Farming is a potentially lucrative business – but few of us can afford to buy arable land, let alone a working farm.
Investors interested in the agricultural sector need not despair, however – there are ways to invest for just about anyone. We explore the options.
Tip: Use this handy savings calculator to determine how long it will take you to reach your savings goals.
Why invest in the agricultural sector?
Volatility can play havoc with investments in equity markets; or markets where company shares are traded. This owes to factors beyond our control, making it difficult to manage or anticipate risk.
Investing in tangible assets can be a good way to diversify your portfolio, protecting you from some of the effects of inflation or a weak currency. Many stokvels pool their resources to invest in agriculture for this reason.
Investing in cattle
Cattle have powerful cultural significance in South Africa and have long been a symbol of wealth.
Livestock Wealth is a company that allows multiple investors to pool their funds via the internet, in order to invest in livestock and growing crops on a working farm. This form of investing is known as crowdfarming, and in the case of Livestock Wealth, investors can enjoy the benefits of ownership with none of the disadvantages. For example, the cattle are insured by the farmer, so this is a relatively low-risk investment.
At the time of writing, you could start by investing R11,529 in a free-range ox, which delivers a guaranteed return of around R12,105 over six months, based on a minimum profit of R576, or 5%, depending on the weight of the ox and the price of beef. The farmer will buy back the asset once it’s fully grown, and you have the option of collecting your earnings or reinvesting your money.
The platform charges a R49 withdrawal fee when you cash in your profits, but all other costs will have been factored into the cost of the asset.
Fractional ownership of a herd
SV Capital, a company that specialises in asset-backed investments, allows you to contribute to a collective herd of cattle managed on partner Beefcor’s feedlot. This fractional ownership means any risk is spread among investors, and insurance further mitigates the risk.
The cattle are kept in the feedlot for around 120 days.
“Your return on investment is determined by the weight of the cattle and the market price at the time of sale,” explains Ayanda Majola, co-founder and CEO of SV Capital.
The minimum investment is R500, and you can expect an average return of around 14.5% after 12 months, including fees and costs, when the investment matures. SV Capital charges an upfront fee of 3.8%, excluding VAT, on the funds raised.
“This investment helps you to blend the overall return of your financial portfolio,” says Majola. “In addition, it’s a type of impact investment as it creates sustainable jobs.”
Other farming investments
Livestock Wealth has taken the crowdfarming concept a step further with its farmland investment option. The platform enables you to invest in a portion of an existing farm, which is then leased out. An investment of R50,000 over eight to ten years can deliver rental returns at a minimum of 4% a year – perfect for a stokvel that wants to invest in land ownership.
“This aspirational investment is ideal for a diligent saver who would like to leave a legacy for family members, as assets can be bequeathed,” says Ntuthuko Shezi, founder of Livestock Wealth.
For investors with less to spend, there’s the option of buying a macadamia tree for R2,000, for a six-year investment period. The farm benefits from the cash flow, which is used to cover operational expenses, and you double your money when the farmer buys back the fully grown tree at the end of the investment period.
Livestock Wealth and SV Capital – both registered financial services providers – allow you to invest via apps or on their websites.
Tip: Free up cash to put to productive use by consolidating your debt.