The Costs and Benefits of Environmental Management and Disaster Risk Reduction in Malawi

Malawi is highly vulnerable to the impacts of extreme weather events. The adverse effects of climate change pose a significant risk to Malawi’s growth and development, with the nation having faced continual and compounding disasters over the last few decades. The impacts of extreme weather events in Malawi, such as floods, strong winds, dry spells, cyclones, earthquakes, and landslides, are substantial – hindering Malawian lives, livelihoods, the country’s economy and damaging infrastructure. On average, floods constitute about 75% of annual average losses estimated at MWK 50,600 million (USD 68 million) on average. However, the average damage does not convey the size of the tail risk – i.e. extreme events with substantially higher damages. For example, the floods of 2015, and the drought which followed in 2016, raised the national poverty rate and resulted in losses valued at approximately MWK 521,500 million (US $700 million), while more recently, in 2019, physical damage to the country was estimated at MWK 163,900 million (USD 220 million) as a result of Cyclone Idai. The analysis recommends prioritizing improvements in Malawi’s Early Warning Systems (EWS) as a more effective use of marginal resources toward improving Malawi’s resilience to floods. Overall, this intervention would yield 16 kwacha in benefits for every kwacha invested, indicating the high socio- economic efficiency of the EWS improvements for Malawi. The EWS improvements require an upfront capital investment of MWK 3,371 million followed by an annual maintenance cost of MWK 506 million. The costs are relatively modest, due to the fact that the investments focus on improvements over the existing EWS system. The benefits obtained are mainly from avoided damage, with the analysis estimating that 10% of housing and property damage; 70% of livestock and 80% of health damage could be avoided with more comprehensive responses to EWS advisories for major floods, and up to 25% of total damage could be avoided in the case of minor floods. The expected value of damage avoided is around MWK 14,000 million annually, however the benefits are skewed towards incidents that occur rarely but have high impact. The analysis also considers Climate Smart Agriculture (CSA), as a second intervention, combining integrated conservation agriculture with crop diversification, drought tolerant varieties, and rice intensification. This intervention would yield 3.0 kwacha in benefits for every kwacha invested.