Daniel Stevens | Supporting the heroes who keep food on our tables
Johannesburg - The UN’s World Food Day, celebrated annually on 16 October, is a reminder of the fundamental human right that all citizens should have access to enough nutritious, diverse, affordable and safe food. Unfortunately, both locally and globally, food security is under threat. And the agricultural sector, which is integral to the sustainability of food security, is facing increasing challenges.
In a recent report the World Bank cited food security as one of the critical challenges for the world to face this year. Locally, Stats SA reported that in 2023 an estimated 15% of the country’s population (9.34 million) experienced hunger, while over one-quarter of households experienced worryingly complex access to food.
While the effects of the Covid-19 pandemic exacerbated this insecurity, it continues to be driven by instability, poverty, an increasing population, and changing climate.
The latter continues to impact South Africa’s hunger crisis significantly, with the severity and frequency of inclement weather spells increasing year-on-year. Long-term temperature shifts and weather patterns continue to create an increasingly hostile agricultural environment characterised by natural disasters like heavy rain, hail, and drought which can cause tremendous damage to both crops and farm infrastructure.
It is therefore more crucial than ever that the country’s farmers receive as much support as possible to help them create a sustainable business and continue contributing to South Africa’s food security.
The insurance industry is helping farmers build climate change resilience
Insurance is an important risk management tool. Agricultural insurance can protect farmers in the agricultural sector by covering losses from adverse weather events. This can help farmers to maintain their income level and to continue farming even if a harvest is lost.
Agricultural insurance can also assist farmers to access credit markets, which can provide financing for food production and act as a catalyst for economic growth for example by enabling farmers to buy new equipment, fertiliser and seed thus increase their output.
Farm debt in South Africa increased sharply to above R200 billion
This increase in debt in the agricultural sector translates to an increase of 6% since 2019. While it is purported to be well balanced in relation to the value of agricultural assets, the immense financial pressure faced by farmers can not be underestimated. Crop insurance curtails these pressures by offering farmers financial protection against yield losses. Without this much needed risk-based product, many farmers will not settle their loans and will be prone to liquidation and/or be forced out of farming altogether which will be a huge setback to their livelihoods.
Crop insurance to guard against climate change risks
As one of the most risk-prone industries in the world, the agriculture insurance industry realises the importance of addressing the effects of climate change, with solutions like crop insurance providing farmers with an edge against climate, environmental, and other risks.
When heavy rains and hail causing damage to crops’ before they can be harvested and sold, crop insurance provides the resources that enable farmers to plant the following season. Settlements for weather damage allow farmers to protect their livelihoods
There is an increasing need for innovative insurance solutions in the sector that use risk assessment expertise and robust, reliable data to support the agriculture industry. As an example, Santam is the only agricultural insurer to have an experimental farm dedicated to scientific research on the effects of various perils to key crops in order to keep up to date with new cultivars. We have recently tested the impact of Frost on Wheat and this research provides us with valuable information which forms part of our assessment procedures. Frost is a very high risk in South Africa and in some areas is simply not insurable.
These research efforts provide farmers with peace of mind knowing they can effectively mitigate even more risks that threaten their business, even as the country experiences an increased frequency of these significant events.
Because of the nature of climate risks and the inherent uncertainty surrounding future events, standard risk modelling methodologies do not adequately assess them.
By adopting new innovative tools, the insurance sector can broaden its climate change risk assessment and better map out possible outcomes that assist farmers in operating more sustainably.
*Daniel Stevens is Executive Head of Agriculture Crop at Santam.
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