Anushka Bogdanov, Founder of Risk Insights
Population undermines the demand for new infrastructure
Infrastructure not built for climate change
Fitch assigns Botswana a poor overall ranking its infrastructure Risk/Reward Index
Limited opportunities on offer for prospective investors
Infrastructure relies on government spending
Funding challenges emerge
As Africa grapples with its own climate risks, including Botswana's flood vulnerabilities, a stark contrast reveals a troubling truth: the continent lacks the financial resilience to weather such storms.
While the UAE drew on substantial resources for recovery, Africa’s infrastructure, often inadequately prepared for climate change, faces severe strain. In Botswana, for instance, the World Bank warned of increasing flood risks exacerbated by climate change. Yet the nation’s limited financial and infrastructural capabilities are struggling to keep pace.
With insufficient investment in climate-resilient infrastructure and a constrained budget occasioned by various factors, Botswana’s ability to protect its population from climate-induced disasters remains precarious.
Despite having a National Development Policy, the Ministry of Environment recently revealed before parliament that there was no dedicated budget for climate change in the 2024 budget.
Lessons from UAE
In April 2024, a single day saw more rainfall than the Gulf region typically receives in an entire year, flooding the usually dry area and laying credence to claims of cloud seeding.
The floods resulted in the deaths of four people in the UAE and at least 19 others in Oman, including 10 children whose school bus was carried away by the torrent, according to mainstream media. The reports said the floods caused major disruption in Dubai, leading to the cancellation of over 1,000 flights at the world’s second-busiest airport and resulting in prolonged delays.
A team of 21 scientists and researchers, working under the World Weather Attribution initiative, determined that global warming was the “most likely” cause of the unprecedented rainfall.
CNBC, a business news broadcaster concluded that the crisis illustrated how urban engineering was failing a major climate change test. UAE announced $544 million for repairing Emirati homes following the disaster, indicating that the rebuilding process was more feasible for them due to their available resources and financial muscle.
Africa’s Infrastructure Not Built For Climate Change
The concern is that Africa may not have the capacity for such freedom. A key question among Environmental, Social, and Governance (ESG) experts is, can Africa’s infrastructure stand the test of climate change and what are governments doing?
Anushka Bogdanov, the founder of Risk Insights views that "Africa's infrastructure is not built for climate change." Bogdanov, has 29 years of international risk management experience. Risk Insights has been at the forefront of revolutionising the ESG landscape on the continent, applying Artificial Intelligence and Machine Learning's advanced techniques to data and model building. When speaking recently during an ESG roundtable in partnership with the Botswana Stock Exchange (BSE) in June, Bogdanov called for proactive economic and infrastructure planning.
Botswana infrastructure exposed to floods
A report by the World Bank in 2021 revealed that Botswana is exposed to numerous hazards including floods. The report titled ‘Climate Risk Country Profile: Botswana’ found that recurring droughts and floods have the most severe impact on the population. The magnitude, frequency, and impact has been observed to have increased, said the World Bank.
“The current trends of weather variability for Botswana are expected to lead to droughts, as well as floods, and soil erosion, particularly along river areas and embankments,” the World Bank said.
World Bank warned that climate change is expected to increase the risk and intensity of flooding and increase the likelihood of water scarcity in the country's northern, central and eastern areas. “Increased potential for higher intensity rainfall events will lead to the heightened risk of flooding, loss of life, and damage to property and infrastructure.”
Graphics by World Bank
Disasters have historically been concentrated along rivers such as the Zambezi River, the Okavango River and its delta, the Boteti River and the Limpopo River, World Bank found. It said storms, typically emanating from tropical cyclones occurring in the region from the Indian Ocean, result in heavy rains and flooding. The World Bank sees increasing urbanisation increasing flood risk locations due to the absence of functioning water drainage systems.
“Urban areas such as Gaborone, Francistown, Molepolole, Selebi-Phikwe and Maun (the five largest and most population-dense towns in Botswana), as well as Tutume, Mahalapye, Serowe and Letlhakane, have already been heavily affected by flood disasters.”
Hindrances for New Infrastructure
Fitch Solutions has concluded that the small and largely rural population undermines the demand for new infrastructure in the country. But while it believes Botswana is relatively small-sized in absolute terms, on a per capita basis, it said Botswana's construction industry is by far the largest in Sub-Saharan Africa; its construction market per person is in line with Mainland China and Mexico.
Fitch however assigned Botswana a poor overall ranking of 14th out of 18 regional markets and 88th out of 104 markets globally in its Infrastructure Risk/Reward Index.
“This performance reflects a small market size in value terms and limited opportunities on offer for prospective investors.”
Global Monitor, which provides unique data, expert analysis & innovative solutions to companies in the world's largest industries, has concluded that a common denominator in Botswana’s infrastructure is that they all rely heavily on government spending and PPP projects, which in turn largely hinge on loan or debt-instrument financing.
Additionally, Global Monitor found that the poor financial health of many infrastructure companies has resulted in lenders seeking to limit their credit exposure to the infrastructure sector, which in turn has made many players cash-strapped.
Fitch adds that: “Domestic construction companies have limited capacity and cannot take the lead on large-scale infrastructure developments”.
With urbanisation putting great strain on existing infrastructure over the past years, the government has been adopting numerous programmes, policies and initiatives aimed at bridging Botswana’s infrastructure gap.
Infrastructure Drive with More Challenges Ahead
Significant allocations within Botswana’s 2024 budget are earmarked for infrastructure development.
Fitch anticipates that short-term growth will be bolstered by increased investment in public infrastructure, with a particular focus on water infrastructure, which has seen the highest expenditure growth in the 2024 budget. Roads will also enjoy a fair share.
Funding Challenges for Infrastructure
Graphics by Fitch Solutions
Fitch also believes that macroeconomic headwinds will slow construction growth given that it is heavily affected by external shocks, such as price rises related to the Russia - Ukraine conflict.
Economist, Dr Keith Jefferis expects plans to implement several infrastructure projects during the 2024/2025 financial year to be derailed by funding challenges, with revenues falling short as the diamond malaise continues.
The bottom line is that the projected expenditure of P102 billion in the 2024/25 Budget is not feasible or achievable, as revenues are expected to under-perform and the consequent borrowing target cannot be financed, Jefferis said in an economic report released recently.
Hence, he said some cutbacks in spending will be required in the current financial year. Part of the problem, according to Jefferis, is the huge projected increase in the development budget to P29 billion (up from P14 billion in 2022/23). “Spending this much on development projects would not be wise, given that most of them have not been subject to proper appraisal and in many cases, the preparation has been rushed,” Jefferis said adding that their “assessment is that the expenditure budget for 2024/25 will need to be cut by some P8 billion (around 8%), reflecting expected revenue shortfalls and that most of this will be achieved by postponing or cancelling development projects”.
IMF said the execution of the development budget should be slowed and focused on high-return projects. Most of the projects by the government are social infrastructure which some economists said are desirable for social fabric. The government issued a statement saying no projects will be cancelled. The government amended the pension funds regulation to allow pension funds to invest 50% of their assets in Botswana. The aim was to use these funds to invest in infrastructure. However, there is still no infrastructure fund framework to allow for this hence pension funds have been investing in other instruments.
Inadequate infrastructure could trigger protests
With inadequate infrastructure, Bogdanov is concerned that climate change will exacerbate inequality in Africa, leading to greater displacement of poor people and presenting significant challenges for governments and societies. She warned that this might lead to social protests and urged governments to seek climate change funding to support development aimed at preparing for climate change. Additionally, she said it is crucial to have the necessary data to secure this funding, as a lack of data may hinder access to financial support.
Africa has not been adequately considered in ESG (Environmental, Social, and Governance) assessments. This is partly because, historically, Africa has had the lowest carbon emissions compared to other continents, contributing less than 4% of global emissions. The main challenge for Africa is governance. To attract impact capital and green finance, Bogdanov said the continent needs to improve its data availability and transparency.
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