Financial service giant, Old Mutual Zimbabwe Limited, says it has scaled up its weather index insurance product during the 2018/19 cropping season as the appetite for the initiative among local farmers improved in the previous season owing to recurring droughts.
Zimbabwe experienced an El Nino-induced drought in the 2015/16 farming season and was declared a national disaster by the government. In February this year, the United Nations (UN) launched a US$234 million international aid appeal for the southern African nation to deal with drought which is poised to affect around a third of the country’s population.
The country is highly dependent on rain fed agriculture and currently experiencing the adverse impacts of droughts of climate change that includes high prevalence of droughts and mid-season dry spells.
At an analyst briefing, held recently in the capital, OMZL chief executive officer Jonas Mushosho said insurance is essential in supporting economic activity. Zimbabwe is an agro-based economy, Mushosho said there is need for the southern African nation to take the issue of agriculture insurance seriously so as to manage the risk that is associated with the adverse effects of bad weather conditions which makes it difficult for famers to get back on the field.
Agriculture contributes 15-18% of Gross Domestic Product and provides livelihoods to approximately 67% who are the rural population. It also supplies about 63% of the industrial raw materials with the share of agriculture in manufacturing value added at 60%, and the share in export earnings 30%. Agriculture related employment supports a third of the formal labour force.
“For the 2017/18 agricultural season, we expanded our weather index insurance product offering to include cover for excess rainfall as well as other crops that were not initially covered. Initially the product covered the impact of drought on maize crop but the dry spells in January 2018 triggered pay outs in some location and so over 300 farmers receiving payouts. These pay outs in the face of decreased yields were vital in highlighting the importance and value of weather index insurance to our target market,” he said.
Experts say agriculture is a high-risk economic activity, which requires farmers to consider agriculture insurance as a mechanism to remain on the field in case hit by natural disasters. In the past few years, farmers across the country have lost their crops owing to prolonged dry spells.
“We are scaling up further in 2018/19 agricultural season and we expect this initiative to add to the sustainability of small scale farming activities.”
Due to the harsh operating environment, most of the farmers operates on a shoe stringed budget. So in any case, if drought struck majority of them are bound to remain off the field.
“Because often the problem is people take their hard earned money to buy inputs and they go into the fields and the rain doesn’t come and they lose the inputs. However, we are able to get that covered in terms of getting them back to the field,” Mushosho said.
He added that the product is an investment into understanding weather patterns and progression.
“So it’s not just a taking these risk without making appropriate investments and giving education to support those farmers on how they better manage their businesses. So we think that it is a good product and we want to grow it so that more farmers can recover and then can support agriculture development in this country.”
Also the weather index insurance product covers farmers on excessive rains and other selected crops diseases. This will relieve most farmers in the case fall armyworm outbreak, which cause massive maize yield losses if not dealt with accordingly. The group’s life insurance business saw its gross written premiums rising 10% from $160.3 million in 2017 to $176.9 million in 2018. General insurance business’s gross written premiums was up 9% to $41.4 million. INSURANCE24