Discrepancies behind botched drought deal

Post was last updated: September 9, 2016

Inconsistencies in the figures and estimates of food insecurity resulting from the drought experienced in the 2015- 2016 growing season is being named as a contributing factor for Malawi failing to access about $30 million drought insurance cover from the African Risk Capacity (ARC).

ARC’s says its drought model is based on the ‘water requirements satisfaction index’ approach and, consistent with other models using this approach, it did not show a bad growing season in Malawi for local maize at the national level, therefore, not meeting the payout trigger on the insurance policy.

In an email explaining why Malawi failed to get compensation for the bad weather experienced during the last growing season despite buying a weather insurance policy with the firm, Mercury Vice President, Molly Toomey, whose firm handles the public relations element of ARC, said African Risk Capacity and international models had initial estimates on food insecurity that were below the numbers reported by the Government of Malawi.

Toomey said ARC undertook its own field visits, as well as field visits with technical experts from the Government of Malawi, and has commissioned data collection from an independent agricultural research institution in order to develop a better understanding of the mismatch between WRSI models and the situation on the ground in Malawi.

“Additionally, ARC is continuing to work alongside a variety of interested parties to identify potential improvements in the way WRSI and other models capture some particular features of Malawi’s 2015/2016 agricultural season which appear to have played a role in the poor harvest,” said Toomey.

In order to further assess the severity of the situation, the Malawi Vulnerability Assessment Committee (MVAC) jointly conducted its annual on-ground assessment. The findings of the Vulnerability Assessment Committee show about eight million people at risk of food insecurity.

Toomey said in response to the conclusions made by MVAC and with the severity of the situation made clear, ARC launched additional technical work to examine what occurred.

Malawi, last year, paid a K2.9 billion ($4 million) annual premium for the drought risk cover with a maximum annual benefit of $30 million. But the country is yet to reap the benefits of the policy.

Finance Minister, Goodall Gondwe, last month said government is considering whether to buy a new drought insurance cover following last season’s botched deal.

Gondwe said government plans to discuss with ARC why they did not honour the insurance policy.

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