South Africa’s Unique Problem and the Agricultural Insurance Market

By Susan Wells – AfricanBrains

Oscillating between drought and heavy rains, the climate in South Africa has heavily impacted its regional crop insurance industry. Not only are insurance companies enduring the strains of financial losses from a high number of claims, but they struggle with the unique challenge of South Africa’s dual agriculture sector.

South Africa is defined by both a well-established commercialized agricultural sector and an emerging, less developed agricultural sector. Recently, there has been increased competition in the insurance market, which has resulted in both competitive policies and drastically lowered premiums. In such a catastrophic market; however, the financial stress to the entire sector is threatening the market’s sustainability.

There is also a human element involved in the catastrophic events that limit food production and income in developing communities. While the agricultural insurance market can often serve the commercial farmer, the rural farmer is often left in financial distress with no insurance coverage. Thus, South Africa’s agricultural insurance problem is twofold: the commercial agriculture industry is shrinking and both insurers and producers have reached a financial stalemate where neither can afford to move forward.

Limited income from poor crop yields paired with the rising costs of production are both working against commercial farmers in South Africa who enter an increasingly competitive international market with each passing year. To be explained simply, the agricultural insurance market and producers are reaching the limits of their resources and face an unsustainable market.

In an article explaining the plight of South Africa’s agricultural sector, Jutta Drewes suggests a public-private venture that would give producers a government-backed initiatives to protect against natural catastrophes that affect crops.

Drewes argues that this solution would be affordable for producers while also being profitable for insurers, thus supporting a sustainable crop insurance system. If official in South Africa decide to co-finance crop insurance, they will be following in the footsteps of countries like US, Brazil, Turkey, Spain and Sudan.

Susan Wells is a freelancer and blogger who writes for insurancequotes.org and other sites that are related to insurance, technology, and lifestyle. She’s always happy to hear from her readers and welcomes your comments and questions.

1 COMMENT

  1. Thank you for providing me the very good information about agricultural financial services.

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