Trade restrictions against high emissions countries are imminent, which will hit SA’s economy....

Windfalls have not always stimulated the structural reforms required to boost the economy....

Increasing frequency and severity of natural disasters pose risk of mounting global defaults....

The fallout of ensuing wars shows that an eye for an eye can often leave us blind....

Already well endowed with key minerals, China is cosying up to the Taliban as the US leaves....

The latest UN report on climate should shock us into realising we are less than two decades away from a full-blown crisis....

Helping the province mine platinum metals would go a long way to reducing interprovincial inequality...

The events of the past few days have shown us the deep interconnectedness between inequality and social fragility. Rising inequality and despair in communities has triggered serious social unrest....

African countries can stop exporting their battery storage metals and can instead manufacture regionally...

The COVID-19 pandemic has put the global food system under sustained pressure and has triggered various policy responses to manage both supply and demand....

SA must jump into action to avert climatic shocks as the average annual cost of US weather disasters soars....

In recent years, the world has encountered a range of compounding shocks: droughts, floods, wildfires, cyclones, and most recently, a worldwide pandemic that has taken over 3.3 million lives—some estimates even indicate up to 13 million deaths. Although the pandemic will (eventually) pass, the next global challenge is already upon us. Climatic shocks are expected to increase in frequency and severity.Agriculture—still the most important sector in many poor countries—is directly affected by climatic shocks. Besides threatening global food security and stability, these shocks can cripple livelihoods, disrupt value chains, and even undermine macroeconomic stability. Climatic shocks have caused significant budget volatility in recent years and deepened corruption challenges. Agriculture insurance can be an antidote to these risks: It de-risks lending to the farm sector enabling repayment of loans, reduces budget volatility of agriculture-related fiscal expenditures by transferring climatic risk to the private sector, increases fiscal space during shock years, and stimulates growth of the agriculture sector, which can unlock job creation potential. It can even reduce the scope for fiscal leakages and corruption.THE CASE FOR PUBLIC POLICYBut agriculture insurance suffers from market failures and information asymmetries that require government intervention to achieve scale and sustainability (see “Government Support to Agricultural Insurance” by Olivier Mahul and Charles Stutley). Information asymmetries arise as farmers understand their risk profile better than insurance companies, introducing scope for anti-selection and moral hazard. Insurance companies need high quality yield data to vet and underwrite products. Being both non-rivalrous and excludable, yield data are a public good, necessitating government intervention to avoid monopolization. Besides, while insurance companies are in the business of managing risk, they often have limited appetite for agricultural risk given its exposure to catastrophic losses from single events. This leads to rationing of exposure or even refusal to underwrite agricultural risks by insurance companies. Finally, farmers often have low levels of financial awareness requiring public support for financial education programs.Figure 1. A straightforward rationale for government intervention ...