The South African disaster management system in its current form is unlikely to solve disaster risk challenges faced by new-era farmers effectively and efficiently. This is due to the bureaucratic nature of government institutions, argues economist Malapane Thamaga.
In 2019, the South African Insurance Association (SAIA) worked on a comprehensive proposal that called for innovative disaster risk buffer systems to support both commercial and smallholder farmers. It was in the form of weather-based index insurance and the subsidisation of agricultural insurance. The proposal was submitted to National Treasury in the same year but to this day the sector is yet to see any of those recommendations implemented.
Nevertheless, disaster continues to ravage the agricultural sector, leaving vulnerable farmers with no choice but to close up shop.
If there is anything we have learnt from the recent unrest in KwaZulu-Natal and Gauteng, it is that more than ever before we need a buffer to protect farmers against adverse risks from unpredictable weather patterns, and perhaps small to medium agribusinesses against disaster risk.
In July 2021, South Africa experienced an unprecedented uprising allegedly triggered by the arrest of former president Jacob Zuma. However, many analysts also pointed out that the looting was fuelled by a high unemployment rate, poverty and economic inequality, worsened by the Covid-19 pandemic in South Africa.
Treasury has estimated the losses due to the looting at approximately R15 billion. It has affected more than 200 shopping complexes. Luckily, for those who are insured, cover by the South African Special Risk Insurance Association (SASRIA) will kick in and compensate for their losses.
SASRIA is a state-owned insurance company and the only insurer that covers claims caused by riots, civil unrest, terrorism and vandalism caused by public disorder. South Africa must be given credit for being one of the few countries with such a comprehensive insurance system that caters for losses resulting from unrest.
Uninsured farmers out in the cold
There is, however, a segment of business that is uninsured and therefore unlikely to recover their assets and inventory lost due to the looting spree, although the president has since actioned government interventions like a temporary relief scheme (TERS) and business restoration programmes.
TERS is aimed at giving relief to vulnerable workers impacted by the looting and unrest while R4 billion has been allocated for the restoration of businesses affected by the looting.
The TERS income replacement is calculated on a sliding scale (38% to 60%), depending on the employee’s remuneration. It is capped at R17 712 per month. Those who earn R3 500 or less per month will be paid income equivalent to their normal monthly remuneration.
The restoration of business package, on the other hand, include grants, working capital for raw materials, stock replenishment, buying equipment and small-scale repairs. Indeed the government must be commended for making such a pronouncement.
Disaster risk is ever present
Yet the reality is that businesses forever face disaster risks that may lead to unrecoverable losses. This is even worse for agricultural businesses. It is said that farming is one of the riskiest businesses in which you can engage, given the risks derived from its correlation to nature and specifically the weather.
Farmers are prone to many sources of risk, including floods, hail, cold and drought, as well as market and other business risks. The situation is even worsening as a result of climate change.
According to the United Nations Office for International Disaster Risk Reduction (UNIDRR), when looking at agriculture, industry, commerce and tourism combined, the agricultural sector bears about 63% of damage and loss from disasters.
However, because agricultural disasters tend to be slow and idiosyncratic (individual or situation-specific), except in the case of floods and storms, these disastrous events hardly catch the attention of the media.
Consequently, emerging farmers experiencing these challenges are unlikely to be supported or compensated for their losses, as is the case with small businesses affected by the July 2021 unrests in KwaZulu-Natal and Gauteng.
For instance, South Africa experienced one of the coldest winters in July 2021, resulting in farmers facing the worst possible crop losses. To this day there is yet to be a declaration of disaster or interventions by the disaster management centres of the department of cooperative governance and traditional affairs.
Weather-based index insurance could be the answer
Similarly, two years ago there was a crop farmer in the West Rand who lost his crops due to a disastrous heatwave that hit his farm and his neighbours. He approached the local department of agriculture’s office for assistance but he was sent from pillar to post between departments.
Government organs mostly claimed it was “not their competency” and therefore the farmer should have gone to his municipality or his nearest department of agriculture for help. To this day this promising vegetable farmer is yet to be assisted. He has since closed up shop.
South Africa is noticeably lagging behind other developing countries regarding climate-smart innovations to counter climate change and to cater for emerging farmers. Zimbabwe, Tanzania, Zambia and, to some extent, Malawi are forging ahead with weather-based index insurance to cater for segments of farmers that were otherwise not catered for by traditional insurance schemes.
Weather-based index insurance is an attractive approach to managing weather and climate risk because it uses a weather index, such as rainfall, to determine pay-outs. Pay-outs are thus pegged to easily measured environmental conditions, or an “index” that is closely related to agricultural production losses.
This is done more quickly and with less argument than is typical for conventional crop insurance; it is administered through mobile phones to eliminate administration costs.
Adopting a weather-based index insurance may therefore see disaster intervention processes shortened compared to what has been the case in the past.
Subsidisation will offer further protection
In 2019, the South African government in partnership with organised agriculture, the private sector and SAIA worked on a programme that called for the subsidisation of agricultural insurance.
According to this proposal, farmers would be subsidised to the tune of 75% for weather-based index insurance in the case of smallholder farmers, and to 25% for multi-peril crop insurance in the case of commercial farmers. Such interventions have the potential to unlock opportunities for access to finance, especially for emerging farmers, thereby assisting them to reach their potential.
Unfortunately, the South African disaster management system in its current form is unlikely to solve disaster risk challenges faced by new-era farmers effectively and efficiently. This is due to the bureaucratic nature of government institutions and their prolonged processes before farmers may be assisted.
Perhaps the 2019 Agricultural Insurance Proposal that SAIA submitted to the National Treasury is worth revisiting.
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