Drought arrives in Africa: resilient agriculture needed more than ever

Drought is gripping parts of Sub-Saharan Africa again. This puts millions at risk in the region. The farmers of Uganda are also under threat as the data in Swiss Re's newest country fact sheet highlights.

According to the UN Office for the Coordination of Humanitarian Affairs (OCHA) the latest drought is again putting large populations at the risk of starvation in Eastern Africa. This is especially true in Uganda, which has one of the most successful agricultural sectors in the region.

In a country where more than eight out of ten people work the land and where 80% of export earnings depend on farming, stable climate conditions are key for development. While Uganda wasn't severely impacted by the 2011 drought, a longer and more severe one would hit the country - and its people - hard.

Irrigation development may help avoid crisis

This doesn't have to be. There's enough water in Uganda to sustain farming even without rain. The key obstacle is a lack of irrigation facilities and know-how among small holder farmers.

"When you look at the farmer level, most of it is communal and subsistence farming," says Daka Munyaradzi from Kungula Agrinsurance Uganda. "The farmers don't have the right expertise."

But knowledge is not the only thing lacking in the country.  Access to financing has also been a major problem. "Most of them [the farmers] have been doing it from their own resources," Munyaradzi says.

Partnerships between banks, governments, farmers needed

This line of thinking was highlighted by Stefan Hirche of the German Development Bank (KfW): "Speaking as a banker it would be good to have a joint product across the value chain linking the financing with the risk management skills of insurance."

These skills are necessary: If banks fear that creditors - the farmers - will default due to a lost harvest, the farmers won't have access to credit. In developed markets, agricultural insurance provides this security. If drought, rain, hail or floods destroy a harvest, farmers still have liquidity because of the insurance payout.

Insurance products that make things happen

This liquidity can now be provided to subsistence farmers, too. Products from developed markets were in the past not applicable to emerging economies since they were tailored to commercial, not small holder farmers. Advances in technology enabled microinsurance solutions, which are now rolled out in many countries including Uganda.

"With Swiss Re we were able to come up with a product which actually covers the farmer but can also be used as collateral with the bank," says Munyaradzi.

"So, for example, with drought cover the bank can go out now and actually loan knowing that if there is a drought the farmer can still pay back because of the claim from insurance. So that has really helped."

The product was designed with assistance from Swiss Re's Agricultural Unit. "In terms of support on the reinsurance side to expertise from them to knowledge transfer they have been a huge help, Munyaradzi says.

Unique solutions for unique countries

This help is also extended to other countries. "We are in the process of developing tailor made insurance solutions for all kinds of farmers – from small holder to commercial – in Sub-Saharan Africa," says Swiss Re's Lovemore Forichi.

By developing these solutions, insurance can play its part to build a more resilient African farming sector. And in a part of the world where farming employs two thirds of a population, this is important for future economic development.

Published 26 January 2015

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