By JUDITH NAMUTOWE –
PANGEA Securities Limited is in the process of establishing a note dubbed Musika Grain Fund financing, with start-up capital of not less than US$20 million.
The fund would be financed by the Department For International Development (DFID) for agriculture companies to tap into for the purchase of their annual grain requirements.
Company chief executive officer Ceaser Siwale said this when he presented a document titled, ‘Musika Grain Fund’ to delegates at the just-ended Zambia International Investment Forum (ZIIF) in Lusaka.
Mr Siwale said that an agriculture company would offer its warehouse receipts as collateral to the investors involving an underwriter who accelerates access of funding to the issuers, while the Zambian institutional investors will go through the learning curve.
“Introduction of a new critical instrument will enhance grain and capital markets simultaneously. This structure will show industry support and provide comfort to investors who require participation,” Mr Siwale said.
He said an issuer of a grain note would utilise the already existing Lusaka Stock Exchange (LuSE) to list the notes to attract market participation through a securitised note that has been approved and regulated by the Securities and Exchange Commission (SEC).
Mr Siwale explained that most of the Zambian institutional investors were restricted by their investment guidelines to invest primarily in financial instruments registered with the SEC and listed on Lusaka Stock Exchange (LuSE) but this would provide a structure which local institutions were familiar and comfortable with.
Mr Siwale said declining maize production trends add pressure on large scale local purchasers to procure their annual off-take requirements at harvest before shortfalls in supply causing prices to rise significantly.
“In order to procure annual maize requirements agribusinesses need help from the capital markets to source funding for these large one-off purchases,” he said.
Mr Siwale said borrowing from the commercial banks for the purchase of grain had become prohibitive.
Through grain grading and storage systems it allows small-scale farmers to compete in the same markets with commercial farmers and deepens the capital market.