Inflation-proof pensions from livestock finance

At UK Agricultural Finance, we pride ourselves on our knowledge and experience of the agricultural sector. As such, we like to keep informed on market trends within agriculture in the UK and beyond.

Inflation is a hot topic throughout the UK, but particularly for agriculture where the input inflation rate has reached almost 30% as of the most recent data from April 2022. But we are not sure if UK farmers will take inspiration from the tactics used by a Zimbabwean pensions firm to combat inflation with cows.

How do cows become a finance product?

Kelvin Chamunorwa wanted a way to create inflation-proof pensions, following the experience of his mother, who was a middle manager at a bank in Zimbabwe. She had worked at the bank for 25 years, contributing to her pension each month, as many typical wage earners do. But atrocious inflation, which reached an annual rate of 231,000,000% in mid-2008, wiped out her savings completely. By the time she retired, her pension was so small it was almost not worth collecting.

This experience pushed Mr Chamunorwa, an actuary trained in Britain, to develop a pension method that would be inflation-proof. His idea was more than a little unusual: cows, it turns out, are inflation-proof. They provide compound returns and are highly valued as a measure of wealth in Zimbabwe.

Mr Chamunorwa started his pension company, Nhaka Life Assurance, where the pensions are not denominated in Zimbabwe dollars, but rather in cows. The Zimbabwean government can not print cows, and hence they cannot decrease their value through inflation.

Savers contribute cash to their pensions, which Nhaka uses to buy cattle. The assets grow by breeding the cattle, which creates compound interest, as each cow can produce many calves in their lifetime. Savers using the fund are typical wage earners such as teachers and bank staff, just like Mr Chamunorwa’s mother. When a policy matures, clients can claim payment in cows or the cash equivalent.

Ruminants are inflation-proof and valuable

There is a long history in Zimbabwe of viewing cattle as a measure of wealth and a way to store value. Centuries of trading and barter with cattle have demonstrated their real-world value, which many Zimbabweans have more faith in than banks or modern currency. Mr Chamunorwa jokes that he has merely updated an old idea and added livestock insurance.

Many Zimbabweans have lost confidence in conventional finance, which makes Mr Chamunorwa’s scheme particularly suited to the country.  His pensioners appreciate being able to invest in physical assets that they can touch, feel and see. Indeed, clients can visit their assets on viewing days, when some of its 70,000 clients may visit the cows at Nhaka’s farm in Selous.

Nhaka’s farm is 75 km from the capital city, Harare. Mr Chamunorwa spends most of his time at his office in Harare, but he also likes to get out to the farm regularly to visit the cattle. There he can see the newborn calves; a physical representation of the investment growing and compounding as those calves grow to have their own calves.

While your typical British person prefers not to measure their wealth in cows, in this challenging economic environment, it’s always good to think laterally and appreciate the protection that real assets can bring.