Pascal Siphugu on Land Bank Insurance’s Vision
At the AIE 2024 conference in Sun City, COVER’s Tony had the opportunity to sit down with Pascal Siphugu, Managing Director of Land Bank Insurance, to discuss the crucial role of agricultural insurance in South Africa.
Their conversation covered the challenges and opportunities in reaching different segments of the farming community, the innovative approaches Land Bank Insurance is pursuing, and the broader impact of agricultural insurance on the country’s economy and food security.
The Social Mandate of Land Bank Insurance – Pascal began by explaining the foundational mission of Land Bank Insurance, a subsidiary of the Land Bank. The company has a clear social mandate: to drive an inclusive agricultural sector in South Africa. “Inclusive,” as Pascal described, means serving all segments of the farming community—from mega-commercial farmers to small-scale, non-commercial farmers.
Over the past 15 years, Land Bank Insurance has made significant strides in supporting the commercial farming sector, capturing about 37% of the market in crop insurance. However, Pascal emphasized that the company’s future focus is on expanding its reach to small-scale and emerging farmers. These farmers, who often struggle with affordability and accessibility, are crucial to the sustainability and growth of South Africa’s agricultural sector.
One of the key challenges for small-scale farmers is the cost of traditional crop insurance, which Pascal likened to a “Rolls Royce” product—comprehensive but expensive. To address this, Land Bank Insurance is developing bespoke solutions tailored to the needs of smaller farmers. A significant part of this strategy involves the introduction of index insurance products.
Index insurance, particularly weather index products, are widely used in developing economies around the world. These products are designed to provide coverage based on predefined weather conditions, such as rainfall or drought, rather than the actual loss experienced by the farmer. This makes them more affordable and easier to administer, especially in regions where traditional insurance might be too costly or complex.
Despite their popularity in other countries, South Africa has yet to fully embrace index insurance, and government support has been minimal. However, Pascal revealed that discussions are underway with both the National Treasury and the Department of Agriculture, Land Reform and Rural Development (DALRRD) to develop and subsidise these products. The goal is to roll out livestock and crop index insurance products within the next year, with government subsidies playing a crucial role in making these products accessible to small-scale farmers.
Overcoming Distribution Challenges – Distribution is another significant hurdle in reaching small-scale farmers, especially those in rural areas. Pascal acknowledged that distribution is costly and time-consuming, but Land Bank Insurance has been proactive in finding solutions. One of their key strategies is the development of black brokers in areas where there is a clear need for agricultural insurance.
These brokers are trained and accredited in crop and asset insurance and are supported by Land Bank Insurance through various initiatives. For instance, the company partners with the Department of Agriculture provincially and local farmer events to create opportunities for these brokers to connect with farmers. By building a network of knowledgeable brokers who understand the unique needs of small-scale farmers, Land Bank Insurance aims to bridge the gap between farmers and insurance products.
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In addition to training brokers, Pascal highlighted the importance of partnerships with commodity bodies and organized farmer organisations. These partnerships are essential for the distribution of index insurance products, as they allow insurers to leverage existing structures to reach farmers more effectively.
The success of these initiatives also depends on strong collaboration with reinsurers and financial institutions. Pascal noted that Land Bank Insurance has received substantial support from reinsurers, particularly in the development and pricing of index insurance products. His team recently returned from Zurich, where they received training and shared expertise on these products, underscoring the importance of international collaboration in bringing innovative solutions to South Africa.
Financial institutions, too, play a critical role in supporting small-scale farmers. The Land Bank, for example, has been allocated funding by the DALRRD to provide part-grant, part- loan financing to farmers. This financing model not only helps farmers access the capital they need but also includes provisions for insurance, ensuring that farmers are protected against potential losses. This integrated approach is crucial for the sustainability of small-scale farming, as it addresses both the financial and risk management needs of farmers.
Learning from Global Best Practices – Pascal also emphasised the importance of learning from other countries that have successfully implemented agricultural insurance programs. He mentioned a recent workshop organized by the World Bank, which brought together representatives from 14 African countries to share their experiences with agricultural insurance. South Africa, despite not yet having implemented index insurance, hosted the conference, demonstrating a commitment to learning from global best practices.
One of the standout examples Pascal mentioned was Kenya, where the government launched an insurance program for emerging farmers in 2016. Today, the program has over 3.2 million policyholders, highlighting the potential for rapid growth and widespread impact when the right support structures are in place. Pascal and his team are planning study tours to Kenya and Zambia to learn more about how these countries have successfully rolled out their programs and to bring those lessons back to South Africa.
As the conversation ended, Pascal and Tony discussed the broader impact of agricultural insurance on food security, poverty alleviation, and rural development. Pascal stressed that supporting small-scale and subsistence farmers through insurance is not just about protecting individual livelihoods—it’s about ensuring the sustainability of the entire agricultural sector.
By providing farmers with the tools they need to manage risk, Land Bank Insurance is helping to secure South Africa’s food supply, reduce poverty, and promote rural development. “The benefits are countless,” Pascal said. “It is a no-brainer and something that we have to do.”
Tony agreed, noting that there are vast areas of undeveloped land in South Africa that are perfect for cultivation. With the right support, these areas could be transformed into productive agricultural hubs, contributing to the country’s economic growth and food security.
The conversation with Pascal Siphugu highlighted the critical role that Land Bank Insurance plays in South Africa’s agricultural sector. By focusing on the needs of small-scale and emerging farmers, developing innovative insurance solutions like index products, and fostering partnerships across the industry, Land Bank Insurance is paving the way for a more inclusive and sustainable agricultural future.
As Pascal and his team continue to learn from global best practices and collaborate with key stakeholders, they are well-positioned to drive significant change in the sector. The impact of their work extends far beyond the individual farmer, contributing to the broader goals of food security, poverty reduction, and rural development in South Africa.