May 20, 2021

Figure of the week: Climate change and African agriculture

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Agriculture is central to sub-Saharan Africa’s economic development and growth, but environmental and climatic changes threaten the stability of Africa’s agricultural development. In order to better understand how climate change will impact African agriculture, a recent report by the McKinsey Global Institute models the impact of changing precipitation and temperature patterns on staple crop yields in Ethiopia and Mozambique.

The report highlights the heterogeneity of climatic changes, as temperature and precipitation, across the continent vary substantially by region (Figure 1). In terms of temperature, McKinsey predicts that northern and southern Africa will experience the greatest increases relative to preindustrial levels. By 2050, nearly the entire continent will be experiencing at least a 2.6-3.0 Celsius temperature increase, and large swaths of both northern and southern Africa are projected to exceed increases of 3.5 Celsius.  Consequently, McKinsey projects that the severity of drought will evolve to be much more enduring and pervasive over time, particularly in northern and southern Africa.

Figure 1. Evolution of precipitation patterns (left) and temperature patterns (right) in Africa

Evolution of precipitation patterns (left) and temperature patterns (right) in Africa

Source: “How will African farmers adjust to changing patterns of precipitation?,” McKinsey Global Institute, 2020. Note: Climate projections based on RCP 8.5 CO2 concentration—a high emissions scenario that reflects no further decarbonization.

The authors write that they expect these facets of climate change to have a severe impact on African agriculture, particularly by increasing crop yield volatility. Using the context of coffee and wheat production in Ethiopia and corn (maize) and cotton in Mozambique, the authors evaluate crop yield volatility by contrasting the probability of a 10 percent or greater decrease in crop yields in the present and 2030.

Figure 2 reveals the probability of declining yields by crop and country and categorizes the positive and negative climatological drivers behind the shifting yields. Notably, unlike the other staple crops researched in the case study, McKinsey projects a significant increase in cotton yield stability in Mozambique. The authors attribute this increase to cotton’s preference for warm temperatures. However, benefits for cotton aside, the authors maintain that the higher volatility for corn in Mozambique is extremely problematic and counters the benefits of higher cotton yields—as most corn in the country is grown for domestic consumption and more economically important than cotton: In the case of a 25 percent single-year decline in corn yields, McKinsey estimates that Mozambique’s economic output would decline 2.5 percent even after accounting for an increase in cotton yields.

Figure 2. The effects of climate change on African crop yields–today vs 2030

The effects of climate change on African crop yields – today vs 2030

Source: “How will African farmers adjust to changing patterns of precipitation?,” McKinsey Global Institute, 2020. Note: Climate projections based on RCP 8.5 CO2 concentration – a high emissions scenario that reflects no further decarbonization.

In Ethiopia, where agriculture accounts for one-third of its GDP and more than seven in 10 Ethiopians depend on income from agriculture, the authors speculate that disruptions from climate change could be devastating. As the right-hand side of Figure 2 reveals, the probability of a 10 percent or greater decline in wheat yields in a given year is projected to rise 0.3 percentage points by 2030. This rise in the probability of weaker wheat yields reflects an approximately 43 percent increase from the probability of this event in the base year. With more than one-third of farming households dependent on income from cultivating wheat, and wheat providing 13 percent of the caloric intake of Ethiopians, the authors warn that climate change could hamper food security in the country.

Leo Holtz

Intern – Africa Growth Initiative

Notably, Ethiopia is the top coffee producer in Africa and the 10th-largest in the world, and decreasing precipitation and rising temperatures may exacerbate the probability of a 25 percent or greater yield decline for Ethiopian coffee. Considering coffee is the country’s most valuable export crop, deriving more than one-third of the country’s export earnings, McKinsey analysts conclude that the economic impacts of climate change on both wheat and coffee in Ethiopia will detrimentally affect smallholder farmers, downstream sectors (trade and food processing), and the broader economy.

While the threat of climate change on the increasing volatility of crop yields looms in the near future for Africa, as well as throughout the world, McKinsey postulates that changes in technology and the adoption of modern agricultural practices, such as irrigation, new seed varieties, fertilizers, and machinery, have the potential to mitigate some of the heightened yield volatility. Although the continent has been slow to modernize agriculture, the authors underscore the importance of governments, investors, and international organizations to institute localized, commodity-specific agriculture planning, in addition to facilitating access to digital tools, in Africa.

For more on climate change and Africa, read “Climate adaptation and the great reset for Africa,” “Confronting the challenges of climate change on Africa’s coastal areas,” and “Africa can play a leading role in the fight against climate change.”

Biden’s nominees would bring diversity to the Fed—if they’re confirmed

President Biden has announced his roster to fill key vacancies on the Federal Reserve’s 7-seat Board of Governors. If confirmed by the Senate, Biden’s nominees would advance his economic agenda at the central bank. They would diversify the ranks of economic policymakers and likely tighten supervision of Wall Street.

Sarah A. Binder

Senior Fellow – Governance Studies

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Mark Spindel

Chief Investment Officer, Potomac River Capital LLC

These nominations follow in the wake of Biden’s decisions late last year to reappoint Jerome Powell to a second term as Fed chair and to elevate Lael Brainard as second in command. Powell and Brainard already serve as confirmed governors, but the Senate will also need to approve their four-year leadership posts. If the Senate confirms all five, Biden’s Fed appointees would reverse the heavy GOP-tilt of the Board engineered by the Trump administration.  
Here’s what you need to know.
Diversity counts
Biden has nominated two Black economists, Michigan State’s Lisa Cook and Davidson College’s Phillip Jefferson, to seats on the Board. He has also named former Fed governor and Treasury official, Sarah Bloom Raskin, as the Fed’s vice chair of supervision, a position Congress created in the wake of the global financial crisis as the Fed’s top banking cop.
These appointments help to diversify the Fed’s almost exclusively white ranks. Since Congress revamped the Federal Reserve Act in 1935, creating the 7-seat Board of Governors, 82 people have served on the Board. Just three of them were Black men, and ten of them were white women. And while Biden’s nominations augment the Fed’s racial diversity, confirming Cook, Brainard, and Raskin would expand the number of women governors by just one, since both Raskin and Brainard already have Board service under their belts. Notably though, this would be the first Board with a majority (four) of seven seats filled by women governors.
Rough waters ahead?
Observers expect a broad swath of Senate Republicans to vote to confirm Powell, a Republican, to a second term as chair. However, it remains to be seen how many, if any, Republicans will vote to confirm the other four nominees. Of course, Senate Democrats—if they stick together—can confirm all four without any GOP support, since Democrats banned nomination filibusters back in 2013.
Like most Congressional decisions, Fed confirmation votes are more contentious today than they were even 15 years ago, before the global financial crisis. The figure below shows shrinking Senate support on final confirmation votes for Fed nominations since the Reagan administration. Of those nominees considered on the Senate floor between 1982 and 2011, only one, Alice Rivlin, received less than 94% of the vote. The most dramatic contests came in 2020: The GOP-led Senate rejected Trump’s nominee, Judy Shelton, by a vote of 47-50, and just barely confirmed another Trump nominee, Christopher Waller. Four other Trump picks never even made it to a floor vote.

Nor can Biden count on filling the Board swiftly. Prior to the financial crisis, nominees waited about three months on average for confirmation. After the crisis, the wait time ballooned closer to eight months. The Senate took nearly ten months to confirm Waller, a record delay for the contemporary Senate’s handling of Fed nominees. Even with Democrats in control this year, Republicans have found ways to slow down the Senate.
Beware partisan crosshairs
Decades of rising partisanship are seeping into senators’ views of the Fed, often turning otherwise low profile Board nominations into politically charged votes. At the same time, public attention to the Fed has grown with its expanding imprint on the economy.   
The central bank has played an outsized role in stemming the economic damage caused by the global financial crisis in 2007-08 and the global Coronavirus pandemic in 2020-21. And with interest rates near zero, central bankers need to use more creative and often contentious tools to manage the US economy. Critics from both sides of the partisan aisle blame the Fed for either doing too much—or too little—to stem an array of old and new problems.
Add in rising expectations that the Fed will hike interest rates early this year to combat inflation and a hot economy, these nominees will face questions at the core of central banking—how fast and how soon to take away the punchbowl. Raising the price of money is never easy, but this Board could find tightening especially difficult given the addition of Biden’s governors committed to the Fed’s goal of a stronger and more racially inclusive labor market. 
The parties also disagree about whether the Fed can or should do more to combat climate change, especially in light of Congress’s own tentative steps. Democrats want the Fed to use its supervisory powers to force banks to address climate risk in their lending decisions; Republicans think such policies fall outside the Fed’s mandate. Partisans also contest whether the Fed should do more to redress racial economic inequities.
Presidents use appointments to advance their agendas. The Fed is no exception, despite the myth that central banks like the Fed are “independent.” But given the often partisan Senate confirmation process, Democrats will likely need to hang together to get Biden’s picks over the finish line.

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