Cedric Stephens | Designing a resilient agricultural sector a welcome move

Prime Minister Andrew Holness listed ‘rural development, climate resilience, and sustainable agriculture’ as areas of action when he spoke at a UN Food and Agriculture Organisation (FAO) regional meeting in Montego Bay, according to a March 8, 2018, Gleaner report.

The same source quoted him in November 2017 as saying, “It was better to invest in climate resilience (now) than to seek to give … aid after the damage is done”, in a story that was headlined ‘Help Now, Not After Disasters’.

Three months after the FAO regional meeting, Mr Holness returned to the theme of resilience. The Jamaica Information Service (JIS) quoted him in a June 2018 statement, at the outreach session of the G7 Summit in Quebec, Canada, as saying, “Building resilience is not optional. It is an imperative for our survival. Creative and innovative solutions must be found to design appropriate risk mitigation, risk transfer, and risk financing tools while ensuring wide participation in solutions.”

What is resilience? Psychologists define it as the process and outcome of successfully adapting to difficult or challenging experiences (and situations), especially through … flexibility and adjustment to external and internal demands. The concept can be applied to persons, organisations, and countries.

More than six years have passed since Mr Holness made statements about resilience. It is, therefore, fitting and timely, given this column’s mission, to examine what actions have been taken by his administration, especially in the aftermath of Hurricane Beryl, and the continuing threats that climate change continues to pose. The JIS reported a few days ago that the PM had directed the Ministry of Agriculture, Fisheries and Mining to develop a National Agriculture Resilience Plan (NARP) by April 2025. This directive is consistent with the argument that Mr Holness started in 2017.

Beryl’s financial impact

Opinion columnist and former Member of Parliament Ronald Thwaites believes that the finance and public service minister’s Hurricane Beryl $45 billion damage estimate is low. He provided no data to support his claim or offered an alternative assessment.

The ‘official’ estimate is 11 per cent of the budgeted allocations for recurrent and capital expenditures ($407.8 billion) for the 2024-25 fiscal year, or 5.3 per cent of the total budgeted expenditures ($849.9 billion). The estimate exceeds the individual budgeted allocations to all government ministries, agencies, and departments except the ministries of education, finance, health and wellness, and national security.

Finance and Public Service Minister Dr Nigel Clarke’s July 28, 2024, article, ‘Building Robust Disaster Risk Financing Framework’, published in The Gleaner amid news of $300 million heists, a $44 million court award, and Kishane Thompson’s run in the 100 metres final in the Paris Olympics, may not have received the prominence and exposure that it deserved. This situation occurred even though the island had been severely affected by Hurricane Beryl 19 days before.

This history-making hurricane affected the lives and livelihoods of thousands of persons across the island who need financial and other resources to begin the long recovery process during a hurricane season that forecasters have said will be hellish.

Minister Clarke – like me – believes that Beryl created an opportunity to further advance public understanding of the policy through “the demonstration of its necessity, benefits, and efficacy”. He cited as examples “marginal and low-income persons”, whose houses were destroyed, as being eligible for grants of up to $400,000. In contrast, persons in the same group whose houses were destroyed in 2012 received a maximum of $60,000. He attributed the “more than threefold increase” to the design and development of the framework.

The article explained that because the country faces a variety of natural disaster risks, the risk-financing framework needs to be flexible to accommodate the full range of disaster risks ... from the low-intensity to the high-intensity events, from the low-frequency to the high-frequency events. The framework will only be effective “if it is sustained over the long term and across successive political administrations”.

The DRF policy “promotes a risk-layered approach to funding disaster relief, recovery and reconstruction through the establishment of adequate reserves to address the costs associated with high-frequency, low-severity events such as floods or heavy rainfall, and the transfer of risks related to low-frequency, high-severity events such as major hurricanes and earthquakes through a portfolio of financing instruments”.

The article also discussed, among other things:

1. The Contingencies Fund: a fund mandated by the Constitution to provide support for contingencies, including natural disasters. It was originally limited to $10 million and 30 years later was increased to $100 million, where it remained for another three decades. At March 31, 2024, the balance stood at $5.3 billion.

2. The National Natural Disaster Risk Fund: the main pool of domestic savings accumulated specifically to finance disaster relief and recovery. The fund was initially capitalised at $1 billion and the Government is legally mandated to make an annual contribution to it.

3. The catastrophe bond where catastrophe disaster risks are transferred to the international capital markets in exchange for the payment of a premium that was funded by the World Bank.

The article omitted mention of the layer of protection available from the Cayman Island-based CCRIF SPC. It is estimated that this entity will make payments to the Government under two policies totalling $4.1 billion because of Beryl.

Agriculture plan

The July 17, 2024, Jamaica Observer, quoting the portfolio minister, estimated losses in the agricultural and fisheries sectors at “$5.7 billion. Approximately 23,040 hectares of farmland were said to have been affected and over 48,850 farmers impacted”.

Nine days later, The Gleaner reported “a massive spike in estimated cost of Beryl impact on the farming sector”.

According to reports in the two newspapers, Government has committed funds totalling $2.1 billion to provide aid to farmers and fishers.

Opposition Member of Parliament for St Ann South Eastern, Lisa Hanna, wrote in her article, ‘Mandatory Crop Insurance?’ in the July 14, 2024, Sunday Observer , about resilience in a narrower context than Prime Minister Holness stated in his 2018 address to the G7 Summit.

“The pattern of our weather systems due to climate change has repeatedly wreaked havoc and devastation. Our farmers lose their produce, land, and income, significantly displacing them. It is only going to get worse,” Ms Hanna argued. The Ghanaian government, she disclosed, found a solution.

It is unclear whether the recently announced directive for the design of the National Agriculture Resilience Plan for 2025 is the natural outgrowth of ideas that were expressed by the PM seven years ago or was triggered by the magnitude of the destruction and damage to the agricultural sector caused by Hurricane Beryl – which impacts GDP growth – or both. Whatever the cause or causes, the NARP is welcome news, assuming it mirrors the Disaster Risk Financing Framework.

- Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com or business@gleanerjm.com.