Efficacy of Risk Reducing Diversification Portfolio Strategies among Agro-Pastoralists in Semi-Arid Area: A Modern Portfolio Theory Approach

Abstract

Agro-pastoralists in the tropical semi-arid dryland areas of sub-Saharan Africa are significantly affected by climate change and variability. The agro-pastoral families are coping with production-related climatic risks through livelihood diversification to ensure food security. Data were collected from a sample of 411 agro-pastoralists across five districts in the semi-arid northern and central regions of Tanzania through survey conducted between November 2017 and July 2018. Secondary data regarding crop yields and livestock populations for eight years from 2009 to 2017 were collected from the National Bureau of Statistics and the respective District offices. Results show that about three-quarters of the agro-pastoralists managed diversified crop and livestock portfolios with two or more crops and animal species. However, simulated crop yields reveal positive correlations. Construction of integrated portfolios that generate good returns at a modest risk can be achieved through strategic choices between high-return high-risk and low-return low-risk crop and livestock activities. Thus, the paper recommends for costly long-term breeding and genotype improvement programs, strategically changing the make-up of the current crop and livestock portfolios which appear to be an affordable and tailored solution for building risk resilience among agro-pastoral communities in the drylands