South Africa has a deregulated and unsubsidised agricultural sector, which means producers are increasingly looking to hedge against adverse weather conditions, thereby minimising losses, Sacharowitz added.
The contract was developed in partnership with Element Re, the weather risk division of Bermuda-domiciled financial services company XL Capital.
When Gensec announced its plans to set up a weather derivatives desk in March, it had originally planned to work in partnership with Missouri-based energy company, and weather risk pioneer, Aquila. Since that time, Aquila has abandoned its entire trading operations, including weather risk.
As well as agricultural companies, Gensec is also set to target energy firms since the South African energy market is in the process of deregulation, said Sacharowitz. Around 10% of South Africa's electricity market should be opened up for competition this year, with a further 20% next year. As private companies compete for revenues, they will increasingly seek innovative financial risk management solutions, Sacharowitz claimed.