Collaboration vital to ensure that SA agri-businesses can recover from drought

18 May 2016 Dawie Buys, SAIA
Dawie Buys, Technical Advisor at SAIA.

Dawie Buys, Technical Advisor at SAIA.

Despite winter fast approaching, South Africa is still experiencing the worst drought in over 30 years, with the agricultural sector having recently experienced an estimated R16 billion loss. Recent statistics released by Grain SA also reveals that total crop production in South Africa fell by 27% year–on-year, from 16.45 million tons in 2014 to 11.9 million tons in 2015. According to Dawie Buys, Technical Advisor at the South African Insurance Association (SAIA), as a result South Africa has become a net importer of maize for the first time since 2008, importing 407 366 tons between May and October 2015.

Buys says that drought is not only an issue being experienced locally, with the Global Risks Report 2016 reporting that water crises is now rated as the third most impactful risk globally for years to come, ahead of weapons of mass destruction.

He says that the local insurance industry is playing an active role in developing initiatives and solutions for the agriculture sector, and is working with various parties to establish an implementation plan. Furthermore, Buys says that government is also considering the feasibility of improving existing agricultural insurance programmes.

“As a result of the drought, the cost of specialised agricultural insurance continues to rise and an increasing number of farmers and agri-businesses are therefore no longer able to mitigate the impacts of the drought as they simply cannot afford the monthly premiums. Consequently, only a handful of farmers have agriculture cover such as Multi-Peril Crop Insurance (MPCI), which protects against the loss of crops due to natural disasters and extreme weather conditions and, in-turn, has led to reinsurance capacity becoming limited”.

In an effort to tackle the challenges and identify possible solutions, Buys points out that the SAIA has taken the decision to convert its existing agricultural committee into a new forum - the SAIA Agricultural Risk and Crop Insurance Forum - with a mandate to act as a focal point and representative voice for the agricultural insurance sector. He says the forum is working closely with the Department of Agricultural, Forestry and Fisheries (DAFF), National Treasury (NT) and the Land Bank to create a Public Private Partnership (PPP).

“We are hoping that this initiative will now gain greater momentum as most industry players believe that this is the only way to ensure a sustainable future for agricultural insurance, particularly crop insurance. The forum will also work to establish methods to assist struggling businesses that have been negatively impacted by the drought, including insurers and reinsurers.”

Although providing relief for all affected by the drought may seem out of reach, Buys emphasises the importance of working together and supporting one another to mitigate the impact of the drought and provide relief for the industry wherever possible. “When all stakeholders confront the issue together, the likelihood of finding a viable and long-term solution becomes much greater.”

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