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How drought or flooding knock small businesses in African cities

How does a small business like a restaurant or panel beater in the Zambian capital, Lusaka, buffer itself against the impact of the kind of extreme drought that hit Southern Africa in the summer of 2014, owing to the arrival of the El Nino weather phenomenon? It buys a diesel generator as a back-up, in case of power outages resulting when lower dam levels in Lake Kariba contribute to the country’s power utility throttling back on its hydro-electricity production. To make this kind of business investment, though, might mean getting a loan to finance the cost of the generator.

But a lack of access to this kind of finance is one of the biggest hurdles to small city-based businesses adapting to climate extremes in the region, according to a study by the London School of Economics and Political Science (LSE). This is one of the findings of the report by the LSE which looks at the impact of drought and flooding on small business operators in three capital cities in Southern and East Africa: Gaborone in Botswana, Nairobi in Kenya, and Lusaka in Zambia.

‘Generally, when a drought like this happens, it’s usually seen primarily as a threat to agriculture and food security,’ explains Prof Declan Conway, co-author on the study and researcher with the Grantham Research Institute on Climate Change and the Environment, at the LSE. ‘But our ongoing work in the Lake Malawi and Shire River Basin for Future Climate for Africa highlighted how disruptions in water or energy supply can impact on city populations and prompted us to consider three additional examples affected by the 2015/16 El Nino event.’

Much of Southern Africa was hit by severe drought as a result of the El Nino weather event, which began in 2015 and was still being felt across the region by the summer of 2016 when researchers surveyed small businesses in the target cities. The bulk of Lusaka’s electricity comes from the hydro-power plant that is fed by Lake Kariba. When dam levels dropped during the drought, the Zambian power utility ZESCO implemented controlled load shedding to manage dips in supply.

Meanwhile, parts of East Africa are generally wetter during El Nino events, and this time Kenya experienced a slight increase in rainfall during the period. Researchers therefore looked at the impact of flooding on small businesses in Nairobi, the repercussions of water shortages for small businesses in Gaborone, and the cost to businesses of load shedding in Lusaka owing to a drop in the dam and rivers levels for water sources feeding Lake Kariba’s hydro-power plant.

‘Our researchers found that businesses responded by changing their operating hours, moving to new locations, or reducing the number of staff in their employ. Sometimes these changes were temporary, sometimes they were permanent,’ Conway explains. ‘Some businesses reported a disruption in their investment plans, such as deciding not to expand their businesses. Some invested in buying a stable water supply or electricity generation capacity.’

Many businesses reported an increase in overheads, including from higher fuel costs as they either had to travel to buy diesel to operate their generators in Lusaka, or to collect water in Gaborone, or to bypass closed roads in flooded Nairobi.

According to the LSE study, formal and informal micro, small and medium-sized businesses – what the World Bank defines as having between one and 99 employees – are central to the economy of the region, and account for about 80% of total employment. This study allowed researchers to get a snapshot of how these kinds of city-based enterprises might experience changes in rainfall patterns, and looked at opportunities for businesses to put measures in place in future in order to insulate themselves better against this kind of climate-related uncertainty.

‘Nearly half of the businesses we surveyed in these three cities said that they didn’t receive warning of the disruption, or that they were unable to act on the warnings that they received, given the other barriers to action.’

Overwhelmingly, though, most of the surveyed businesses said that a lack of access to loan facilities made it difficult to make the kind of business investments needed to be more resilient in the face of this kind of change in rainfall patterns in future. The report, written by Dr Kate Gannon, Conway, and colleagues at the Grantham Research Institute, the Universities of Barotseland and Nairobi, and the Botswana Institute of Technology, Research and Innovation, was published in the journal Global Sustainability in 2018.

*The work covered in this story was undertaken by members of the Uncertainty Reduction in Models for Understanding Development Applications (UMFULA) research group. This is not directly an FCFA project but work that is associated with FCFA as part of a research project on The economic impact of El Niño related floods and drought on small and medium enterprises in Botswana, Kenya and Zambia.

This article was written by Leonie Joubert and is part of a series that delves into the science and researchers associated with the Future Climate for Africa (FCFA) initiative.