Breaking the Vicious Cycle of Poverty through Sustainable Environment and Natural Resources

Management in Malawi: Lessons Learnt from the UNDP-UNEP Poverty Environment Initiative

Anand Babu Prakasam , Michael Mmangisa, Moa Westman and David Smith

Outline of Presentation• Introduction• Scope of the paper• Findings of Economic Analysis of ENRM• Government Policy response• Conclusion

Introduction• About 80% of Malawians depend on renewable natural

resources for subsistence and income

• Malawi is heavily dependent upon natural resources including land, soils, forests, water, fisheries and air for economic growth and poverty alleviation

• The agriculture sector (35-40% of the GDP and 90% of the country’s export earnings and over 80% of the total labour force) is reliant on the natural resources sector

Introduction• ENRM concerns in Malawi include deforestation and

unsustainable use of forests, pollution, loss of biological diversity and land degradation

• Compounded by increased climate and weather variations

• Negatively affecting the performance of sectors such as water, agriculture and energy

• Impacts the poor (especially on women and vulnerable groups) that depend more on natural resources for their livelihood

Scope of the study• The paper draws on findings from the “Economic

Analysis of Sustainable Natural Resources Use in Malawi,” from 2011 by Yaron et al

• Highlights why the poverty-environment nexus and the sustainable management of natural resources is instrumental for Malawi’s achievement of poverty reduction

• Focuses on government policy and budget options for the promotion of sustainable ENRM for socio-economic benefit from these resources can be increased

Objectives of the Economic Study• Provide evidence on the costs and benefits of natural

resource management

• Examine the link between natural resource management poverty reduction, economic well-being & development

• Assess net benefits of key interventions that encourage sustainable natural resource use

Key Findings

NR Sector Official Statistics

Additional contribution identified

Total share of GDP

Sources of new evidence

Forestry 1.8% 4.3% 6.1% BEST (2009) – charcoal & firewood Fisheries 4.0% - 4% Wildlife - 2.7% 2.7% WTTC (2009) – nature-based tourism Total 5.8% 7.0% 12.8%

Annual cost (2007 prices) NR sector & source of cost – base case MK Million US$ Million % of

GDP Soils: 8,988 65 1.9% On-site impact on agriculture 7,540 54 1.6% Off-site impact on hydropower 1,433 10 0.3% Off-site drinking water treatment 15 0 0.0% Forests: 12,983 93 2.4% Unsustainable roundwood (excl fuelwood) 3,100 22 0.4% Unsustainable fuelwood 6,089 44 1.2% Flood prevention (indicative only) 232 2 0.2% Indoor air pollution 3267 23 0.7% Outdoor air pollution - WB 2002 327 2 0.2% Fisheries: 3,906 28 0.8% Unsustainable use (lower bound) 3,906 28 0.8% Wildlife: 665 5 0.1% Poaching loss (indicative only) 665 5 0.1% Total 26,573 191 5.3%

Unsustainable NR use costs Malawi >$191m annually! Equivalent to 5.3% of GDP in 2007

Financial Implications of this loss

• Malawi is losing significantly!

– US$191m/year, equivalent to 5.3% of GDP in 2007

– More than allocation to key ministries in 2009• Education: $175.3 million• Health: $163.6 million

Unsustainable NR use is using up Malawi’s wealth

Adjusted Net Savings (ANS) = green accounting rate of national wealth creation

= national saving + human capital formation – depletion of natural capital – degradation of natural capitalo WB estimate = 12.24% of GNIo WB/Authors = 7.14% of GNI

o Thus, environmental and natural resource degradation implies that wealth is being created more slowly

o The addition to human capital (educational expenditure) is outweighed by natural resource degradation

Implications for poverty: yield losso Recall: Yield loss due to soil degradation = $54m p.a.o Conservatively, this reduces agricultural yields by 6%

o Other studies document higher losses e.g. 8-25% p.a. (Bishop, 1995)

o Reduced food security for the pooro Increased fertiliser usage for the less poor

o Benin et al (2008) argue:o 6% improvement in agricultural yields during 2005-2015,

would increase overall GDP growth from 3.2% to 4.8% p.a. proportion in poverty falling to 34.5% by 2015 i.e. the

incidence of poverty falls 12.5% resulting in 1.88 million people being lifted above the poverty line by 2015

Losing national income from NR degradation leads to higher poverty

• Benin et al (2008) consider GDP growth of 4.2% p.a. above the baseline case. – Over 2004 – 2015, the proportion in poverty

would be halved from its 1990 level – to 25.2%• If the lost economic value from unsustainable

resource use each year across all ENRM sectors (≡ 5.3% of GDP) was converted into economic growth, the impact on poverty would be even greater

Government of Malawi Policy Responses to Natural Resources Management

• Justification for CC, ENRM in the MGDS II• Incorporation of sustainability indicators in Sustainable

Land and Water Management pillar of the ASWAp• Revised the NFAP highlights decent work as EAFA to

ensure poverty-environment links• Ecosystems and community based approach for the revised

National Forestry Policy• Emphasis of the PSIA and EIA for all extractive projects in

the national budget guidelines• NECCCS emphasises communication of economic benefits

for sustainable ENRM

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