Effects Of Climate Change Risks on the Financial Performance of Agricultural Firms in Zambia: Evidence from Kabwe District

Abstract

Climate change has emerged as one of the most significant and far-reaching challenges confronting agricultural production and economic stability in the contemporary world. Across developing nations, agriculture functions not merely as an economic sector but as the principal foundation of livelihoods, food security, and national development. In Zambia, the agricultural sector employs over sixty percent of the population and contributes approximately nineteen to twenty percent of national gross domestic product, making it central to both economic activity and household livelihoods. This study aims to generate evidence-based insights into how climate change risks on the financial performance of agricultural firms in Zambia. The specific objectives of the study were to identify what specific climate-related factors influence the financial performance of agricultural firms in Kabwe District, to analyse how climate change risks affect the operational costs of agricultural firms in Kabwe District, to determine the extent to which climate change risks impact the profitability of agricultural firms in Kabwe District. The researcher employed a convergent parallel design, a mixed methods approach that collects and analyses quantitative and qualitative data simultaneously. For the quantitative strand, stratified random sampling will be used to select a sample of 239 agricultural firms from a diverse population of 594 in Kabwe District, ensuring that various categories of firms will be adequately represented, thereby increasing the accuracy and generalizability of the results. From the findings, the study concludes that drought is overwhelmingly the most prevalent and most frequently identified climate factor as the primary driver of financial performance disruption, followed by extreme temperatures at 14.6%, floods at 7.1%, and pests and diseases at 5.0%. Revenue stability data corroborated these perceptions, with 46.4% of firms reporting climate-induced revenue reductions of between 26% and 50%, and a further 36.4% reporting reductions exceeding 50%, meaning that 82.8% of sampled firms experience significant climate-induced revenue instability. The mean revenue disruption score of 3.43 (SD = 0.890) reflects a moderately high and broadly consistent level of disruption across the sector. At the regression level, the model for this objective was statistically significant overall (F = 5.124, p = 0.001), confirming that climate change risks collectively constitute a significant determinant of financial performance and supporting the rejection of H₀₂ in favour of H₁₂. Extreme temperature emerged as the sole statistically significant individual predictor of overall financial performance (β = 0.268, p = 0.000), a finding consistent with the qualitative evidence where key informants described how high temperatures reduced labour productivity during peak farming activities and damaged crops during critical growth stages, directly eroding revenue while leaving cost structures elevated. Drought frequency (β = 0.143, p = 0.112), rainfall variability (β = 0.031, p = 0.654), flood occurrence (β = 0.098, p = 0.203), and pest and disease outbreaks (β = 0.076, p = 0.317) were positive but not individually significant, suggesting their primary financial influence is indirect, transmitted through operational cost escalation and output reduction rather than as independently measurable revenue impacts in isolation.