How do African SMEs respond to climate risks? Evidence from Kenya and Senegal

This paper investigates the extent to which small and medium-sized enterprises (SMEs) in poor countries are adapting to climate risks, and how they are doing so.

The researchers surveyed 325 SMEs in the semi-arid regions of Kenya and Senegal. They estimate the quality of current adaptation measures, distinguishing between sustainable adaptation and reactive coping. The researchers find that financial barriers are a key reason why firms resort to reactive coping mechanisms, while general business support, access to information technology and adaptation assistance encourage sustainable adaptation responses.

Engaging in adaptation increases the likelihood that a firm is preparing for future climate change. This finding lends support to the strategy of many development agencies that use adaptation to current climate variability as a way of building resilience to future climate change.

The ability of firms to respond to climate risks depends in no small measure on factors that can be shaped through policy intervention.

Key points for decision-makers

  • This research surveyed 325 small and medium-sized enterprises in the semi-arid regions of Kenya and Senegal, where approximately 80 per cent of the workforce is employed by SMEs. The firms surveyed are heavily exposed to climate risks and employ a range of strategies to adapt.
  • The paper distinguishes between adaptive measures that aim to maintain business continuity (sustainable adaptation), and those that are mere coping strategies to ward off the worst impacts of a disaster (reactive coping).
  • The results show that the more frequent the occurrence of extreme weather events, the more the balance shifts towards reactive coping.
  • Insufficient market access and financial barriers lower the probability of sustainable adaptation and increase the probability of reactive coping. Good information, general government support and specific adaptation assistance increase the probability of sustainable adaptation and reduce the probability of reactive coping.
  • Firms that are currently engaging in adaptation behaviour are more likely to plan ahead and prepare for future climate change. These efforts are held back by insufficient climate information.
  • There is a need for a more systematic evaluation of different government interventions to establish which adaptation policies work best.

This working paper has been produced as part of the Pathways to Resilience in Semi-arid Economies (PRISE) project.

ISSN 2515-5709 (Online) – CCCEP Working Paper series
ISSN 2515-5717 (Online) – Grantham Research Institute Working Paper series