Floods set to cause long-term economic impact in Malawi and Mozambique

28 Jan 2015

Floods set to cause long-term economic impact in M...

Floods have killed hundreds of people, displaced thousands of others and destroyed crucial transport and energy infrastructure since they first began in Mozambique and Malawi in early January 2015. The effect on business operations and trade has also been severe, delaying mining exports and disrupting agricultural production. Although international aid has now begun to arrive, rescue operations are likely to take several months and there is a strong possibility that the impacts of the floods will be prolonged in both countries.

The floods in the southern region of Africa began on 7 January, as torrential rains affected Mozambique, Malawi, Zimbabwe and Tanzania. Tropical Storm Chedza subsequently hit Madagascar, leaving at least 68 people dead. The rains have been most devastating in Malawi where officials say nearly 200 have died, and in Mozambique, where 117 have lost their lives. Nearly 400,000 people have been affected in Mozambique and Malawi combined, and Malawi has declared a third of the country to be a disaster zone, while Mozambican officials have announced a Red Alert – the highest level of state emergency – in response to the crisis. Mozambique and Malawi are frequently affected by heavy rains between January and March, with both countries witnessing acute flooding following Cyclone Funso in January 2012, which left more than 70 people dead and seriously damaged critical infrastructure.

The most recent floods have had a significant impact on crucial transport and energy infrastructure across the region. Two bridges on Mozambique’s north-south EN1 highway collapsed on 14 January, creating ongoing disruption to transport across the country. The rains have also knocked down 10 electricity pylons, cutting off power to Nampula, Angoche and Morrupula, while roads in the central city of Beira, particularly in Munhava and Muchatazina districts remain impassable. Infrastructure has been similarly affected in Malawi, with the country’s power generating company Escom shutting down its main hydro plant on the Shire River in mid-January, leading to widespread blackouts.

Extensive infrastructure damage has had some impact on coal mining companies including Rio Tinto and Vale in Mozambique. The Sena Railway was forced to close for four days in mid-January, leaving approximately 74,000 tonnes of coal stuck in the Moatize basin in Tete, unable to reach the port at Beira. The line was reopened on 13 January, but further rains should be monitored closely as they are likely to cause additional delays to exports. In March 2013, continually heavy rains in Mozambique shut down the Sena railway line for two weeks, forcing Vale to declare force majeure on a number of coal shipment contracts.

In the longer term the floods are likely to have a detrimental effect on the economies of both Mozambique and Malawi. Senior officials in Malawi have reported that the rains have caused extensive damage to tobacco crops nationwide, which account for around 60 percent of Malawi’s foreign exports. Authorities say it is not yet clear how badly this year’s yield will be affected but any reduction in exports will severely dent government revenues. This will be particularly problematic for Lilongwe, coming as it does in the wake of the September 2013 “cashgate” corruption scandal. The scandal saw Western donors suspend aid worth USD 150 mn to the country, which previously accounted for around 40 percent of the national budget. The Malawian president announced on 27 January that Lilongwe would need to revise its growth forecast for 2015 as a result of the impact of the floods.

The effect is likely to be equally severe in Mozambique, where telecommunications, transport, energy and agriculture have all been impacted. Agriculture, on which around 80 percent of the Mozambican population is reliant, has been especially affected. Officials have said that fields are likely to remain inaccessible until the end of the rainy season in March, which could result in large quantities of crops being destroyed. Estimates are not yet available for how extensive the damage will be, though similarly severe floods in 2012 left 41,979 crops completely destroyed. The IMF said in late January that it was considering revising its economic growth forecast for Mozambique for 2015 down from 7.5 to 7 percent as a result of the effects of the flooding.

Although international aid has begun to arrive in Mozambique and Malawi in recent days, it is likely that the flooding will continue to affect businesses and individuals in both countries until at least the end of the rainy season. Malawi has received around USD 20 mn to combat the effects of flooding and several relief agencies are working to help the victims in both countries. However, Lilongwe has said it requires USD 81 mn to expand its emergency response to the floods, and faces a funding gap of USD 67 mn, suggesting that efforts to tackle the flooding will lack the resources to be effective for some time. Past episodes of flooding in the region have illustrated Maputo and Lilongwe’s slow response capabilities, taking at least eight weeks before most residents could return to their homes following Cyclone Funso in January 2012. Both countries are also now facing a high risk of cholera and diarrhoea epidemics, which could further complicate the region’s recovery from the emergency and leave Mozambique and Malawi with diminished infrastructure capabilities and reduced economic outputs for 2015.

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