Presented by Greenwell Matchaya Presented at 2015 ECAMA Research Symposium Malawi Institute of Management (MIM), 4-5 June, 2015

1. 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

2. Outline
• Introduction
• Objectives
• Methodology
• Results

3. 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

4. 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

5. 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

6. 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 +++++=

7. 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

8. Results-descriptives
• Gross production value trends
An increase in value
Mainly led by SA
Most MI countries
produce less
Potential for intra-
regional trade

9. 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

10. 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

11. 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

12. 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

13. 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

14. Results -econometric
OLS Random Effects Fixed Effects
Coef. Coef. Coef.
Rainfall 0.00* 0.00* 0.00
Temperature -0.91 -0.91 -0.07
Temperature squared 0.02 0.02 0.00
NDVI 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 -0.94
Number of observations 107
Adjusted R-Squared 0.84

15. Results-simulations
• 50% rainfall reduction

16. Results-simulations
• 50% rainfall reduction and 25% reduction in vegetative cover
-6-4-2024
MillionUS$
1993 1999 2004 2010
year
actual net exports Effect of shock
Shock: 50% rainfall and 25% NDVI decrease

17. Results-simulations
• Reduction in investments in irrigation, and an increase in
temperature as well as population also appear to impact
negatively on net exports

18. 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.