Created in 2015 by serial entrepreneur and former Accenture strategist Ntuthoko Shezi, Livestock Wealth is well on its way to revolutionising the way that South Africans invest.
The capricious nature of the stock market combined with the plethora of financial jargon hardly make it a welcoming environment for the novice investor, but what if you could invest in something that has retained value for thousands of years, an asset so tangible that you can touch it… Livestock Wealth has made this possible by creating a new investment vehicle; the cow, the rationale for which being that “stocks are complicated. Cows are easy” ; a slogan which greets potential investors when they first enter the company’s impressive website.
Livestock Wealth CEO, Ntuthoko Shezi, cites the words of Warren Buffet: “never invest in something you don’t understand” when explaining the main reasons he started the company. According to Shezi, 65% of South Africans do not understand the stock market, however, “Investing in livestock is in every African’s blood. It’s not only a living, breathing, walking form of collateral that offers great returns – it also affords a sense of pride.”
Started in 2015 with 40 cows and a loan taken out against one of Shezi’s businesses, Livestock Wealth now boasts 6800 hectares under supervision, 650 investors and thousands of cows. Shezi has also won the backing of organisations such as Bank of America Merrill Lynch in the form of R500,000, and the Gauteng provincial government’s Innovation Hub with R400 000 through winning multiple pitch competitions.
By offering their investors the opportunity to own a cow, Livestock Wealth is tapping into the intrinsic value so many South Africans assign to cattle, a commodity which has been synonymous with wealth and prosperity for decades.
Shezi aims to promote the consumption of sustainably sourced “grass beef” whilst simultaneously providing a guaranteed offtake agreement for the calves of communal farmers.
So how would you invest?
You, as the potential investor or “future farmer”, begin the 5-step investment progress with the choice of 4 farms, once you have chosen your farm, this will be the location of your cow. Next you purchase your ‘stock’ which can either be in the form of a six to eight-month-old calf or a 3-month pregnant cow, depending on your desired investment maturity. The ‘GrassBeef’ cow option, where the investor buys a calf is a 24-month process, whilst the Pregnant Cow option takes 12 months. You are then required to pay a monthly maintenance fee which takes care of the feeding and veterinary costs along with basic insurance, which covers death by illness and natural disaster along with theft. There is also an option to purchase ‘shared ownership’ of a cow by which Livestock Wealth pairs you with other likeminded investors. Once the purchase is complete, you are sent an ownership certificate citing you as the rightful owner of the cow. For the next 12- or 24-months, you can sit back and watch your cow (stock) grow, whilst receiving weekly updates on the Livestock Wealth App regarding the size, weight, age and whereabouts of your investment. When the time comes for the calf or fully-grown cow to be sold, Livestock Wealth uses the revenue to replace the animal and reinvests the profits into the farm until it is time for dividends to be paid.
What are the returns like?
Despite the unusual asset class, Livestock Wealth has obtained an average annual return of 12.4%. To describe this figure as an above market rate return would be an understatement; if you compare this number to the year to date returns of the JSE top 40 and the IBEX 35 indices, Livestock Wealth comes out on top. Compared to its native index (JSE Top 40), cows prove to be a more efficient investment by a whopping 35%. When compared to the Spanish IBEX 35 the relative performance is ever stronger.
Apart from the great returns, another factor which is attracting more and more investors is the steadiness of livestock production and meat consumption. Cows, unlike many other assets are immune to political and economic turmoil, as seen in the graph below. The only real influencer of production levels are droughts, which we can see had a minor effect through from the end of 2015 to 2017 but which also hike up the cost of meat, thus increasing the return on investment for Livestock Wealth customers.
Aside from helping to alleviate extreme poverty by providing off-take agreements to rural farmers, Livestock Wealth is also aiming to promote grass fed, natural beef, which is not only more environmentally friendly, but also far better for the consumer than factory farmed beef, ; grass fed beef contains 50% more omega 3 and 8 times more beta-carotene. Livestock Wealth has also made it possible for its investors to use their cow as collateral when taking out loans though the company’s partners.
What’s on the horizon for Livestock Wealth?
With meat consumption showing no signs of decreasing and the number of investors growing daily, Shezi is hopeful that Livestock Wealth will be managing 1 million cows by the end of 2019.