The team behind Agrarius
Johannesburg – It is exciting times for investors and farmers alike as Agrarius Sustainability Engineered today listed Africa’s first Shari’ah-compliant sustainability linked Sukuk on the Johannesburg Stock Exchange (JSE). Agrarius is driven and administered by 27four.
Agrarius is an agriculture focused investment company offering investment opportunities through its R10 billion JSE listed asset-backed Note Programme. The proceeds of which are invested in sustainable and green projects in the agriculture sector value chain.
The benefits of Agrarius and it being Shari’ah compliant
The Note Programme is the first of its kind for the African continent. According to Mufti Ahmed Suliman, Chairman of SAC, Agrarius is a product that will benefit not just the Muslim community but the farming community and non-Muslim community as well.
“This particular product allows for Muslims to invest and earn a Halaal return from the product. It will greatly and immensely benefit the non-Muslim community and the farmers of the country.”
One of the main concerns for every Muslim before they invest in anything is will the proceeds be Halaal. Mufti Suliman has spent an incredible amount of time to ensure it was Shari’ah-compliant.
“Nabi (SAW) said that when you get involved in a transaction in terms of which you pay in advance for your crop … Then it is a requirement, for the transaction to be Shari’ah compliant, for the weight and measure you are getting in exchange for what you are paying for should be known upfront. The Prophet (SAW) said you also need to know the delivery date.”
The exciting innovations being brought together
The JSE has had the framework for Shari’ah-compliant products for some years now. What makes the product stand out from the rest is it a Shari’ah-compliant sustainability linked note. This means the cost of funding reduces as you reach your sustainability goals, explained Samuel Mokorosi, Head of Origination and Deals at the JSE. What also makes it exciting and unique is the different innovations that came together to make this happen.
“We got so many exciting innovations coming together. We have a black-owned asset manager. We have agriculture which is probably an underserviced industry from a funding perspective. We have Shari’ah compliance and sustainability linked note. So, it is all just coming together in a beautiful mix.”
It is not just these innovations coming together that has made investors excited. Mokorosi explained the Sukuk has been listed on the Sustainability Segment of the JSE which makes it even more appealing to investors.
“Our investors have been really keen to get their hands on these sustainability instruments because it ticks boxes for them from an environment, social and governance perspective … What we found is the Sustainability Segment has been oversubscribed by investors. We had good oversubscriptions from investors and that gives me the confidence that this will continue to be an excellent story.”
Oversubscription is where a company asks for a certain amount of money eg. R5 million and find that investors are willing to invest much more than that.
What happens if not enough cash flow is generated to pay the profit share or capital back
Investing in anything is a risky business, especially when it comes to farming. While it is an attractive investment and talks to food scarcity, farms suffer from floods, droughts and other natural disasters. If that should happen, there is a chance one’s investment could be at risk. Dr Theo De Joger, Managing Director of the Southern African Agri Initiative, admitted it is a possibility that farmers could suffer a bad year. This is why agriculture needs “patience, sympathetic capital”.
“We start down for hours talking about managing the climate. How can we mitigate and adapt to changes in the climate? How can we ensure sustainability? How do we do disaster aid and link up to crop insurance? For a very rare moment we found a lot of comprehension and compassion for that side of financing.”
27four explains on their site that Agrarius Sukuk provides investors with a “diverse portfolio of transactions across the agriculture value chain. Various protections mechanisms are applied at multiple levels to help ensure obligations are met”. These protection mechanisms are reserve account, collateral and insurance according to the site.
SMread: Key announcements from the Medium-Term Budget speech
Investing in Agrarius for the common investor
Interest is extremely high in the Sukuk note with queries coming from America, Europe and China. With interest so high from abroad, it is only natural that South Africans would want to invest. Fatima Vawda, Managing director at 27four, is quite certain many people will want to invest due to the favourable profit participation. It is also a fixed income instrument. At the end of the Sukuk term, you will get back your initial investment. The annual rate is the drive up plus 4.5% which at current rates is 11.5%
“In comparison to the profit share you get at the banks at the moment or even the conventional banks, it is much higher. You are definitely going to outpace inflation. Nobody is going to give you 11.5% in this current environment. The nice thing is you got liquidity.”
If you need access to the funds immediately, you can sell it in the market because it is now tradeable on the market. One Sukuk note is R10 000 and can be bought through a stockbroker or through any bank. Agrarius is also highly regulated, according to Vawda.
SMread: 75% Energy Availability Factor Mandate is Impossible to Achieve at Eskom
The future of Agrarius
Before things could get this far, the Agrarius team had to raise R500 million. Werner Opperman, CEO of Agrarius, has credited the roadshows they have gone on as one of the main reasons they managed to hit their target capital. With the launch being a success, Opperman’s expectations have been met and then some. Now it is all about creating a pipeline to get these funds to the right people.
“Our main focus for the next couple of weeks is to deploy the capital that we raised now into our pipeline so we can get our returns for our investors and also achieve our impact. After this will be the report backs. We are going to go back to the communities, see what has been done, how the money has been used. The process will be repeated.”
