Original Research

Preferences for index-based crop insurance in South Africa

Phiwe Jiba, Mzuyanda Christian, Khulekani Nxumalo, Victor Mmbengwa
Jàmbá: Journal of Disaster Risk Studies | Vol 16, No 1 | a1611 | DOI: https://doi.org/10.4102/jamba.v16i1.1611 | © 2024 Phiwe Jiba, Mzuyanda Christian, Khulekani Nxumalo, Victor Mmbengwa | This work is licensed under CC Attribution 4.0
Submitted: 29 September 2023 | Published: 12 June 2024

About the author(s)

Phiwe Jiba, Department of Agricultural Economics and Extension, Faculty of Natural and Agricultural Sciences, North-West University, Mmabatho, South Africa
Mzuyanda Christian, School of Agribusiness, Faculty of Agricultural Economics, Nelson Mandela University, Port Elizabeth, South Africa
Khulekani Nxumalo, Department of Agricultural Economics and Extension, Faculty of Natural and Agricultural Sciences, North-West University, Mmabatho, South Africa
Victor Mmbengwa, Department of Agricultural Economics and Extension, Faculty of Agricultural Science, University of Limpopo, Mankweng, South Africa

Abstract

The main reason cited for the low participation rate in indexed insurance in Africa is the lack of farmers’ involvement in the initial conception. The main aim of this article was, therefore, to design an improved participatory methodology that would help farmers in South Africa gather information on the value they place in new crop insurance initiatives based on weather indices. The main objective of this study was to determine their willingness to pay (WTP) crop insurance in the Eastern Cape. The study adopted a cross-sectional design, and the respondents were selected by using a probability sampling procedure. A sample of 150 respondents was selected. The results from descriptive statistics showed that 62% of the smallholder irrigation scheme farmers were between 52 and above years of age, male and female: 87% and 13%, respectively. The results from the probit model revealed that out of nine variables included in the model, only four namely, logAge square, gender, marital status and age were significantly influencing the WTP index-based crop insurance at 1%, 5% and 10%, respectively. However, age was found to reduce the chances of participating in crop-based insurance. A large proportion of those who were willing to pay insurance had not previously experienced losses because of natural hazards. Therefore, it recommended that the government should use existing extension officers to educate the farmers and promote the importance and benefits of insurance products.

Contribution: The results are expected to contribute to the local government to improve disaster resilience through strengthening regional financial funding.


Keywords

index-base insurance; probit model; willingness to participate; natural hazards; Eastern Cape.

Sustainable Development Goal

Goal 13: Climate action

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