Rethinking Disaster Risk Financing in the South African Agricultural Sector: An Ex-ante Approach

By Prof. Bibi Z. Chummun and Dr. Mpho Steve Mathithibane 

Disaster capitalism

South Africa faces increasing levels of disaster originating from natural risk. It is exposed to a wide range of climate hazards, including drought, flooding, hail, and severe storms that can trigger widespread hardship and devastation. However, even more shocking than the risks themselves is how public funds are misappropriated during various stages of disaster to exploit crises, how inefficiencies are disguised as workable solutions, and how little to no political will exists to find answers. These man-made ineptitudes, much like the contentious tendering system and questionable government procurement stem from inner workings of corrupt criminal elements, disaster opportunism, the dominance of white private capital and rise of black elitists benefiting from disasters. This reflects what Naomi Klein once called ‘disaster capitalism’. This concept is evident in the country’s blatant misuse of its R500 billion (USD 30 billion) COVID-19 relief funds summed up by hyperinflated face mask prices, and mysterious contracts with mushrooming newly registered companies.

State of disaster

In 2016, the Free State, North West, KwaZulu-Natal, Limpopo, and Mpumalanga Province were declared drought disaster areas in accordance with the Disaster Management Act No. 57 of 2002. An estimated 250 000 farmers were directly affected and over 6 million people were indirectly affected.

In March 2020, the Western Cape, Eastern Cape, and Northern Cape provinces were declared national state of disaster areas due to drought. Floods are also a pressing problem. On April 13, 2022, the government declared a national state of disaster in the province of KwaZulu Natal in southeastern South Africa, following a devastating flood whose damages lead to the displacement of more than 40 000 people and caused hundreds of recorded deaths. The importance of a state of disaster classifications is that it immediately triggers contingency plans and access to additional funding to bolster relief efforts. Many people in South Africa live in conditions of chronic disaster vulnerability, these are ecologically fragile areas exposed to recurrent natural disasters. The problem is further exacerbated by poor levels of basic service delivery in the form of water and sanitation, in addition to the lack of storm water infrastructure and poor road networks.

What is striking about South Africa is that, like every aspect of society and economy, climate change, too, is racist. Blacks disproportionately reside in ‘sacrifice zones’, be it townships or former homelands. Black owned businesses contribute low to carbon footprint that influences climate change but suffer the effects disproportionately without much financial resilience. These ecological inequalities shade into the structural economic inequalities that chain Blacks in South Africa to the gallows of disadvantage. Colonialism followed by the apartheid era laid the foundation and created structural opportunities for racist and classist hierarchies to be normalized. Post democratic reforms have been slow to change this status quo. Therefore, a state of wealth and want reflects the current political landscape and tells the story of wide inequality in Africa’s second largest economy.

Legislative response instruments

Legislative instruments such as the Disaster Management Act provide for persons, that have been affected by a disaster, to apply for social relief of distress. The Act provides for an integrated and co-ordinated disaster risk management policy that focuses on preventing or reducing the risk of disasters, mitigating the severity of disasters, preparedness, rapid and effective response to disasters. However, there is a growing public outcry on the adequacy and timeliness of support interventions. These rumblings of dissent are anecdotally a driving factor behind social unrest and violent protest, including the July 2021 spate of looting and destruction of property worth billions of Rands in Gauteng and KwaZulu-Natal province.

Disaster response strategies in South Africa like drought assistance have historically relied on post-event relief. However, these relief schemes face challenges due to poor coordination, and their reach to farmers is limited and untimely. These schemes result in underfunded responses, and they encourage underinvestment in risk reduction and preparedness, which increases the economic and human costs of catastrophes. There are complex bureaucratic hurdles within these structures that impede and continue to frustrate effective drought response efforts. The more generic hurdles include a lack of transparent processes over the selection criteria, an obscure and unscientific basis for allocation of funds to affected farmers, as well as poor governance and oversight with limited accountability that often leads to non-payment for farmers in the most remote areas. In South Africa a drought relief scheme was implemented in the North West province after two consecutive years of below-average rainfall. Ultimately, more than 60% of the affected farmers did not receive any assistance. Within local jurisdictions, vulnerable farmers often lack political capital and knowledge to organize, mobilize, and lobby effectively for timely government relief. In part this may due to poor unionization among farmers and farmworkers, and smallholders’ interests are often inadequately represented within civil society organizations.

The frequency and severity of extreme weather events, including drought, is set to intensify due to climate change. This entails changes in rainfall distribution, pests and plant disease proliferation, higher evaporation rates, increased temperatures, reduced crop yields, and spatial adjustments in optimal cropping areas, which all affect sustainable agricultural development. Therefore, there is a need for progressive economic and social policy instruments to prepare, respond, and proactively reduce the effects of natural risks on the agricultural sector. One of the main response instruments is disaster risk financing, which aims to increase the resilience of vulnerable countries to the financial impact of disasters as part of a comprehensive approach to disaster risk management, as suggested by the World Bank.

Social protection policymakers and practitioners cannot afford to ignore long-term impacts of disaster and persistent climate change any longer and need to integrate their planning and action plans. Managing the impacts of climate risk on agricultural production requires an integrated approach that brings together risk-coping, mitigation, and adaptation in the short and long term. In terms of government interventions, this means coordinating and integrating disaster risk management programmes, social safety net programmes, and agricultural development interventions. The solution is for governments and their partners to adopt pre-agreed, prefinanced, rules-based preparedness plans that can be implemented after a disaster strikes without the need for further political decisions. Therefore, it is critical to rethink and reshape current policy to shift towards ex-ante support as a long term and sustainable response strategy to disaster risk management.

Market Disaster

In this respect, economists like to advocate insurance markets. According to this mainstream environmental economics view, insurance is an effective apparatus for responding to losses. Insured individuals are identifiable, the value of insurance is known, and the extent of losses can be quantified according to established standards. However, even insurance structures, markets and products are exclusionary in nature, and black South African farmers have little to no agricultural insurance protection due to prohibitive costs and inappropriately designed products that do not address their risk transfer needs. An approach that profits largely white capitalists and, yet, does not address the needs of the majority of South Africans and cannot provide the needs of the most vulnerable is definitely ‘market disaster’. The process of rethinking disaster risk financing should be accompanied by a parallel and sobering interventionalist approach to rethink the position of black South African farmers. This is critical in making progressive stride to building a more resilient society.