Sustainable agriculture investment company Agrarius Sustainability Engineered has listed Africa’s first Shari’ah-compliant sustainability-linked Sukuk on the JSE.

This constitutes the inaugural issuance by the company under its R10-billion Shari’ah-compliant sustainability-related asset backed note programme focusing on the agriculture sector, which was registered and approved by the JSE during September.

The inaugural issuance, in terms of which Agrarius targeted to raise R500-million, was oversubscribed by investors. The proceeds from the issuance will be invested in green and sustainable projects and transactions in the agriculture sector value chain.

The Agrarius Sukuk, which is issued for a term of 36 months, will mature on October 28, 2025, and is expected to start making periodic profit distributions to investors from September 30, 2023. Shari’ah-compliant instruments forbid paying interest and instead reward investors through the sharing of profits.

The Sukuk has been listed on the Sustainability Segment, which was established by the JSE to assist companies to raise debt for green, social and sustainable investment projects.

Agrarius says a significant portion of the proceeds from issuances under its note programme will be invested in existing agri-businesses that are looking for capital to expand their operations.

“Agrarius’ mission is to transform the agriculture sector from an extractive economy to a circular economy by mobilising pools of capital to projects that meet both investor return targets and broader sustainability objectives,” says Agrarius CEO Werner Opperman.

Agrarius’ sustainability-linked Sukuk will lead to capital formation in the agricultural sector, which is currently severely under-served by traditional finance, says JSE capital markets director Valdene Reddy.

“The JSE encourages product innovation in the sustainability space. This issuance by Agrarius showcases an investment approach that differs from traditional models. We welcome the mechanisms to enable access to funding to grow pivotal sectors within the South African economy,” she explains.

The JSE launched the Sustainability Segment in June 2020 with the aim of providing a platform for companies to raise debt for green, social and sustainable initiatives. This year, the segment was expanded to allow for sustainability-linked bond issuances, which allow for the cost of capital to be directly linked to sustainability outcomes and impact.

The segment makes it accessible and easier for companies to list and trade sustainability-related instruments to raise funds for activities directed at sustainable development.

Following the listing, the number of sustainability instruments listed on the JSE’s Sustainability Segment has risen to 54, pushing up the segment’s market capitalisation to more than R32-billion.