Senior Business Reporter
Cass Saddle’s Agriculture Exchange Traded Fund (ETF), made up of listed agricultural sector equities, became the fifth ETF to list on the Zimbabwe Stock Exchange (ZSE) this year with the local bourse anticipating more listings before year end.
The ETF, which listed by way of introduction, took off with a seed capital of $36 199 404 and also became the fifth overall securities listing on the ZSE this year, after it was officially registered on the exchange yesterday.
Lands, Agriculture, Fisheries, Water and Rural Development Deputy Minister Davis Marapira in a speech read on his behalf by Bwenje Taderera, the chief director strategic planning and business development in the ministry, said innovations as the Cass Saddle’s agriculture exchange fund are instrumental for improving access to capital for investment into the various value chains in the agriculture sector.
“The creation and listing of this Agriculture Exchange Traded Fund represent the marriage between agriculture and financial markets, which is a very important step towards promoting agriculture as a business, in line with the Agriculture and Food Systems Transformation Strategy (AFSTS).
“For this reason, we celebrate all efforts by our financial market players to align with this vision of improving our economic fortunes through the agriculture economy,” he said.
Deputy Minister Marapira said that the listing also enabled the broader community to benefit from profits that are generated in the agriculture economy.
“As the NDS 1 seeks to facilitate appropriate funding for agriculture, the capital markets also play a pivotal role towards home grown equity based financing solutions for agriculture. Therefore the market should consider listing more agriculture related companies to achieve more benefits,” he said.
An exchange traded fund (ETF) is a marketable security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can.
According to the Cass Saddle ETF prospectors, a seed initial capital of $36,199 billion has been deposited by Cass Saddle Asset Management in the weights, comprising 36 199 404 units.
The first 10 counters of the index are National Foods with a weight of 28 percent, BAT 15 percent, Tanganda 12 percent, Hippo Valley 11 percent, Seedco 9 percent, TSL 9 percent, CFI 8 percent Dairibord 3 percent, Zimplow and Ariston 1 percent respectively and Cash 3 percent.
“The agro ETF will be listed on the ZSE and additional investments will be used to purchase shares on the market as addition to the portfolio. Investors can deliver a basket of stocks in the exact weight of the fund through an authorized participant or buy units in the ETF through a registered stock broker whenever they wish to invest,” read part of the prospectors released ahead of the listing.
According to the prospectus, CABS Custodial Services will be the ETF custodian; thus it will hold the assets of the fund, whilst CABS Trustee Services will be the trustee.
Settlement of trades in the units will be done in electronic format in accordance with the settlement modalities approved by the Zimbabwe Stock Exchange.
Deputy Minister Marapira said the agricultural sector is responsible for feeding the nation and providing livelihoods to 67 percent of Zimbabwe’s population in rural areas, and is also vital for recovery and growth of the economy.
Moreso, enhanced agricultural productivity forms an integral part of the national economic blueprint, the National Development Strategy 1 running through 2025.
“To this end, it becomes imperative that this agricultural thrust be reflected even in our financial markets,” he said.
He added that as part of the Government’s journey towards transforming the agriculture economy from a US$5.2 billion economy to an US$8,2 billion economy by 2025, innovative financing for enhanced agricultural productivity is absolutely essential.
ZSE chairperson Caroline Sandura said the agriculture sector is well documented as being one of the key pillars of the Zimbabwean economy, contributing an average of 10 percent to gross domestic product over the past 5 years and slightly over US$1 billion in export receipts in 2021.
“The agriculture sector also supplies up to 60 percent of the raw materials required by industry. It is therefore commendable that Cass Saddle Asset Management picked this important sector for their ETF,” she said.
She said that the year 2022 has so far been the best year in terms of new listings for the ZSE as the bourse anticipates new products and listings.
“The increase in listings is clearly coming from the new securities that, we as ZSE, deliberately promoted in our quest to diversify the security offerings. ZSE management and staff are currently working with various potential REIT issuers and we look forward to it being the next source of new listings, “she said.
Mrs Sandura added that ETFs have a number of benefits, including portfolio diversification, liquidity and relatively lower management fees.
Cass Saddle Asset Management chief executive Calvin Mugabe said that the ETF would offer diversification and the benefits are tremendous. It also allows smaller players to participate in buying and selling of shares and it is our role as financial intermediaries to ensure that there is credibility in the agriculture sector,” he said.
Mr Mugabe added that the ETF is also a way of deepening the financial markets credibility bringing instruments into agriculture so that more investments are channeled into the agriculture sector.