According to the insurance scheme’s designers, the aim of the Ethiopian pilot insurance scheme would be to help farmers survive the drought and retain their farm tools, so that they can recover their livelihood once weather conditions improve. Yes, this specific idea looks extremely reasonable but used in a wrong context. Working in these 20 pilot program areas (districts) where rains are not a limiting factor for crop and pasture development is absurd. The underlying causes of food insecurity in these areas is chronic in nature, just does not have anything to do with climate variabilility. That is why the government chose those areas to be covered by the productive safety net program. The insurance companies (or WB and WFP experts) also do not have any plan in working in areas like pastorals where rains are not predictable and insufficient most of the time and hence water is a limiting factor for any food security.

Before jumping to such unreliable arguments, we should understand the underlying causes of Ethiopian recurrent food insecurity. The problem in the country is much more complex than rainfall or weather vagaries. We know for sure that climate variability has a serious impact on our food security. However, the current problem is more chronic: including poor governance, insecurity (conflict), recurrent droughts (forcing million to deplete their productive assets), overgrazing and degradation, poor infrastructure (health, markets, etc.) etc. Irrespective of the performance of rains, these underlying causes will continue to make these people more dependent on humanitarian assistance. Hence, relying on rainfall as a sole variable in providing insurance premium is a waste of tax payers money!

The western half of the country always produces almost enough for the whole country while the eastern half is facing a chronic shortage all the time. Hence, availability is no longer a critical issue in understanding food security in the country. To take you through the best example – we have had the best rainfall performance in 2005/06 with an official estimates indicating that Ethiopia produces about 17.12 million MT of grains in 2006. Assuming that these estimates are true, the existing 73 million people needs about 13 million MT of grain for consumption implying that we have more than 4 million MT of grain as surplus. However, we have now about 11 million people (about 8.3 million chronically food insecure getting assistance through productive safety net program and about 2.6 million through emergency relief program). So, the WFP and professor Sachs try to convince the world that insurance will resolve this chronic problem.

The WFP/WB proposes that insurance contracts should be based on a rainfall index, which correlates with historic, drought-induced food needs. However, not only the rainfall patterns but also donors and the government intervention design has changed and the drought- induced food needs is either no longer existing in many areas or has minimized significantly because all chronic reasons (rather than weather variability) are dictating the bulk of humanitarian assistance.

Currently all of the selected areas are either included in the productive safety net program or they are in an area where rainfall or water is not a limiting factor and hence all the woredas selected are indirectly not eligible for the payout. In tackling the underlying causes of food insecurity, the government and humanitarian community designed a new system called productive safety net program which is aimed to transfer resources in a more planned year to year bases. Hence, saying the weather insurance is designed as a new way of help to Ethiopia with its chronic food shortages is unreasonable. This is rather a way of transferring the future donor resource (tax payers’ money) to this unsustainable system.

The whole idea of insurance emanates from one factor, rainfall index, which is no longer a critical one, in putting people under humanitarian assistance or not. Can anyone believe that any sophisticated insurance company will give money for nothing? The US $ 930,000 insurance premium is only for selected 20 woredas (districts), where rainfall is not a limiting factor. The AXA RE Insurance Company should have studied and helped the design of the ‘rainfall index’ to make sure that they will not reach the stage of payout as their pure motive is profit making. They ask for US $ 930,000 in providing US $ 7 million if rainfall fails below a certain threshold?? They are so sure that even for the food security crisis year like 2002/03, their index will not pay as the rainfall amount was above the threshold! Of course, the rainfall amounts in these specific areas will not go below the index levels stated!! Thus, leaving ‘emergency’ or lives and livelihoods of the poor in the hands of private profit making institutions should not even be taken as an option!

According to the analysis done on recent rainfalls, the originally developed index did not make 2002/03 as eligible year for insurance??!! They later slightly modified the model to look as covering 2002/03. The year 2002/03 is the worst year in our recent humanitarian food insecurity chronology, in which the government (the PM) himself was declaring his incompetence saying that we need assistance for about 15 million rural people (which is 25% of the rural population during that year). In a side line note, the government should have stopped a little while and ask themselves ‘What is going on? – how can I triple people needing humanitarian assistance in 10 years, the PM should have asked himself??!! What went wrong with my development agenda? And so on….

They also tried to give unfounded reasons for their feasibility. According to the researchers this insurance system will provide enough lead time for humanitarian assistance as soliciting resource (cash or food) is always a long process. Yes, pleading for resources is always a time taking phenomena – however, they know for sure that we have a strong Emergency reserve (Ethiopian Emergency Food Security Reserve (EFSR)). We know EFSR is a result of our long suffering created as a result of recurrent drought. Donors and the government can borrow food and non-food resources from the reserved before their pledge arrives in country. So, we do not need an insurance company (as insurance companies are) to give us their money early enough to provide assistance. The EFSR stands in supplying resources to the government or donors before their resources. The only major purpose of establishing EFSR is specifically this one and we are refuting its sole sustainable purpose for unreliable and unsustainable insurance mechanism.

In a country where you have much of the agricultural sector so mechanized and large scale, using this kind of insurance scheme may look feasible. Otherwise, in a country where you have only less than 5 percent of farming is mechanized and large scale, and where more than 95 percent of it is subsistence and highly dependent on fragmented and small plots of land and extensive mixed farming, using this kind of ‘insurance scheme’ will not be sustainable and will continue to develop the dependency syndrome that we are craving to kill. It just does not work! It is also a pity that well experienced and reputable economists, like Sachs are missing this important point?!!

It is really unfortunate that our ‘so-called Ministers’ approved and endorsed this unrealistic idea without even reading and understanding the whole concept and what it is going to entail!? Should I be surprised??!! Are these people really thinking about resolving the underlying causes or exacerbating it?? Do they really care?? Or are these ‘so-called’ experts dream for hunting for money? The WB experts do have the reputation of doing something which is not sustainable and most of them are just longing for fulfilling their academic interest or hunt money! But, WFP is doing an excellent job in saving lives by distributing food for those who need it most – and that is what they do best and must continue doing so without going to this kind of unsustainable activity. Yes, diversion of meager development resources to insurance companies is like playing on tax payers’ money! Do we really need an insurance system to help ameliorate the chronic problem that we have?!!