N

Ntuthuko Shezi describes himself as an innovator, someone whose job it is to change the way the world works and lives. He also refers to himself as the Cow Executive Officer of South African company Livestock Wealth. His business has built a platform where cows are one of the products available to local and global investors. Jeanette Clark reports from South Africa.

In October 2015, Shezi – an electro-mechanical engineer by training – and his team launched a platform that allows anyone, anywhere in the world, to profit from farming in South Africa. In the same way someone can purchase stock in a company or invest in a money-market account, the platform enables its clients to invest in livestock and crops raised or cultivated on a farm.

Five years down the line, Livestock Wealth has R100 million (US$6.1 million) in assets under management and offer investors four different products: a free-range ox, a pregnant cow, a connected garden or a macadamia nut tree. The prices of these products are fixed with Livestock Wealth’s commission built-in. The investment terms and prices range from R2,000 (US$122) for a macadamia nut tree and a profit of between 95 per cent to 105 per cent after six years, to R18,730 (US$1,141) for a pregnant cow with a profit of R1,873 (US$114) to R2,622 (US$160) after 12 months.

“The premise of all the products is very simple,” explains Shezi. “Each of them looks like and behaves like a bank fixed deposit that follows the life cycle of that product.”

For Shezi, raised in Ndwedwe in KwaZulu-Natal province, livestock and land equate to real and tangible wealth. It is a concept entrenched in his family by his grandmother who recognised the livestock she owned as assets she could leverage when funds were required, e.g. for tuition for Shezi’s mother.

“There are a lot of farmers who own assets but who can’t derive value out of it in terms of liquidity or profit. You have millions of people who are city dwellers who want to own these assets and make a profit when it goes to market or at harvest. Livestock Wealth makes the link,” Shezi says.

For the farmers, the investment brings liquidity and capital to boost productivity or better utilise available farmland.

The most popular product in Livestock Wealth’s portfolio is the free-range ox, according to Shezi. A client can invest R11,529 (US$702) in a healthy and fully maintained free-range ox that’s in the last six months of its lifespan. The ox grows in the farmer’s care over the six-month period until it is ready for sale and slaughter. The investor earns a minimum profit of R576 (US$35) and a maximum of R701 (US$43) – depending on the weight of the ox and the meat price.

The pregnant cow product works in a similar manner: a verified pregnant cow can be purchased and after 12 months, the investor receives the initial investment amount plus a 30% share of the income on the sale of the calf.

With the macadamia nut tree, the investor only sees a return after six years. The capital is used by the farmer to get the tree to production and the profit is, on average, close to 100%.

Livestock Wealth is currently not offering the fourth product, the connected garden, to new investors as Covid-19 caused a limited route to market for the mostly herbal produce cultivated.

The benefits and challenges of a new idea

Shezi remembers the nerve-racking 24 hours after their website went live when the team launched Livestock Wealth in October 2015. Twenty-six pregnant cows had been loaded onto the platform and the company had just executed a well-attended press launch. They were waiting for investors to bite. “That first day I kept looking at the website and nothing happened,” he remembers. “Two days later, we got our first transaction and we were ecstatic, over the moon.” The first batch of products, those 26 cows, sold out in three weeks.

In the beginning, Livestock Wealth had to operate in what Shezi – a fan of arcade games – calls “single-player mode”. The company and Shezi had to be the ‘farmer’ at the one end of the transaction. Only once they had investors onboard and traction in terms of awareness did the company start taking on partner farmers and moved into the role of agent, linking the buyer to the seller.

At present, Livestock Wealth is a registered credit provider with the National Credit Regulator (NCR) and registered with the Agricultural Produce Agents Council; although, when it started, the company operated in a regulatory vacuum. Initially, the company was the seller and simply provided cows to buyers, a transaction with no regulatory conditions attached. Once it acted as an agent, it ensured it had registration and accreditation under the Agricultural Produce Agents Act in place.

Although Livestock Wealth does not technically provide credit to the farmers and functions only as a conduit or agent for the sale, Shezi says the NCR registration has been invaluable. “We engage with the farmer on a contractual basis as the agent but at the same time, we function as if we are loaning them your money by doing credit checks on the individual farmer and his company, making sure he can be trusted with your investment. This way there is extra protection for the investor,” he says.

   Livestock Wealth has started selling free-range beef from its partner farms to end-customers.

Growth and diversification

Livestock Wealth has 58 partner farmers situated across South Africa. Some of the locations are Lichtenburg in the North West, Richmond in KwaZulu-Natal, Tzaneen in Limpopo and Senekal in the Free State. It has 11 employees and four field staff members who “roam the land”.

The company is open to more applications from farmers to have it act as their agent but Shezi is mindful that any marketplace remains a careful balancing act. “We have to match supply with demand. We cannot have a situation where we promise access to market and there is an oversupply,” he says.

Over time, more investment options were added and technology developed to support investors’ customer experience. Livestock Wealth features a calculator on its website that enables investors to see the potential return of the products they are interested in. Shezi admits finding the right skills at the right price to develop the technology has been one of the major challenges over the years. “Building the tech to support the growth has been tough. When you can find the skills in South Africa, it is too expensive or it just doesn’t exist.”

Livestock Wealth has also started selling free-range beef from its partner farms to end-customers. “Food prices were going up. We saw a gap in the market to offer lower prices if we could get the consumer to commit to being a regular buyer of the beef. If you are part of the Farmer’s Club, you get the product at a better price,” Shezi explains.

“I am happy with the foundation we have laid. We have deep trust in the marketplace and depth of knowledge in our field,” he says.

With the measures put in place to vet farmers and do physical farm visits to ensure the security of the assets, Shezi is comfortable their track record will remain intact. He says there have been no instances where poor farming practices compromised the value of the assets Livestock Wealth manages. The company still manages two farms to have a base from where to operate as well as for research purposes. A new development to be launched before the end of the year is a technology solution to improve security and limit livestock theft.

“We have developed excellent proprietary tech to track livestock. Just last week, we finished development on the tracking alarm system which every partner farmer who works with us will have to implement over time. It is a collar around the cow’s neck that enables live tracking,” Shezi says.

Taking market demand into consideration, the company has its sights set on an ambitious target of managing R10 billion (US$608.3 million) in assets within the next five years.