Thursday, August 18, 2022

Climate change: what are the economic stakes?

A new World Bank reports finds that water scarcity, exacerbated by climate change, could hinder economic growth in Botswana. Not only that, the report states that the country’s vulnerability to climate change is exacerbated because of its dependence not only on agriculture, but also on other sectors vulnerable to climate change. These sectors include mining, tourism and energy.

While climate change activists, globally and locally are proposing that the economy should grow less to be able to reduce greenhouse gas emissions fast enough to reach net zero by 2050, some argue that the notion of degrowth is unrealistic for Botswana. This is because higher levels of economic activity tend to go hand-in-hand with additional energy use and consumption of natural resources.

The World Bank admits that climate change presents an increasing challenge to Botswana’s long-term growth strategy. Currently the country ranks in the top three countries in Sub-Saharan Africa that will experience an expected average temperature increase of 2.9 to 3.8 degrees Celsius by 2100, which makes it highly vulnerable. Over the past few years, Botswana recorded a significant drought exposure, especially the agricultural regions, which are predominantly rainfed. The National Drought Risk Index estimates that 40 percent of the agricultural areas in the North-East, North-West, South-East, and Southern districts, and in Kweneng and Kgatleng are now drought-prone areas.

“With more than one-quarter of the country’s employment concentrated in the agricultural sector, climate change threatens livelihoods and increases poverty risks,” caution World Bank researchers.

As it stands, the effects of drought are estimated at 38 percent of the total GDP of the areas hit by droughts (equivalent to US$5.8 billion of GDP per year). However, under future climate conditions, the World Bank says this may rise to 80 percent of the GDP.

The economic cost….

The World Bank makes one point very clear: Botswana lags behind its East African peers in water management, storage, and irrigation, which are key to building a resilient agricultural sector. At the same time, limited water availability has also affected mining activity and increased tensions between humans and wildlife, trends that are further exacerbated by low technology adoption rates and limited access to alternative off-farm income streams.

The World Bank researchers caution that Botswana could become “highly water stressed” by 2040 due to a projected rise in demand. The stress is already felt by 62 percent of Small and Medium Enterprises, who revealed in the International Trade Centre SME competitiveness survey in 2019 that environmental risks were frequently on their mind. During the same survey, three-quarters of SMEs also rated their access to water as “low” or “medium.”

Apart from agriculture, Botswana’s tourism sector is also overwhelmingly dependent on nature-based and biodiversity-driven activities, making it particularly vulnerable to climactic impacts. The country’s prime tourism area – the Okavango Delta, in which a significant portion of profitable low-volume high-cost tourism is concentrated, depends heavily on water-based wildlife. The World Bank has not missed that, “This key tourist attraction is vulnerable to variable rainfall, with a projected decrease by 20 percent of stream flows for the Okavango catchment”.

Given all these, in order to strike a balance between tackling climate change and growing her economy, Botswana would have to advance economic diversification, make infrastructure more resilient to climate shocks, and increase access to financing according to experts at World Bank. Other recommendations include in an enhancement of social safety nets and policy buffers.

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