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Livestock Insurance: Zimbabwean Firm Allows Clients to Invest in Cows

After previously writing off his home country as one unlikely to recover from economic devastation, Zimbabwean-born and UK-educated Kelvin C...

After previously writing off his home country as one unlikely to recover from economic devastation, Zimbabwean-born and UK-educated Kelvin Chamunorwa has found himself back in Harare, building a financial services company serving the country’s vast low-income market. 

And he is using a 900-strong herd of cattle located on the outskirts of the city to do it. Natalie Greve spoke to Chamunorwa to learn more about his business.

Chamunorwa comes from business-minded stock – parents in middle management positions in banking, and grandparents who successfully ran their own business. 

In his late twenties, as a qualified actuary and with a growing family in the UK, he saw little reason to permanently return to Zimbabwe. 

News from the country was saturated with reports of unprecedented inflation, crumbling infrastructure, institutional decay, political duplicity and a terminal economy.

But a family visit to Zimbabwe in 2015, just after Chamunorwa had turned 30 and shortly after the economy had been dollarised, challenged his bearish view.

“I had resigned myself to the fact that I probably wasn’t ever going to work in Zimbabwe, because the financial sector had been gutted and actuarial skills weren’t in demand. But what I found was that the perception of the economy was far more severe than the reality. It just wasn’t as bad as was being reported,” he tells How we made it in Africa.
Livestock Insurance: Zimbabwean Firm Allows Clients to Invest in Cows

Chamunorwa’s research at the time showed double-digit yearly premium growth in the pension and insurance markets, admittedly off a low base.

But the opportunity came with a catch: confidence in financial institutions had been eroded after money had been lost in traditional financial products due to hyperinflation. Potential customers now sought a store of value for their critical savings that they could trust.

“I realised they wouldn’t put money in a traditional institution and there was a need to rebuild this trust with a different approach. The concept of buying ‘units’ in pension policies was too nebulous a concept. We needed to create a policy backed by a certain amount of units that would never deplete, and would hold its value, even if inflation ran away,” he says.

Still somewhat unsure of exactly how this would be done, but buoyed by the country’s prospects, in 2018 he bought an existing financial services business in Zimbabwe that had a licence and an operational system in place, and introduced two fairly traditional products offering funeral and accident cover for the lower-income economically-productive market, thus establishing Nhaka Life.

But just two years later, Zimbabwean inflation spiked again, eroding the business’ balance sheet and renewing Chamunorwa’s resolve to discover an alternative store of value that could act as an inflation hedge.

“It was frightening for me, because it was the first time that inflation impacted me personally. As a business, we decided to pursue an alternative asset that would protect us in future. Conceptually, the focus was on the preservation of value,” he says.

During this process, Nhaka ultimately identified cattle as an optimal store of value. As a biological asset that would largely hold its value regardless of inflation rate swings, Chamunorwa says cows are a unit of value that Zimbabweans understand, and yield value over the long-term, owing to their potential reproduction rate of around one calf a year.

“In the same way Nhaka, as an institution, was immunised from inflation risk, we realised that we could offer to same to clients and retail the concept. This led to us refining the cattle-denominated investment product and launching it earlier this year.”

Described as a growth investment product, clients invest in Nhaka Life’s cattle-backed investment plan for a minimum of $5 a month with a return driven by the number of calves born each year.

Premiums are denominated in either kilograms of cattle (for smaller investments) or per head of cattle (for larger amounts). The policy is backed by a live herd of some 900-cattle that are owned and managed by Nhaka on four farms located about 80 km from Harare.

“We are able to immediately convert our clients’ investments into kilograms or heads of cattle because we already own the commercial cattle-breeding operation. As the cattle reproduce, their investment grows. If their animal dies, they are paid out from livestock insurance, which guarantees that the head of cattle or kilograms they have invested in never decreases,” he explains.

Should a client’s assigned heifer produce an offspring, the value of that calf is then added to their portfolio. If the cow produces a male calf, it is sold as a bull after two or three years, and proceeds are used to procure the equivalent value in female calves.

Cows that are unable to reproduce are sold and replaced with productive animals, while those that have reached the end of their reproductive years are sold and replaced with a younger breeding heifer of equivalent value.

Returns are also realised through the sale of high-quality specimens for genetics and breeding, the profits of which are returned to the investor.

After two years, clients are able to partially withdraw their investment at the equivalent monetary value and, after five years, are able to fully withdraw or physically collect the equivalent of their investment in liveweight cattle, should they prefer. 

Nhaka applies predetermined charges which allows it to share in the profit growth of the herd. “From an operations perspective, we make the decision about the sale of the cattle, but the client benefits fully from the proceeds,” confirms Chamunorwa.

Responding to the inevitable risks associated with a live asset, he says herd health is managed through frequent tick-control dipping, vaccinations, veterinarian oversight, quarantine measures and livestock insurance. - How we made it in Africa

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