The African Risk Capacity Limited (ARC Ltd) says the availability of insurance in the agriculture sector would help boost capital flow for farmers as it lowers credit risks.
This comes as the Johannesburg headquartered ARC Ltd revealed that it had mobilised US$100 million that is available to its member states in Africa to help make insurance more affordable in agriculture.
ARC Limited chief executive officer, Lesley Ndlovu told the media on the side-lines of a business summit in Harare last week that his organisation was actively involved in providing insurance cover for farmers across the continent and in Zimbabwe.
This does not only offer protection against climate change vagaries but also makes capital comfortable in the agriculture sector.
“We are de-risking agriculture which facilitates greater capital to flow into the agriculture sector. This will lower the cost of capital itself meaning that many more Zimbabweans can participate in the agricultural sector.
“Agriculture is important at the national level in terms of the national strategy. So we are facilitating a pathway to increase resilience in agriculture and secondly to increase the level of investment that is going into the sector so that a lot more people can participate and benefit from this sector that we all agree is extremely important,” Ndlovu said.
He emphasized that private sector involvement would be key to tackling the question of financing climate change adaptation.
“This is a question that requires input from all the various players such as the government, the banking sector and also insurance companies. The private sector has a big role to play because we cannot rely solely on the government to tackle some of these issues.
“There’s a lot of willingness from the private sector to create solutions that are relevant to the farmers in Zimbabwe,” Ndlovu said.
“At the African Risk Capacity we have a mandate to grow the number of people that are covered by insurance. Currently we are covering about 30 million people every year through our insurance programme. But when you look at the needs across the African continent it’s close to 700 million people. We already have a huge impact on the continent but there is room for us to do a great deal more.
“One of the barriers that we face to the uptake of insurance is the unaffordability of premiums so the role of subsiding premiums falls on the governments themselves and also on international development partners. At the level of the ARC we have managed to mobilize US$100 million in funding for governments to be able to subsidize their participation in insurance programmes. Zimbabwe is already a client and in 2020 we paid a claim to the government after the drought that we experienced here”.
Founded in 2014, ARC Limited is a hybrid mutual insurer and financial affiliate of the African Risk Capacity Group. The organisation provides parametric insurance services to African Union Member States and farmer organisations, employing innovative financing mechanisms to pool disaster-related risk across Africa and transferring it to international risk markets.
In so doing, it improves the continent’s response to climate-related disasters and contributes to resilience building and ultimately to food security.
“Efforts are ongoing to ensure the ARC product portfolio is reflective of the needs of member states and provides progressive solutions to weather-related disasters,” Ndlovu said.
In addition to agriculture, ARC Limited is also in the renewable energy space.
“The other big sector for us is renewable energy. We are providing the transition from fossil fuels to renewable energy. This happens in two ways. We have a balance sheet that allows us to invest some of our own money into the energy transition together with providing a de-risking mechanism in the sector.”
