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How Climate Change Affects the African Economy

“Rain does not fall on a roof alone.” An African proverb.

The changing climate has an equal impact on every country and sector. It has risks and opportunities at the same time, and the financial sector is not immune to these risks and opportunities.

Climate change has shrunk the African economy. In less than 9 years, the African continent’s GDP will shrink by 15%.

These losses are manifested in reduced productivity and damage to key economic sectors. When financing these sectors, financial institutions should require certain actors to prioritize climate adaptation actions. In agriculture, climate change may reduce the production of major staple foods by as much as 40%. Facts have proven that ecosystem-based adaptation methods can buffer climate-induced losses and increase yields by as much as 128%. A good example is the Zaï or Tassa technology, which is a traditional soil conservation method that has been shown to increase yields by 500%.

Climate change may reduce the amount of water available for agriculture by as much as 40%.

Climate-adaptive solutions such as solar irrigation will be of great help in solving water safety issues. Facts have proved that solar irrigation can increase production by 100%, save water by 40% to 80%, and increase income by 80%. Enter the undeveloped constituency This cannot be done effectively without taking advantage of the informal sector participants who are the biggest supporters of African economies. The informal sector in Africa employs more than 80% of the population, which means that these sectors bear the brunt of climate change risks. At the same time, the formal financial system serves them the least because they are considered high-risk. As many as 90% of these informal sector participants trade in cash and are not part of the formal financial system in Africa.

Data from climate action solutions can inform relevant policy incentives and promote further climate action. The climate action solution for solar dryers has been proven to reduce post-harvest losses, which is an agricultural function, and creates business opportunities for youth and the informal sector, which is a planning function. These data can be used to provide information on the policy incentives of these sectors so that these climate action solutions for solar dryers can be further upgraded as a tool to realize the priorities of these sectors.



with information from: https://intpolicydigest.org/how-the-financial-sector-can-implement-climate-action-in-africa/

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