April 13, 2024

Investing in the future of farming

4 min read

Agriculture in South Africa is growing. The primary agricultural sector has increased by an average of 7.5% per year since 2008, outpacing the total economy, which grew by 6.6% on average per year over the same period.

Despite its relatively small share of the total gross domestic product, primary agriculture is a significant provider of employment, and a major earner of foreign exchange. The estimated value of imports during 2022 increased by 17.2% from 2021, while the estimated value of exports showed an increase of 18.2% in the year.

But the sector remains challenged by infrastructural weaknesses that result in loadshedding and poor road quality, the effects of climate change, animal epidemics and the same macro-economic factors that are affecting all industries in South Africa. The challenge, says Kobus Stapelberg – partner in the Agri Division at King Price Insurance – lies in anticipating and managing risks better, to keep premiums down while keeping livestock, crops, machinery and other assets covered properly.

‘Pay as you go’ for farmers

Since King Price entered the agri sector in 2018, it has implemented future-forward thinking to benefit farmers, starting with its industry-first ‘pay as you farm’ agri insurance product that offers farmers comprehensive cover for their agri vehicles all-year round, linked to an annual rebate based on the time that the vehicles are actually used. Stapelberg says that ‘pay as you farm’, which is offered in partnership with FarmSpace and Africa Farmers Network, is designed to help farmers save on their insurance premiums, lower their capital risk and maximise their profits.

Data is the future

While keeping their ears to the ground at farmers days, festivals, auctions, producers’ associations and the like, to hear directly from farmers what they want and need, the insurer also works closely with actuaries to properly understand the available data in order to mitigate risk and determine best pricing.

“We’ve developed a motor rating tool specifically for our agri book, which looks at the real risks that farm vehicles are exposed to. We’re the only insurer in the sector that has partnered with M.A.P Scientific Services to help farmers benefit from data insights related to fires. In terms of livestock management, we’ve partnered with VeePlan – a network of 300 vets that inputs data on every sickness in an area – and we’ve also partnered with ID-Scan, which enables farmers to scan the unique nose-prints of their cattle via a phone app into a database to enhance the traceability of stolen livestock,” shares Stapelberg.

Managing climate change

Climate change is another area the insurer is looking at from field to farmhouse and, while its approach to mitigating risk in this area is heavily data-driven in order to model cover for the future, it also focuses strongly on education to mitigate risk right now. “We’re seeing more heavy and out-of-season storms, and more fires and floods. We engage with farmers on every aspect from lightning conductors and fire breaks, to installing surge protectors.”

Looking forward

King Price also actively promotes the future of farming by supporting agricultural schools and colleges, and encouraging communities to do so as well. “We believe in investing in the schools themselves. We focus on changing their bottom-line from deficit to profit, and their outlook from past practices to future potential. The facilities need to be functional so that the kids – the next generation of farmers – can learn how to optimise processes, resources and tech, and take farming forward.”

In terms of trends, Stapelberg notes that South Africa is the second-largest citrus exporter in the world, and says that the entire value chain, from planting and harvesting to packing and processing, presents opportunities for insurers to better support the sector. South Africans are also among the world’s largest consumers of chicken – in 2020, this equated to 1.89 million tonnes. Better risk management in the poultry sector will go a long way to enabling scale and cost efficiency. And, as regulations around cannabis production ease up, the local market is expected to experience significant growth, thus providing massive opportunities for an agri insurer to both add value to the sector and grow its book.

“The future of farming is tech. Just about every supplier in the agri sector has an app to help farmers optimise production. Tech is enabling smoother, faster processes and better practices, which all have the end benefit of freeing up cashflow and increasing profit margins. At King Price, we’ve embraced a tech-first approach to insuring agri risks, and we’re seeing that the younger generation of farmers is embracing the future of farming,” ends Stapelberg.

Image credit: wirestock/Freepik

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