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El Niño – threatening food security and disrupting markets

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The weather phenomenon El Niño has loomed large in recent global news reports, and while officially considered over, its economic and humanitarian impacts are still mounting, and will continue well into 2017 and beyond. Like the archetypal bandit in a classic Western riding into town and wreaking havoc, El Niño has devastated many regions: some places left with a landscape of parched earth and animal skulls, others a soggy wasteland of flooded crops and disease. In every case, economies have been badly hurt by the knock-on effects of this ‘weather bandit’, and investors need to understand the direct and indirect impact on the sectors and countries they invest in and consider both the challenges and the opportunities that have emerged.

Despite its ominous name, El Niño is a natural meteorological event that occurs every seven to eight years. While the impacts of this cyclical event are somewhat predictable, the severity of the latest episode and spill-overs into the socio-economic and macroeconomic arenas have been exacerbated by current market conditions. Low commodity prices, slowing global demand, a low-growth environment, and volatile asset prices have left many of the poorest regions extremely vulnerable.

According to the United Nations, more than 60 million of the world’s poorest people have been affected by extreme weather conditions, ranging from droughts to floods to forest fires. Global agencies such as the United Nations’ Organization for the Coordination of Humanitarian Affairs, the Food and Agriculture Organization of the United Nations, and Oxfam, have extended numerous calls for a concerted global effort to alleviate heightened food insecurity worldwide.

The investment opportunities are myriad – the old adage that every challenge presents an opportunity – given that food security remains essential in any region. Clever investment, careful assessment of risks-and-returns, and appropriate public-private partnerships on the African continent are sure to provide a good long-term return to local and global investors.

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RisCura is a global, independent financial analytics provider and investment advisor. Our clients include institutional investors with over $200 billion in assets under advice, as well as a significant number of asset management, hedge fund and private equity firms. RisCura works with the largest African investor base in listed and unlisted African investments on the continent.

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