Effects of climate variability and insurance adoption on crop production in select provinces of South Africa

Increasing climate variability increases the risks in production and prices of agricultural products. Inarguably, Africa's susceptibility to climate change is high because it hosts the majority of the world's poor who cannot afford the costs of coping mechanisms. Agricultural insurance is being largely put forward as a coping measure of adapting to climate change to sustain farm production and farmers' livelihood. The study critically reviewed numerous publications on climate change impacts and the role of insurance in the adaptation process. It examined the effects of varying weather conditions and insurance on net crop revenue using the instrumental variable regression approach on a Ricardian model. The study further identified factors influencing the purchase of insurance among the farmers with a probit model. The study data were collected from a cross section of farmers in three selected provinces of South Africa. Results of data analysis indicated that owning insurance, number of labourers employed, size of irrigated farmland and rainfall have significant effects on net revenue. It was also revealed that experience, indicated by years of farming and revenue, influenced farmers' adoption of insurance. Consequently, the paper advocates for the provision of efficient irrigation facilities and promotion of insurance among farmers.