Maseru, Lesotho – 22 August 2025 – The African Risk Capacity (ARC) Group today issued a US$2,767,958 insurance payout to the Government of the Kingdom of Lesotho, following the activation of its sovereign drought insurance policy for the 2024/25 agricultural season. This payout, made possible by the Government’s subscription to ARC’s innovative sovereign risk financing mechanism, will fund the country’s Final Implementation Plan (FIP), which will be in the form of emergency food aid and cash transfers to households affected by the drought.
The Kingdom of Lesotho, which held the Chairmanship of the ARC Conference of the Parties from April 2024 to April 2025, has been a strong advocate for climate resilience and disaster risk financing in Africa. The two ARC drought insurance policies (crop and rangeland) taken out for the season were funded through the Africa Disaster Risk Financing (ADRiFi) programme, an African Development Bank/ARC initiative, and premium support from the German Development Bank KfW.
The payout will support drought-affected vulnerable households in all 10 districts of Lesotho. Each household is anticipated to receive a sum of (Maluti 1500) equivalent of $81 as determined by the LVAC (cost of minimum essential basket). An estimated 30,709 farming and vulnerable households will be reached by this assistance (a household is composed of an average of 4 members). While 90% of the total payout will benefit vulnerable farming families directly affected by crop failure, 10% will support the scale-up of the social cash transfer for ultra-poor labour-constrained households.
Dr Jean-Chrysostome Ngabitsinze, ARC Group Director General, emphasised the importance of Lesotho’s proactive approach and leadership to managing climate risks, noting:
"Lesotho’s leadership in investing in disaster risk financing sets a powerful example for Africa. This foresight ensures timely resources to protect lives and livelihoods. ARC is proud to stand with Lesotho in translating policy into real impact for vulnerable communities."
Reflecting on ARC’s operational impact, David Maslo, Interim CEO of ARC Ltd, added: “This first-ever payout in Lesotho is about giving people the means to recover with dignity and continue building their futures. We commend the Government’s commitment to protecting its citizens through pre-arranged financing tools, together with the support of our partners, and encourage scaling up such coverage. This forward-looking approach shows how countries can withstand climate shocks without derailing their development efforts."
The payout ceremony in Maseru brought together senior government officials, ARC representatives, development partners, and other stakeholders, underscoring the role of sovereign risk financing as a practical tool for resilience.
Honourable Minister in the Prime Minister’s Office, Hon Limpho Justice Tau, welcomed the support, noting, “Lesotho signed the Memorandum of Understanding with ARC in October 2020, and further ratified the treaty in July 2024. These has given the country amazing fruits as now we are benefiting from this payout equivalent to 49,100,357 million Maloti to be geared towards assisting vulnerable small Farmers who were affected by dought in the cropping season 2024/25.”
Highlighting the importance of timely financial support in disaster response, Hon. Dr Retselisitsoe Adelaide Matlanyane, Minister of Finance and Development Planning, said: “For Ministries of Finance across Africa, ARC is particularly important. It gives us a predictable and reliable instrument to manage disaster risks while protecting national budgets and safeguarding the livelihoods of our citizens.”
The Government of Kingdom of Lesotho, the ARC Group, and development partners such as the African Development Bank have all reaffirmed their commitment to strengthening climate risk management strategies and promoting innovative solutions to protect vulnerable populations from future climate shocks.