Meeting the agricultural challenge in Africa

Agriculture is the main pillar of the economy and the major source of employment in nearly all countries in sub-Saharan Africa. But climate change and population growth threaten stakeholders from governments, NGOs, multilateral donors and the insurance and financial sector, as confirmed at the fifth Swiss Re Agricultural Insurance Workshop in Nairobi.

A continent of growth
By 2050 the population in Africa will double to 2.4 billion people. A large share will be living in cities and will depend on a vibrant agricultural sector for their food. This growing population will need commercial farms that sell surplus to city markets. Many of today's farmers, however, only grow enough to feed themselves. What's more, production needs to become more resilient to the effects of climate change.

That was evident at the conference from the many discussions delegates had on the impact of the latest El Niño. Many regions have been hit by droughts with lower yields in some countries leading to economic losses as well as food imports.

It also became clear that there is not one root cause of this problem. Many agreed that the lack of insurance for smallholder farmers is an important aspect. In developed countries, farmers keep on farming because they have insurance in place if drought, hail, flood or pests affect a harvest. In Africa that is not the case.

Outside South Africa, insurance penetration of agriculture is on average only one percent. A direct consequence is that farmers have to give up farming if disaster strikes, because they have nothing left to restart their business. Under-insurance also hampers the development of the sector. Loan payments for credit cannot be paid if a harvest is lost and not insured. This threat of loan defaults makes access to credit very difficult in Africa.

Banks, insurance, governments and farmers must act together
So how to solve the issue? Designing and providing state-of-the art insurance products like parametric covers will not be enough. We already offer them in many markets but upscaling is often difficult. One key obstacle is getting information on credit, distribution, markets and weather to farmers. To change this we must understand the full ecosystem in which the farmers – especially low-income farmers - operate and partner with stakeholders like governments, NGOs, seed and fertilizers providers, banks and distributors to get the services they need. Only then will we successfully build a sustainable farming sector.

We can accelerate this process if we also use the latest technologies. Combining underwriting and claims management apps with mobile payment solutions, for example, is one way to bring services and information to remote areas.

We need to share know-how with all stakeholders. As Ed Wilson from MRA in Mozambique said: "Agricultural insurance is a new field to most of us in Mozambique. We appreciate being able to interact with practically skilled invitees and you as Swiss Re specialists."

Beat Schnegg, Head Agriculture Reinsurance for Swiss Re, added: "We can bring the same level of security to farmers in Africa as we see in other parts of the world. The technologies and solutions are there, but we need to work with governments, banks, NGOs and distributors in the region to ensure that farmers can access them."

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