As a prelude to the seventh edition of the Conference of the Parties to the ARC (CoP7) that opens this Sunday at the African Union headquarters in Adis Abeba, the Pan African Risk Management Mutual (ARC) organized a workshop to journalists on the media treatment of financing climate risks and the risks of natural disasters. In this interview, Mohamed Beavogui, Director General of the AU Specialized Institution, talks about the objectives of this initiative and the future challenges of the ARC. Exclusive!
Financial Afrik: You organized this Saturday, a workshop for journalists on the media treatment of financing climate risks and natural disasters. Do you think that the media do not play their role effectively?
Mohamed Beavogui: Climate risk management is a fundamental problem that affects all sectors of society and all professionals. The problem is that Africa, in its totality, particularly at the national level, despite the decision of the heads of state, has not taken the climatic disasters to their proper measure. And so, this aspect of the issue passes not only by governments, but also by civil society, the private sector and journalists as well. They inform about news that attracts the attention of people, governments and the private sector. However, it turns out that climate risk management is first of all a new theme, an issue on which governments have not been sufficiently sensitized yet. So we only measure climate risk management in drought, flood or cyclone crisis, as unfortunately happened in Mozambique, Malawi and Zimbabwe. And because of this, we, having been mandated as a specialized agency by Heads of State in 2012 to help African governments to manage and finance climate risks. We thought we needed to communicate. And to communicate, you have to go to those who know how to communicate and who communicate. That’s why we organized this dialogue, information and awareness workshop with journalists. This is the first workshop of this kind that we are organizing to begin to create a core core that will form in the future the network of journalists specializing in climate risk management and communication. That’s our goal. For us, it is a seed that is planted, and this seed will develop into a network. It is clear that over the past decade there has been a greater frequency of floods, cyclones and droughts, and we are also seeing that these perils are much more important in terms of their power. We must, therefore, draw everyone’s attention so that everyone can play their small role in order to protect our populations and increase the resilience of our countries.
Your organization claims $ 500 million for claims on the continent. How do you think countries can prevent these risks?
Let me be a little more specific. Our structure has cumulatively covered African countries that have taken out insurance for a value of 500 million USD. That is, if there were up to $ 500 million in risk, we were able to put those resources at their disposal because they hedged globally for that amount over the course of 5 years. The risk may be lower than what we subscribed to, and / or too small, so we do not need to pay. If it is important, we pay; which was the case of Senegal in 2015. They were paid about 16 million USD and four countries including Mauritania, Niger and Malawi also received payment. To date, only 33 countries have signed the ARC Treaty after 5 years of service, despite being a specialized agency of the African Union.
What are your next challenges in your activities?
As you said, we provided 500 million USD in those five years. We paid more than $ 37 million to the countries that were affected; our wish is therefore that the pool grow. It’s like a tontine. The more members there are, the better the work is. The more members, the lower the premium paid to cover. It is extremely important. The more diversified the pool members, the more diversified the risk. Our wish is to have a much larger pool with many more African countries. As you can see, when there is drought in West Africa, there are none in East Africa and Southern Africa; and vice versa. When there is a flood in one area, there is not one at the same time in another area. So, by putting our marbles together as we say, we could all help a country and since we got together, the cost of the contribution becomes small. That’s the goal.
But how to make the pool grow?
That’s the difficulty. It does not grow because member states have difficulty paying their premiums. Sometimes it is because they are not sufficiently aware of the issue of risk management and the use of insurance. As you know, we pay for insurance, but we receive benefits only in case of risk. And often, people get the impression that a payment is being received even if there is nothing or when there is a small disaster. But you know that in any insurance, there is a franchise that you choose yourself. And so, there is this kind of understanding that there is still to do. It is important to protect yourself and this way of protecting oneself is a solution that makes sense. In this context, we want to help governments, on the one hand, to pay their premium, and on the other hand, to have the necessary knowledge to better understand the issues and make the right decision for the level of the premium and level of participation. With the African Development Bank (ADB), we have just put in place an initiative on financing climate risks. The Gambia benefits from this funding. The first country to benefit from this financing will be able to pay its premium during the next 5 years with the help of the cover that this facility brings to it. We have 9 countries in the pipeline, we need to find the necessary resources to fill the facility so that all member states that want it can benefit at least for the next 5 years in a degressive way so as to allow understanding and control of the system and gradually define in which part of the national budget resources can be taken to pay this premium in order to protect themselves.
What was, or what is the African response of the ARC in the case of Mozambique that you quoted?
Unfortunately, although Mozambique has already signed the treaty, it has not yet signed the cooperation agreement with the ARC. So we are in the middle of the process that leads us to the opportunity to work together, in a structured and organized way, on the one hand. On the other hand, it must also be said that what happened in Mozambique is rather an aspect that we are just going to start next year. It concerns floods and cyclones. These two tools are ready. This year, we test them for African countries. You will remember that the ARC started with drought only first because you have to go little by little. We think that with the drought, we have closed the loop. The flood tool and the cyclone tool are ready and are in test pool now, and we will be able to make it available to States next year. In fact, there are states that are simulating it this year, including RCI and Ghana, with no insurance premium, and we try to observe and see what the reading is. It is climate modeling that allows us to measure the evolution of these climate changes. It must therefore be adapted to each country, which requires local work. That is why at the ARC level, we first want to train the nationals with whom modeling will be done. That it is not external work and when we leave, there is no one left to do it. Above all, it must be national responsibilities: that nationals should be able to advise the government in a very independent way and allow them to decide beyond the point of view of a certain expert from elsewhere.
So far, what are the main shareholders of the CRA, and how is its capital?
As you said, we provided 500 million USD in those five years. We paid more than $ 37 million to the countries that were affected; our wish is therefore that the pool grow. It’s like a tontine. The more members there are, the better the work is. The more members, the lower the premium paid to cover. It is extremely important. The more diversified the pool members, the more diversified the risk. Our wish is to have a much larger pool with many more African countries. As you can see, when there is drought in West Africa, there are none in East Africa and Southern Africa; and vice versa. When there is a flood in one area, there is not one at the same time in another area. So, by putting our marbles together as we say, we could all help a country and since we got together, the cost of the contribution becomes small. That’s the goal.
But how to make the pool grow?
That’s the difficulty. It does not grow because member states have difficulty paying their premiums. Sometimes it is because they are not sufficiently aware of the issue of risk management and the use of insurance. As you know, we pay for insurance, but we receive benefits only in case of risk. And often, people get the impression that a payment is being received even if there is nothing or when there is a small disaster. But you know that in any insurance, there is a franchise that you choose yourself. And so, there is this kind of understanding that there is still to do. It is important to protect yourself and this way of protecting oneself is a solution that makes sense. In this context, we want to help governments, on the one hand, to pay their premium, and on the other hand, to have the necessary knowledge to better understand the issues and make the right decision for the level of the premium and level of participation. With the African Development Bank (ADB), we have just put in place an initiative on financing climate risks. The Gambia benefits from this funding. The first country to benefit from this financing will be able to pay its premium during the next 5 years with the help of the cover that this facility brings to it. We have 9 countries in the pipeline, we need to find the necessary resources to fill the facility so that all member states that want it can benefit at least for the next 5 years in a degressive way so as to allow understanding and control of the system and gradually define in which part of the national budget resources can be taken to pay this premium in order to protect themselves.
What was, or what is the African response of the ARC in the case of Mozambique that you quoted?
Unfortunately, although Mozambique has already signed the treaty, it has not yet signed the cooperation agreement with the ARC. So we are in the middle of the process that leads us to the opportunity to work together, in a structured and organized way, on the one hand. On the other hand, it must also be said that what happened in Mozambique is rather an aspect that we are just going to start next year. It concerns floods and cyclones. These two tools are ready. This year, we test them for African countries. You will remember that the ARC started with drought only first because you have to go little by little. We think that with the drought, we have closed the loop. The flood tool and the cyclone tool are ready and are in test pool now, and we will be able to make it available to States next year. In fact, there are states that are simulating it this year, including RCI and Ghana, with no insurance premium, and we try to observe and see what the reading is. It is climate modeling that allows us to measure the evolution of these climate changes. It must therefore be adapted to each country, which requires local work. That is why at the ARC level, we first want to train the nationals with whom modeling will be done. That it is not external work and when we leave, there is no one left to do it. Above all, it must be national responsibilities: that nationals should be able to advise the government in a very independent way and allow them to decide beyond the point of view of a certain expert from elsewhere.
So far, what are the main shareholders of the CRA, and how is its capital?
For clarification, we have the agency and a subsidiary that is the insurance company. This company received a capital of two donors that are England and Germany. They put $ 200 million at our disposal as capital base. Now, every time a country takes its first insurance policy, it immediately becomes a member of investors, because in the premium you pay, a small piece is used for capital. It contributes to the progressive replacement of 200 million so that after 20 years, the capital is entirely African. Otherwise, when you return, it is not only that you have insurance, but you become a shareholder at the same time, you pay for shares without even realizing it. And our wish is that there are many countries; like that the level of this action falls because the premium drops in general.
Interviewed by Nephthali Messanh Ledy, Special Envoy to Addis Ababa
