Insurance for small scale farmers key

Tirivanhu Kateera

Over the years, farmers especially communal and small scale farmers have lost produce be it crops or animals to adverse weather effects as the same were not insured.

The reasons for not taking up insurance cover vary from farmer to farmer amongst them, past unfulfilled promises and insurance illiteracy.

Recently, there was news that the Government was contemplating instituting compulsory insurance for small scale farmers in light of various climate-induced calamities such as hail storms, droughts, pest outbreaks and floods. Climate change is a serious reality that is gripping the whole globe, hence world leaders met in Glasgow, Scotland for the United Nations Climate Change Conference (Cop26) to find ways to minimise its effects. 

Agriculture Finance Corporation (AFC) Holdings Acting Chief Executive, Francis Macheka hinted that insurance against the vagaries of inclement weather gave financiers and farmers a guarantee of recouping their investment in times of calamities, particularly for small scale farmers who are considered, "high risk." He said, “It is the intention of the Government to introduce compulsory insurance. We acknowledge the risk of climate change and threats to national food security. There is no doubt insurance has a role for financiers to feel safer.”

What compels government not to ignore this sector is that, small scale farmers contribute 60 percent output in the agricultural sector, but financiers are not keen to finance or to invest huge amounts to these farmers because they do not insure their crops or livestock, which has  retarded agriculture growth in the country over the years.

Despite the immense contributions to the national grain reserves, smallholder farmers remained uninsured, a development that called for a compulsory insurance scheme before they are eligible for agricultural inputs loans such as Pfumvudza/Intwasa or enter agreements that allow insurance companies to deduct money from farmers’ accounts after selling their produce.

It is against this background that the Government through the AFC's insurance department is putting in place those mechanisms to rope in private insurers to hedge agriculture against losses due to extreme weather conditions. This will be a boon in the agriculture sector, which is the backbone of the country’s economy, and will subsequently guarantee the success of the National Development Strategy One.

The fact that climate change has sparked weather-related catastrophes should also persuade farmers and all relevant stakeholders to prioritise insurance covers for their farming enterprises.

 Of late contract farmers in tobacco industry have also adopted the principle of ensuring that their farmers insure their crop from unseen disasters such as hailstorms. In that regard, Government through the AFC holding has made a remarkable insight towards ensuring that farmers are protected from unforeseen calamities, which affects both the livelihood of the farmer as well as food security of the country.

Moreover, Vision 2030 is attainable if the country is food self-sufficient, to the extent of exporting, cutting trade deficit in the process. This alone will boost economic growth as money previously channelled towards the importation of grain and other agricultural produce will be channelled to other projects such road and dam construction; importation of other essentials such as drugs and fuel as well as retooling the manufacturing sector.

The rise of the agriculture sector also guarantees raw materials for the local industries, jobs and support to other downstream industries in the manufacturing sector.

Most farmers are, however, still sceptical when it comes to agricultural insurance as they have been duped before by some fly-by-night insurance companies something, which Government must step in and assist farmers so that it does not recur.

According to the calculations, insurance cover for one hectare of tobacco ranges from US$230 to US$300, half hectare ranges between US$130 and US$200, while a quarter hectare is US$70. Farmers complained that contracting companies fail to honour their side of the bargain in cases of fire and hailstorm, despite deducting the insurance fee. Farmers have lost confidence in insurance firms who take advantage of little-informed communal farmers by not fully explaining the fine print to them. Others have also lost confidence in insurance firms because of the way they have been treated in the past.

In 2019, Tobacco contracting firm, Agritrade Leaf Tobacco, was in the eye of a storm after it allegedly deducted insurance premiums from farmers without prior contractual agreements. The premiums were submitted to Champions Insurance. However, Agritrade denied claims that farmers did not enter into any contractual agreement on insurance cover, but acknowledged that there were problems dogging the scheme. These are some of the issues Government must look into and address before implementing compulsory insurance in the agriculture sector.

Other farmers said they take comfort in the fact that they have never experienced any risk on their crops before, hence do not see the advantages of insurance. These must be encouraged or educated that insuring their crops hedges them against the unforeseen extreme weather conditions that are currently dogging the whole world.

According to Springer, maize currently covers 25 million hectares in Sub-Saharan Africa, largely on smallholder farms, and it accounts for about 20 percent of the calorie intake of 50 percent of the population. In sub-Saharan Africa, maize is the most widely grown crop and is a staple food for an estimated 50 percent of the population and insurance will be the only sure way to guarantee food security amidst climate change concerns.