The impacts of biophysical factors and public agricultural water investments on net agricultural exports in Southern Africa

Matchaya G, Nhemachena C, and Nhlengethwa S

ReSAKSS-SA/IWMI

Outline

• Introduction • Objectives• Methodology• Results

Introduction • SADC -interesting divide of middle and low income countries • The Middle income –generally mineral or service based

– The Low income ones, have huge presence of agriculture

• Also note that in all the countries Agriculture- very critical• The dichotomy offers opportunities for intraregional trade in

agriculture• Trends show SADC heating and drying,

– with decline in rain, reliability, increase in floods

• Factors that affect agricultural production affect agro-trade – Through surplus– Deficits /shortages

Objectives • The main objectives are two fold

– Discuss the importance of biophysical and climatic factors

– Speculate on what would be potential impacts of changes in the factors on net exports in the SADC region

– Draw some recommendations for SADC countries to consider

Methodology

• To meet the objectives above, – Present trends in key variables that may affect agri production and

consumption

– Use an econometric model to estimate potential effects of factors on net exports

– Use model estimates to generate some simulations on potential impacts of the factors

Econometric model estimation

• Estimation based on

• Where Yit is the net exports in country i at time t; • Nit is a matrix of biophysical risk variables in country i at time t; • Cit is a matrix of crop and livestock disease risk variables in country i at time

t; • Sit are the variables related to socioeconomic risk in country i at time t • Wi is a matrix of agricultural water development indicators in country i and

at time t. • The fixed effects (μit) control for the heterogeneity among countries, and eit

is the common error term

ititititititit euWSCNY +++++=

Methodology …

• Data and Sources, – Production, exports, imports, data are from FAO– Additional data on other variables –sourced from IFPRI etc– Biophysical Risk included (temperature, rainfall, vegetation, land

degradation and forest coverage)– Socio-Economic Data included population, public expenditure on water

development and GDP per capita

Results-descriptives• Gross production value trends

An increase in valueMainly led by SA

Most MI countries produce less

Potential for intra-regional trade

Results-descriptives• Total Agricultural Exports

An increase in export value

MI countries export more value

Low income countries need to value add to gain more

Results-descriptives• Total Agricultural imports

An increase in import value

MI countries importing more

Negative trade balance in the SADC as export<import

Not good for agro-based economies

Results-Biophysical Risk

Growing conditions risk index-Temporal variability of NDVI, rainfall, temperature and a low soil nutrient capital indicator

The higher the index number the more the growing condition risk

Compared to other regions, SADC has more risk of this kind

Results Descriptive

Drought mitigation is rated by estimating the area receiving above normal rainfall and that receiving below normal rainfall

SADC mitgable risk is at ~49%Logic: if drought area< non-drought area, high mitigation potential through trade

Assuming no trade restrictions

• Drought Risk Mitigation potential through internal trade

Descriptives• Population is booming, GDP per capita is rising, but productivity of cereals is

increasing at a slower rate• Irrigation potential is still under utilized and investments in the water sector

appears stagnant or declining

Results -econometricOLS Random Effects Fixed Effects

Coef. Coef. Coef.Rainfall 0.00* 0.00* 0.00Temperature -0.91 -0.91 -0.07Temperature squared 0.02 0.02 0.00NDVI 0.99 0.99 1.59**Soil Quality decline -0.09*** -0.09***Tree coverage 0.01*** 0.01***Total population (millions)

-0.03*** -0.03*** 0.00

GDP per capita, PPP (constant2011 international $)

0.00* 0.00*

Population of largest city (million) 0.39* 0.39*Total crop land area 0.00*** 0.00***Constant 3.09 3.09 -0.94Number of observations 107Adjusted R-Squared 0.84

Results-simulations

• 50% rainfall reduction

Results-simulations • 50% rainfall reduction and 25% reduction in vegetative cover

-6-4

-20

24

Mill

ion

US

$

1993 1999 2004 2010year

actual net exports Effect of shock

Shock: 50% rainfall and 25% NDVI decrease

Results-simulations • Reduction in investments in irrigation, and an increase in

temperature as well as population also appear to impact negatively on net exports

Conclusions/recommendations• Climate related shocks on production affect agricultural exports for most of

the region’s countries. • The SADC region can mitigate some of the shocks by enhancing within

country and intra-regional trade.

• There is a case for increase in investment climate change adaptation strategies

• Removing barriers to trade, can mitigate the negative impacts of drought

• Generally, then investments in water resources, can help reduce effects of erratic rainfall on net exports.