Drought affects Hydropower and reduces Growth Outlook

Drought conditions caused by the El Niño weather phenomenon are set to further worsen economic growth in Zambia, with economists saying this year’s figure will be below the 5% projected by the country’s finance minister. The key agriculture sector will be hit by the dry weather conditions the region will suffer this season. Agriculture is important for Zambia as most families depend on the sector for their income and could therefore be left in need of food aid, a further strain to stretched government coffers. The World Food Programme (WFP) and the United Nations Food and Agriculture Organisation (FAO) said in a report on Friday that 8.7% of Zambia’s rural population is food insecure. According to the report, entitled Southern Africa Food & Nutrition Security Update, “current long-range rainfall forecasts for southern Africa are indicating below-average rainfall”. “Although agriculture makes up less than 20% of GDP (gross domestic product), a large proportion of the population depends on small-scale farming operations for sustenance as well as for their livelihood,” Richard Tome and Robert Hill, economists at Focus Economics, said by email.

About ten economic analysts surveyed by Focus Economics this month agreed that as a result of the developments in Zambia, the country’s economic growth for 2015 will fall to 4.2% before picking up to 4.6% in 2016. Zambia has recorded brisk growth in the past few years, with the economy growing by 5.6% in 2014 and an average 7.1% in the past five years. “Increased operating cost to the mining industry is not the only factor dragging on GDP growth, and it is difficult to quantify exactly what impact the drought has had,” Tome and Hill added in a commentary on the impact of dry conditions on Zambia’s economy.

In 2014, Zambia recorded a record low corn harvest and this has boosted inflation, reduced taxation revenues and forced the government to tap into corn reserves. Agriculture in Zambia “may not be a substantial contributor to GDP, but fluctuations in output do affect prices, and reduced output from inclement weather has already pushed up prices” this year, the two economists said.

h3. Hydropower to be hit hard

“The most substantial impact the drought will have on the country is via electricity. Hydropower accounts for more than 90% of Zambia’s electricity production. A lack of rain has lowered water levels at power-generating reservoirs and has forced the country to cut electrical production, and increase tariffs,” they added.

The agriculture sectors of other regional countries such as Zimbabwe, Malawi and Mozambique will also be affected by the drought conditions prevalent in the region. The FAO and WFP report stated that 29 million people in southern Africa are facing food insecurity, and cautioned that the impact of current conditions will last until 2017.

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