Home Africa Agriculture Insurance: Africa’s Crucial Role and Partnerships for Growth

Agriculture Insurance: Africa’s Crucial Role and Partnerships for Growth

by Grace Kisembo

Africa’s agriculture insurance sector is currently underrepresented, accounting for less than 1% of global premiums. In a world grappling with increasing hunger and food insecurity, particularly in Africa, this low participation rate is a significant concern. Daniel Stevens, head of Santam Agriculture crop insurance, delves into the factors contributing to Africa’s underdeveloped agriculture insurance sector and explores potential solutions.

The 2023 Agricultural Insurance Pulse Report paints a grim picture of the world’s rising hunger and food insecurity. The number of undernourished people has surged to an estimated 828 million in 2021, with Africa bearing a substantial burden, as 57.9% of its population faces moderate to severe food insecurity. Poverty, unemployment, climate change, and conflict are among the multifaceted challenges exacerbating the problem. However, agriculture insurance holds promise in mitigating these issues.

Global agriculture insurance premiums currently stand at just over USD 46 billion, with projections indicating growth to USD 80 billion by 2030. However, Africa’s share of these premiums is less than 1%, primarily due to various factors:

Africa lags in coordinated investment and public-private partnerships (PPPs) for agricultural insurance. Such partnerships are vital for extending insurance education, premium support, and access to credit. Some progress has been made through partnerships with organisations like Africa Risk Capacity, benefiting countries like Lesotho, Mozambique, and Zimbabwe.

Insufficient infrastructure development, including roads and water harvesting dams, hampers agriculture. Adequate infrastructure is crucial for economic growth, and road maintenance in rural areas needs improvement.

Parametric Solutions: Many African countries lack widespread parametric insurance solutions for smallholder farmers, hindering innovation in flexible product design. However, countries like Kenya, Uganda, and Mali have embraced parametric insurance.

Multi-Peril Crop Insurance (MPCI): South Africa is unique in offering MPCI without government subsidies. While there is demand for this product, the absence of subsidies and the high risk associated with crop insurance make it costly and challenging to implement.

Out of the 600 million developing farmers in Africa, only 600,000 are insured, highlighting significant market failures. Adverse weather patterns in South Africa, leading to frequent and severe claims, exacerbate market failures. Challenges on both the demand and supply sides include farmers’ limited awareness, affordability issues, and a lack of understanding of insurance solutions.

Technical expertise, reliable data, and reinsurance support are lacking in crop insurance. Santam Agriculture aims to contribute meaningfully to South Africa’s agricultural sector by educating farmers through its consumer financial education (CFE) program and participating in industry events to raise awareness about crop insurance solutions.

Africa has immense agricultural potential and unlocking it through robust insurance solutions is imperative. Partnerships, investment, infrastructure development, parametric solutions, and subsidy considerations are essential elements in propelling Africa’s agriculture insurance sector forward. Santam Agriculture is committed to playing a pivotal role in this journey, ensuring that Africa’s agricultural sector can thrive sustainably.

By collaborating, Africa can harness its agricultural potential and bolster food security, contributing to a brighter future for its people.

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