The South African Reserve Bank published a Working Paper Series study (WP/25/17) analysing the economic impact of severe droughts in the Southern African Development Community (SADC) using a synthetic control approach to estimate both short-term and long-term effects. The paper finds that droughts have large and persistent output costs, reducing GDP per capita in affected SADC countries by about 18% on average, with a smaller estimated effect for South Africa of around 5%. Using panel data for 1980–2018 and defining “severe” droughts as events that affected more than 1 million people or were nationwide, the study examines Angola (1989), Botswana (2015), Malawi (2002), Mozambique (1991), South Africa (2004), Zambia (1991) and Zimbabwe (1991). Estimated average annual GDP per capita losses range from about 37% in Mozambique and 25% in Malawi to 24% in Angola, 13% in Zambia, 11% in Zimbabwe, 10% in Botswana and 5% in South Africa, with effects characterised as long-lasting. The paper also reports placebo and leave-one-out robustness checks and notes that some results appear sensitive to the choice of control countries in certain cases, while concluding that policymakers should consider long-term policy responses to drought risk and that the findings may be relevant for assessing banks’ agricultural credit exposures.
South African Reserve Bank 2025-10-23
South African Reserve Bank working paper finds severe droughts reduced SADC GDP per capita by about 18% on average
The South African Reserve Bank's study (WP/25/17) assesses severe droughts' economic impact in the Southern African Development Community (SADC), revealing significant GDP per capita reductions, averaging 18% in affected countries and 5% in South Africa. Covering 1980–2018, it highlights long-lasting effects, with Mozambique and Malawi experiencing the highest losses. It suggests policymakers address drought risks and consider implications for banks' agricultural credit exposures.