Need for huge changes in SA’s agricultural sector
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Drought underscores need for significant changes in SA’s agricultural sector
| South Africa needs to cultivate a material mind-shift when it comes to its agricultural demographic. This point is being underscored even more as the country faces one of its worst droughts in two decades. So says the Manager for Market Intelligence and Marketing at Mutual & Federal Agriculture, Andries Wiese, who comments, “The drought is having a hugely negative effect on different sectors of the economy, impacting on a number of areas including the insurance industry, food security, the health of the country’s livestock as well as the financial impact on the agricultural sector. The importance of the agricultural sector to the economy is clearly of enormous significance.” Wiese says that South Africa’s large biomass, while a vital resource for the feeding of animals, is very dry right now and therefore very combustible. “Fire is a vital consideration at the moment. Due to the current weather conditions, which include very warm air and strong winds, fires spread much quicker than usual. This in turn threatens the lives of those who live in informal settlements, livestock, animals, assets and people’s economic well-being.” Wiese says that South Africa needs a government-sponsored insurer in the agricultural sphere similar to that of the South African Special Risks Insurance Association (SASRIA) model, which was specifically set up to cover risks posed by political and non-political riots and public disorder in general. SASRIA cover is designed to supplement insurance cover that insurers exclude on the basis of the damage being caused by extraordinary circumstances for which they are not prepared to assume risk. Wiese says, “Discussions around an insurance model for disaster relief is in progress and in terms of the National Development Plan, the government has a clear interest in putting South Africa on path to food security, amongst other things. However, in comparison to the rest of the world, insurance in the agricultural industry is not well-subsidised. Considering South Africa’s limited water resources and other factors such as the current very combustible state of the biomass, this should be addressed. “South Africa’s agricultural ingenuity and professionalism – for example, 68 per cent of commercial farmers in South Africa have a tertiary education qualification – lends itself to our ongoing agricultural success. However, a material mind-shift and a collaboration between different parties is required to support the ongoing viability of the agricultural sector, which has such a large impact on the economy.” Wiese clarifies that South African agricultural insurance falls into two main categories, namely assets insurance, including buildings, vehicles and animals, and crop insurance. “About 70 per cent of crop farmers don’t take out insurance. Crop growing is a volatile business and crop insurance premiums are expensive. These farmers are obviously extremely exposed and would naturally benefit enormously from a government-sponsored agricultural insurance product.” Wiese adds that in South Africa, livestock insurance is a significant part of food security. “Elsewhere in the world, the focus is predominantly on the crop market but in South Africa, the well-being of our livestock plays a critical role. Due to the current drought, farmers are already selling off some of their livestock and breeding herds. The long-term impacts are likely to include a decrease in future meat production and smaller numbers of breeding stock going forward. This, in turn, will have future implications on the availability and cost of meat for consumers.” Wiese says that, as regards the ongoing negotiations to support the agricultural insurance industry, firm suggestions regarding the way forward have certainly been brought to the table. “While it is true that areas of the discussions, in which Mutual & Federal is involved from a resources perspective, do represent somewhat of a ‘political hot potato’, keeping the conversation ongoing is absolutely vital. “Now, we need buy-in from the Treasury and other fiscal authorities to bring about a material change in mind-set and make sure that the agricultural industry in South Africa remains a viable sector of the economy. Because of its long-proven agricultural history, which spans over 100 years, Mutual & Federal is well positioned to take part in creating and delivering solutions across the spectrum,” he concludes. |
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| Credit To: Hugo, S. (2016, April 20). Drought underscores need for significant changes in SA’s agricultural sector. RiskAfrica Magazine. Retrieved from: http://www.riskafrica.com/drought-underscores-need-significant-changes-sas-agricultural-sector/ | |
 Refer to the Agricultural Insurance article |
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