Africa’s investment and trading patterns are changing overnight, with its vast natural resources providing loads of opportunities in a fast growing, relatively young market of almost a billion people.

Amid all this potential, however, economic development has been slow; and the challenge lies not only in accessing the resources, but also in financing development, enhancing productivity and improving socio-economic conditions of the continent’s people.

It is critical to help reduce poverty, create skilled employment, and provide efficient services and support for the primary as well as secondary segments of Africa’s economies in a socially and environmentally responsible manner.

Adding to these challenges, though, is the extreme climate conditions plaguing Africa, thereby increasing the need for additional financial investments.

During the droughts and floods that befell South Africa during the first quarter of 2011, the government declared seven provinces and 33 municipalities as disaster areas. The Inter-Ministerial Committee set up to deal with the disasters, headed by Co-operative Governance and Traditional Affairs Minister Sicelo Shiceka, has put the cost of the damage at over R1 billion.

Social Development Minister Bathabile Dlamini has thanked those citizens who have helped raise more than R168 million to assist those affected by the floods: the Disaster Relief Board set aside R48m, the business sector pledged R70m and the National Lottery Board donated R50m.

She noted that in total, about 20 000 people had been affected and have received assistance. The South African Government has prioritised humanitarian relief, the repair and upgrading of public infrastructure, agricultural relief in the form of equipment, livestock and crops, and repairs to damaged houses.

“This response illustrates our commitment to serve our people, and we’ll continue our efforts in providing much-needed humanitarian relief to reach more families affected by disasters,” said Dlamini.

The Department of Social Development has provided assistance to 6 256 families through the Social Relief of Distress grant, a provision of assistance intended for persons in such dire material need that they are unable to meet their own or their family’s most basic needs.

The Industrial Development Corporation (IDC) – owned by the government, under the supervision of the Department of Economic Development – is a national development finance institution (DFI) set up to promote economic growth and industrial development within the country. It has launched a R10-billion scheme running over five years, aimed at facilitating job creation and growing the overall economy.

The Transformation and Entrepreneurship Scheme was set up by the IDC to finance affected marginalised groups in South Africa, with the aim of stimulating and developing particularly small and medium enterprises – making the mainstream economy accessible to women, people with disabilities, equity contributors, workers and communities.

An amount of R1bn was set aside for these funds, offering assistance in starting up businesses, expansions or expansionary acquisitions, and business operations such as planning, training and mentorship.

In addition, the IDC set aside R750m in total to assist those farming businesses that have been affected by the floods and drought. A portion of R500m thereof is for agro-processing companies that fall within the IDC mandate. Funding will be available at prime less 3%, repayable over 10 years, to businesses that demonstrate economic merit and efficiency in new job creation.

“Many farmers had been affected by extreme weather conditions and require financial assistance,” said the IDC’s head of agro-industries, Rian Coetzee.

“Funding can only be used to finance the replacement and/or repair of non-insured infrastructure, and can also serve as emergency working capital to prevent further losses to current farming operations.”

The remaining R250m was loaned to the Land Bank to assist affected agricultural businesses that fall outside the IDC’s mandate. Land Bank’s strategy officer Andrew Makenete said this financial boost would go a long way toward helping farmers, since natural disasters were very difficult to predict and plan for financially.

Vodacom has donated R500 000 toward the victims, inviting its customers to contribute via the Vodacom Red Alert programme launched early last year. The Vodacom Red Alert initiative provides a technology-based platform through which customers can donate an amount of R5, R10 or R20 toward a specific natural disaster.

Funds raised through Vodacom Red Alert are channelled through the South African Red Cross Society, a highly reputable agency providing humanitarian relief, which is the Vodacom Red Alert-appointed distribution agency.

But would this cover future disasters as well?

The traditional sources of funding intended for Africa already experienced challenges in the recent global economic crisis; and during this period, DFIs played an important role in increasing investment when other financiers were reducing theirs.

More DFIs have re-evaluated their positions and roles, taking steps to align their strategies with the objectives of different regions – offering investors both strategic partnership in the development of projects as well as provisions for disaster funding.

The risk assessments of DFIs often differ from those of traditional investors, as do their recognition of conceivable returns and approach to investment. DFIs balance the financial returns with the requisite responsibility of socio-economic returns of the investments.

Therefore, a partnership with local and regional DFIs adds a valuable dimension to projects, as they typically understand the socio-economic dynamics of the countries in which they operate as well as the nuances of the politics of the various regions.

Floods in South Africa, Australia and Brazil have left death and destruction in their wake, with many losing their lives and thousands being displaced.

Roland Schulze, Emeritus Professor of Hydrology at the University of KwaZulu-Natal, said both South Africa and Australia are countries that are characterised by severe floods and droughts; and these two countries – in comparison to the rest of the world – are places with the most extreme climates.

He warned that the greatest issue in climate change is not whether it is going to get wetter or drier – the biggest issue for scientists is that extremes are likely to become even more extreme which, in essence, means South Africa can expect more disasters the same, if not worse, than the ones experienced earlier this year.

The government invites each citizen to align with DFIs to prepare and reach out to those who could possibly be affected.

Rizel Delano