This article was first published in Estate Living (in print and online) and follows on from a previous article I wrote on investing in cows.
‘Honey, I bought a cow!’ might sound like the opening line to a comedy show, but it is a serious statement that could make you a lot of money while being good for our failing economy.
Livestock farming is big business in South Africa. A multibillion rand business, to be sure – from small herds roaming the hills of remote villages to large-scale animal production farms that no one wants to think about. Most of the population relies on livestock farming for meat, milk, wool and many other products, so whether we like it or not, livestock farming is booming and worth looking into as an investment option.
With beef-producing cattle it’s easy to see that the value of these animals is directly linked to the cost of meat in the supermarkets. The ongoing drought has played a large part in the increased price on the shelves but the general costs of running farms and feeding the animals – as well as livestock theft – play a large role too. So, when conditions become harder and costs rise, cattle become more valuable.
It can be a good investment, but surely owning cows necessitates having land, expertise and time available to manage such an endeavour? You can’t exactly buy a cow and let it graze on your front lawn – I’m sure the body corporate would not be impressed! There are some informal schemes available where one can buy a cow and let someone look after it in return for the first calf, but these investments are risky as they generally offer little protection to investors, and the handshake agreement can easily be broken.
But Livestock Wealth, an innovative investment product, is making it possible for people without the requisite land and skills to own cattle. It’s bringing together farmers who are looking to grow their businesses and investors with cash to spare. Through their unique crowdfunding platform they’re really making it possible for anyone to invest in cows.
How credible is your cow-lateral?
The idea was first presented by Ntuthuko Shezi (founder of Livestock Wealth) in 2015 at TEDx Johannesburg, and the company has since grown from a handful of investors and 26 cows in 2015 to 700+ investors who currently own over R26 million’s worth of cows.
And it’s not just investors who love the idea; Livestock Wealth has won multiple awards such as the African Entrepreneurship Award (BMCE Bank of Africa) as well as the SAB Foundation’s Social Innovation Award. Their site also boasts many press articles from the likes of Huffington Post, CNN, CNBC and others. If the past three years are anything to go by, then Livestock Wealth is certainly a business to keep your eyes on.
The company is also currently looking to expand into other forms of agriculture, to offer similar ‘time-based investments in agriculture’ for chickens, vegetables, timber and anything that grows.
How it works: The e-cow-nomics of it all
The investment model has changed slightly since inception as the company expands and perfects their offering. The current investment option is similar to that of a fixed deposit account; it’s easy to understand and low-risk. You can either invest in a calf (R10,850) for a six-month period, or in a pregnant cow (R18,530) over a 12-month period. You deposit the required money and will earn between 10% and 14% growth on your investment (paid out at the end). The final ROI is based on the beef price when the calves are sold at auction. After your investment period is over, you can withdraw completely or simply continue reinvesting. Livestock Wealth also caters for smaller investments – you can invest in a portion of a cow, which opens the investment opportunity to new investors who are just starting to grow their wealth.
The investment process happens online and you’re issued with an investment certificate along with a photo of your cow. You’ll also get details of the farm and farm manager, and you can even visit the farm to see your cow if you wish. Some of the farms also have accommodation offerings and you can make a weekend trip of it.
(SPOILER ALERT: Don’t put the photo on your fridge and give your cow a name – you know how this will end)
The underlying business model is that cows produce calves each year, and the majority of these are sold for meat at auction, with a small percentage being kept to grow the herd. Owning an individual animal is risky as it could be stolen, get sick, be injured, or be attacked by predators. Also, there’s no guarantee that every cow will produce a calf every year. But the risks are mitigated when investing through Livestock Wealth as all animals are insured against loss, and profits are split across all investors to ensure that everyone receives a gain even if something has happened to their individual calf or cow. ‘Safety in numbers’ softens the blow when things go wrong.
What’s in it for the farmers?
For farmers the benefit of this model is that they are able to raise cash, which is generally tied up in the actual herds they farm. This assists them in running and growing their business. The farmers are also being exposed to large corporates such as Woolworths, which is one of the buyers of calves. This gives credibility to the farmers and also ensures that they adhere to sound farming practices.
Want a cow?
It’s probably not a good investment option for committed vegans or squeamish meat eaters who like to think boerewors is born dead in a punnet in Pick n Pay but, if you’re ready to diversify your investments and go for something a little unusual, head over to the Livestock Wealth website or, better still, give them a call. You’ll be participating in a truly African tradition, assisting small-scale farmers and contributing to a unique South African entrepreneurial start-up. You may even find yourself having to do some interesting explaining to your spouse when investing in cows.
PS – Please let Livestock Wealth know that you read about them on my site!