The African Risk Capacity is a specialized agency of the African Union designed to assist member states resist and recover from the havoc of natural disasters through a weather insurance mechanism. In an exclusive interview, CNBC Africa’s Wole Famurewa spoke to Ngozi Okonjo-Iweala, Governing Board Chair of the African Risk Capacity, to get more insight on this agency.
OKONJO-IWEALA: I am Chair of the board of the African Risk Capacity, which is an African Union agency started by Africans to deal with issues of weather and climate change and this has come about because of the experience we’ve had on the continent. As we see increasing volatile changes in weather patterns, floods and droughts and climate change impact, we’ve seen a lot of loss of lives and livelihoods, livestock, farmers losing everything and if you remember all those pictures of African children dying with flies whilst we are waiting for people to bring us relief that paints a very unpalatable picture.
I am very proud that the African Union with the support of the world food programme, the Rockefeller foundation, the UK, Swedish and German Governments came together and said ‘we want to develop a solution to this problem so we don’t have to wait for others’, that solution is to form an agency, that will sell weather based insurance to Countries- a sort of public- private partnership so Countries would purchase insurance against droughts for instance and if based on some very detailed database system called the Africa Risk View, if it triggers that this Country’s drought reaches a certain level that merits payment of the insurance, the insurance is paid out and within two to three weeks, the Country gets the money and is able to disburse that money so that is what the African Risk Capacity is. ARC also formed an agency called the African Risk Limited which is in charge of this insurance.
FAMUREWA: It is definitely a good idea in terms of getting Africa to fix its own problems; indeed, we have seen this agency come to the rescue of Countries like Senegal, Mauritania and Niger in times of Crisis with Natural disasters. When you look at Africa as a continent with limited resources in terms of Government budget; is this affordable insurance plan for the Government?
OKONJO-IWEALA: Absolutely. I am not saying it’s cheap but it’s affordable. We have 32 Countries on the continent that are signatories and out of those, seven have actually purchased insurance and of those who purchased, last year, we were able to make a payment to three of them- Senegal, Mauritania and Niger because they had drought in parts of the Country and it triggered. Depending on how many people you want to insure in the Country, what parts of the Country, geographical areas. the number of people; you could pay up to three million dollars for this insurance per year but you could also get payouts that are multiple times that.
For example, for the countries, we paid out 26 million dollars so if you pay three million, you could get up to nine million or six million depending on the area which the coverage is limited to the number of people. These 26 million dollars we paid out for the three Countries were gotten fast within two to three weeks because we actually work hard with the Countries to prepare Contingency plans that can be executed immediately there is a problem. We covered 1.3million people with this money and livestock, there was disbursement for cattle feed, livestock so people didn’t die and livestock did not die and more importantly, we didn’t wait months for the UN to raise money for us, we solved our own problem.
FAMUREWA: The ARC has relatively ambitious targets; you are hoping to reach thirty countries with nearly 1.5billion dollars in support in 2020. How do you hope to achieve that?
OKONJO-IWEALA: Right now, with the seven Countries, we have 178million dollars in coverage, we want to increase that to 1 to 1.5 billion dollars in 30 Countries by 2020. We feel it is doable. Remember, of the 32 signatories, only seven so far have actually purchased insurance so by 2020, we should be able to get our 32 Countries to purchase this insurance. In addition, the G7 at the just concluded climate change conference in Paris (COP 21) recognized the important value of this mechanism and applauded that Africans have come forward with their own solution and they actually said that they want to increase coverage to 400 million people of insurance worldwide. There is also an insurance mechanism in the Caribbean and Pacific but the largest one where they can get the most impact is in Africa.
We are expecting to get to 150million people, so they are willing to put money behind this in order to help us expand the insurance but more important than that is that the Countries themselves are beginning to see the value, we had 26 signatories and we are now at 32, more countries are coming and we just want those countries to purchase insurance. For example now, we have a drought in parts of Southern Africa, Zimbabwe, parts of Lesotho and parts of South Africa. I think Zimbabwe is a signatory and they have actually done much of the work, if they had already paid for the insurance, we would have been able to disburse money to them, now they are waiting for an appeal, for the UN and other agencies to bring money but if we had just received the three million, we might have been able to disburse multiples of that to them to start taking care of the people who are suffering.
FAMUREWA: Given the interaction in Paris and with the setup of the ARC, would you say Africa has come to the point where it understands and appreciates the risk that climate change poses going forward?
OKONJO-IWEALA: I think we understand it much more. A couple of years ago, I was really worried that maybe we are not getting the message, I think especially during the build up to the climate change conference, there was much more understanding but I’m not sure we are there yet, I think if you talk to the average person on the street about what climate change means, even the average policy maker, you will still have to spend some time explaining, we see the ramifications in terms of flood and drought but what to do about it and how the urgency of action is needed, not everybody really understands that yet.
FAMUREWA: Help us appreciate the risk going forward; what is Africa likely to face in terms of climate change and its impact in the future?
OKONJO-IWEALA: I think the risk is significant for Africa. We did not cause most of the things leading to climate change- the carbon emissions in the atmosphere, the need for a carbon-free environment is now evident to everybody and we have to be part of it but I think that the damage has been done to some extent and that is why the climate change conference was so important, every country has put forward an action plan, I really think it’s a serious problem and you know we experienced serious flooding a couple of years ago in Nigeria, which affected a couple of million people, hundreds of thousands of households, so you have that impact and you have to pay attention to it, this is affecting some of the people who are the poorest in our population.
FAMUREWA: Beyond what the ARC is doing, talk more about how Africa can galvanise support from the private sector, local and international, donor groups and the rest of the world
OKONJO-IWEALA: I think a lot of that was discussed in Paris and there were discussions about the green climate fund, where 100 billion dollars from 2020 is supposed to be pledged by developed countries to help support, mitigation and adaptation from the impact of climate change and the international community really needs to come forward with that amount of money but I believe that African Countries also need to take their own precautions and get ready with their own resources and not be caught or taken by surprise. We really need to look at this critically to plan ahead and that has to be done by the Countries themselves and the best way is to purchase insurance ahead of time.
It is not going to solve everything but it will give you breathing space to save lives and livelihoods whilst now, if you need to do an appeal by the time that appeal comes, you would already have solved part of the problem, so I believe it’s a two part thing, countries need to put forward their own action plan, you can’t just wait for people from outside. In addition, the international community then needs to come and support this because Africans were not the agents of climate change, they are victims. Now, there are many things we can do and if we don’t do them, we will become even further more serious victims than we would have been.