Analysis of economic benefits of seasonal rainfall forecasts over Kenya

Abstract

Simply documenting the effects of climate variability and providing better climate forecasts to potential users are not sufficient. This study determined the economic benefits of seasonal rainfall forecasts over Kenya for the periods 2001 to 2013. Only the two main rainfall seasons namely March-Apri1-May (MAM) and October-November-December (ON D) were considered The observed seasonal rainfall totals for MAM and OND for 12 stations over Kenya covering a span of 44 years (1970 to 2013) obtained from Kenya Meteorology Services was used. The forecast consensus map for the MAM and OND seasons for 14 years (2001 to 2013) obtained from IGAD Climate Prediction and Applications Centre website was also used. Bias analysis was used to determine the skills of the seasonal forecasts. The profit/loss analysis and the effective interest rates analyses were used to determine the economic benefit of the seasonal rainfall forecasts over Kenya. For the profit/loss analysis, the underlying assumption was that users of the forecasts invested an initial sum of money on the first forecast apportioning the investment across the three climatologically equip-probably. Profit/loss in the first forecast is reinvested for the second forecast and so on to all subsequent forecasts. The effective interest rate was calculated from the compound interest rate formulae. In Bias analysis, for the MAM season, the below normal category was under forecasted by 1%, the Near Normal category was over forecasted by 7% and the Above Normal category was under forecasted by 5%. For the OND season, the Below Normal category was over forecasted by 6%, the Near Normal category was over forecasted by 9% and the Above Normal category was under forecasted by 15%. In the profit/Loss analysis, for the MAM season, the maximum closing amount was recorded in Mandera with Kshs 1004.61 and the minimum closing amount was in Nakuru with Kshs 29.31. For the OND season, the Maximum closing amount was in Nakuru with Kshs 1312.15 and the minimum closing balance was Kshs 182.24 in Narok. For the effective interest rate analysis, For the MAM analysis, the maximum effective interest rate was in Narok with 15% and the lowest effective interest rate was in Mombasa with -14%. For the OND analysis, the maximum effective interest rate was in Nakuru and Nyeri with 22% and the minimum effective interest rate was in Narok with 5%