SMALLHOLDER MAIZE FARMER’S WILLINGNESS TO JOIN INDEX INSURANCE IN VHEMBE DISTRICT: LIMPOPO PROVINCE

Abstract

Only a negligible proportion of smallholder farmers in South Africa have crop insurance to mitigate production risks. This article analyses the demand for index-based crop insurance by smallholder farmers in the Vhembe district of Limpopo Province in South Africa based on their willingness to join a proposed insurance product. The total population of smallholder farmers was categorised according to four local municipalities that make up the Vhembe district. Questionnaires were used to collect once off data from smallholder farmers. The contingent valuation method was used as a method of choice to further analyse the willingness to buy a crop insurance product. Analysis revealed that 86% of the farmers were willing to buy the index-based crop insurance. Further analysis using Probit regression model found that age, farm size, and risk management strategies were factors infl uencing smallholder farmers` willingness to buy crop insurance product. This study has shown that smallholder crop farmers` willingness to buy crop insurance products as a risk mitigation strategy is low in the Vhembe district of Limpopo. The study recommends awareness and education with regard to crop insurance purchase for smallholder farmers. This can be done as one of governments’ intervention towards agriculture as a form of subsidy to resource poor farmers.