, Western and Northern Provinces; )

Background/Context IV

Market Risks

• Price volatility – most significant risk facing actors along agr.

commodity value chains

• Unpredictable output prices discourage investment in

productivity-enhancing and income-raising technologies and practices, relevant for poverty reduction

• Reduction in international prices (e.g. cotton) is experienced

in the local market;

• Maize – although price volatility of maize has lessened since

early 1990s, government intervenes during some years

• E.g. export ban followed by bumper crop led to oversupply and

therefore a collapse in farm-gate prices

• Price uncertainly due to FRA unpredictable involvement in

procuring and disposing of strategic maize reserves

Background/Context V

Enabling Environment Risks

• Under Structural Adjustment Programme (1980s, 90s)
• Macroeconomic and other policy changes (incl. disbandment
• f input and marketing subsidies, and privatization) impacted

GDP enormously

• Retrenchment in the civil service, incl. extension workers

affected levels of value chains

Note: However, it is not possible to quantify losses resulting from policy changes due to fluctuations occurring throughout the country’s macroeconomy (e.g. inflation rates, exchange rates)

Zambia’s Agriculture Sector

• Agriculture is the main source of livelihood – Popln 1.5 m/60% of

households

• Huge agriculture growth potential in Zambia
• 42/74m hectares (58%) of land are suitable for agriculture
• Only 14% of land suitable for agriculture is being cultivated
• Less than 30% of land potentially suitable for irrigation has been

developed

• Available land per capita is higher than most southern African countries
• Low population density (19.2 persons per km2) reflects in 6 hectares of

land available to each person

• Sufficient water resources (ground, rain and surface) for rain-fed and

irrigated agriculture

• Three distinct agro-ecological zones distinguished by temperature,

rainfall and soil type

• Agriculture policies are best understood in the context of political

phases (Republics) in the country’s trajectory

Zambia’s Agriculture Sector

II

• Despite potential, agr.’s share of overall GDP is small relative to that
• f other sub-Saharan African countries
• Services and industry contribute more to Zambia’s GDP
• However, agr. wields important effects on the larger

macroeconomy

• 2013-2015 - agr. sector experienced negative growth due to

extreme weather events – economy slowed down approx. 2%age points.

• Farmers remain highly vulnerable to a myriad of agr. risks in Zambia

(e.g. effects of El Nino, La Nina)

• Zambia Vulnerability Assessment Committee (ZVAC) reported:
• 38% and 41% reduction in maize production for 2014-2015 and

2015-16, respectively

• A decrease in water and pasture available for livestock
• Increased incidents of disease outbreaks (e.g. Newcastle

disease for chicken)

• The above exerts pressure on the country’s limited resources

required for investment in other equally important areas

Zambia’s Agriculture Sector

II

Strategic Reserves and Inputs

• 1966, Zambia established the Food Reserve Agency
• Originally mandated to administer national food reserves
• 2005, FRA Act was amended
• To expand its crop marketing activities
• Is involved in maize marketing today
• 2001 to date
• Credit schemes were replaced by Fertilizer Support

Programme (to include maize and fertilizer subsidies)

• 90% of smallholder farmers grow maize as their main crop in

Zambia

• Above two (FRA and FISP) increased govt spending for maize

purposes

• Ad-hoc policies concerning maize witnessed

Data and Methodology

• An ASRA???
• An orderly process to analyze, identify and prioritize risk
• Serves as the basis for design of risk management strategies
• Zambia ASRA???
• Objectives to:
• Identify, analyze, quantify and prioritize risk in the ag sector
• Identify risk management solutions for scale up and

strengthening

• Focus of Assessment
• Risks affecting agricultural commodities
• Together accounting for 80% of the value of farm

production in Zambia

• Beef, maize, sugarcane, cassava, tobacco, cotton,

groundnuts, vegetable, chicken and pork

• Levels: micro, meso and macro
• Data: Primary and secondary; desk literature reviews;

interviews; focus groups

Data and Methodology II

• Quantitative Methods were applied to:
• Estimate production losses and trade losses resulting from

the export ban

• Qualitative Methods applied to:
• Estimate risks to the enabling environment
• Negative deviations from medium to long term yield trends,

greater that what can normally expected in agriculture prodution to:

• Estimate production losses Value of losses:
• Estimated in local producer prices
• Expert interviews and published literature
• Used to validate key findings
• Used to note other areas of ARM warranting analysis

Data and Methodology III

• The range of experts and stakeholders consulted:
• Reflects the interdisciplinary set of issues at play in ARM
• Includes public and private sector actors in:
• Policy, planning, economics, livestock development, veterinary

services, epidemiology, disease surveillance, agriculture research, irrigation and water, natural resource management, disaster risk management, meteorology, grain trading, agriculture finance and insurance

• ARM is a focus of the World Bank through out the developing world

Agriculture Risk Assessment

The study:

• Looked at Production, Market and Enabling Environment Risks over

the past 30 years

• Found droughts, floods, diseases and pests, extreme price volatility,

macroeconomic changes, and unexpected policy changes – to beiimportamt risks facing Zambia’s agriculture sector

• Others: Input distribution delays, trade restrictions, political

uncertainty, and adhoc govt levies

• Period was assessed under three eras
• pre-SAP (1980s); during SAP (1990s); and, Post-SAP (2000s)

Source: Braimoh, Ademola; Mwanakasale, Alex; Chapoto, Antony; Rubaiza, Rhoda; Chisanga, Brian; Mubanga, Ngao; Samboko, Paul; Giertz, Asa; and Obuya, Grace. Increasing Agriculture Reselience through Better Risk management in

• Zambia. World Bank Washington DC.

License: Creative Commons Attribution CC BY 3.0 IGO.

Impacts of Risks on the Agriculture

Sector

Risk Prioritization and Management

• Prioritising risks is the first step towards managing them based on

the likelihood of Risk Event and scale of economic consequences.

• The Report illustrates how risks should be prioritised
• It highlights risks and ranking in terms of priorities as well as

recommendations concerning areas for resolve

• For Zambia the following three areas of risk management are noted

as warranting priority:

• Strengthen Early Warning Systems to detect threats to food

security

• Develop Climate-Smart Agriculture and increase resilience

to climate-related shocks through diveversification

• Develop the Zambia Commodity Exchange and build a

shock-responsive safety-net

PARM Next Steps

Following the WB study prioritization and further engagement with Ministry of Agriculture (side by side with CB)

• Two areas for feasibility studies towards developing

ARM tools (that potentially incorporate all risks) have been identified

• Terms of Reference will be developed for these

feasibility studies

• Feasibility studies will be undertaken by Consultants

to identify potentila tools for managing risks

• Outcomes of studies will be shared with Government

and key stakeholders for validation

• Mainstreaming of ARM issues in the 2nd Generation

NAIP will also be considered

Thank you for your attention!