Report of
the Portfolio Committee on Economic Development on its oversight visit to the
1.
Background
People
all over the world have found different ways to co-operate in the production
and distribution of goods and services, across different types of economic
systems. But particular forms of such co-operations (co-ops) were formalized in
the nineteenth century
Despite challenges of many kinds, and
diverse trajectories of development, the co-op model has continued to inspire
people, and co-op movements have endured and thrived in many countries of the
world.
2. Introduction
The
South African Micro-finance Apex Fund’s (Samaf) mandate is to contribute to
Government’s poverty reduction goals by acting as a catalyst for the
development of an effective micro-finance by:
·
Providing support
for the establishment of sustainable micro-finance institutions that can reach
deeper and broader to the enterprising poor;
·
Facilitating the
establishment of an enabling environment for effective financial intermediation
and creation of working markets for the enterprising poor; and
·
Building a
strong, effective and efficient Apex Fund.
The
Portfolio Committee on Economic Development (the Committee) undertook the
oversight visit to ascertain if the funding provided by Samaf is contributing
to job creation and poverty alleviation.
3.
3.1. Sibanye Cape SACCO Limited
Sibanye
Cape SACCO (Sibanye) is legally registered with the Registrar of Co-operatives
as a bona fide savings and credit co-operative. The Sibanye is in the process
of registering with the Cooperative Bank Development Agency (CBDA) as per the
Cooperatives Bank Act of 2007.
Sibanye
is a member driven organization that empowers people to become self sufficient
by providing products and services through encouragement of regular savings to
individuals and their families who live and work in the
Sibanye
is run by a board of directors elected by the members during a properly
convened general meeting.
Sibanye
provides a number of saving products to their members, where more than R6m have
been accumulated this far. They also provide funeral plans. They offer their
members loans for productive and provident reasons which are registered with
the National Credit Regulator. Sibanye charges interests to micro-enterprises
at 30% and other loans 40%, on the reducing balance system. The loans range
from short term 3 months to one year and; longer term two to three years.
Sibanye
SACCO partnered with SAMAF in 2007 to expand its membership and loans program.
They received a R2 million lending facility from SAMAF and a capacity building
grant of R1m. Since their partnership with SAMAF in 2007:
·
They have given
out more than 5 304 loans to the value of R5,2m.
·
Sibanye currently
has 4 163 active savings accounts and 2 632 members.
·
The funding
received from Samaf has also given them the opportunity to launch their Micro
Enterprise loan project, where they currently have 84 groups with five members
each. This project is based on the Grameen model and they have disbursed more
than R800 000. The plan is to recruit 300 more groups in 2011 and it is
envisaged that they will operate in all areas, townships and locations.
The
member profile of SC SACCO consists of:
|
Number
of Groups |
503 |
|
Number
of loans |
1
521 |
|
Active
savings accounts |
4
163 |
|
Total
savings |
R5
182 381 |
|
Total
loans |
R4
856 063 |
|
Total
loans disbursed since project |
R5
210 573 |
|
Repayment rate |
76% |
Committee observations:
·
Bad debt remains
a challenge for the FSC, which is currently at 20%.
·
Samaf’s
assistance to Sibanye has contributed to its sustainability and viability.
·
The aim of
government funding is not for FSCs to enrich themselves, but to assist the poor
and the needy and therefore the interests charged by FSCs should not be too
excessive (in the case of Sibanye at 40 percent on the reducing balance sheet,
which still comes to between 26 – 28%).
The interests charged by Sibanye to its clients need to be reviewed.
·
The committee
commended Sibanye for a job well done and the excellent infrastructure that are
currently in place to assist those in need.
Visiting Sibanye’s clients
a.
Thembeka Mokati - Spaza Shop
Ms Mokati started her
business 1993 by selling cushions and managed to support herself for sixteen
years, but never had the opportunity expand because the profits from her
business never allowed her to do so. She formed the Sizimisele group with
4 other ladies from her area and the loan she received from Sibanye
allowed her to open a spaza shop and selling sheep-heads which she cooks
over the weekend starting Thursdays. She’s doing very well and hopes to obtain
a container on one of the main roads were she can run her business
from.
b.
Thandazwa Lumkile – Hairdresser
Ms Lumkile recently
started a hairdressing business with only her personal hairdryer and a
shack in her yard. She made an application with the Siyanda Group in order
to buy her a washbasin, hairdryer stand, mirrors and various products needed to
provide quality service to her clients. She has done extremely well as her
profits allowed her to open a hairdresser in
c.
Ellen Pontshi - Perfume/ Shebeen
Ms Pontshi became
unemployed two years ago and being unable to find other employment she
started her own business by selling healing foot pads with plans of perfume in
the future. She subsequently heard about Sibanye and spearheaded the process of
getting a group together. She managed to do so and started her perfume
business but soon realized that this would not be able to support her during
the month as most people took it on order and payment was only
received at the end of the month. Subsequently, she decided to open a small
shebeen in order for her to have cash-flow during the week and found that there
is more money to made with business so she has applied for her liquor license and
is in process of building a shebeen on her property.
3.2. Tetla Development Services
Tetla’s
central office is in Observatory,
The
core business of Tetla is to make credit available and accessible to members.
Tetla
supports women who are struggling to access start-up capital. Most of the women
supported by Tetla are unable to access loans from commercial banks and many of
these women rely on Tetla to strengthen and expand their business. Most of
Tetla’s clients have survivalist income generating projects, mostly operational
in the informal sector, where they are selling their products in the local
markets only. Most of their clients have minimum access to primary and
secondary education. Eighty percent of women who receive loans from Tetla are
also involved in their traditional roles as mothers, housekeepers and in some
cases the head of households.
Tetla
uses a solidarity group lending methodology to lend to groups of five to eight
borrowers of new and experienced business people. Borrowers are then expected
to co-guarantee each other’s loans. The loan term ranges from 4, 6, 8 and 12
months and the loan sizes ranges from between R500 to R10 000.
Tetla
charges a flat interest rate of 27,6% per annum plus fees.
Tetla’s
loan book as at the end of December 2010:
|
Number
of groups |
271 |
|
Number
of borrowers |
1
410 |
|
Total
loan outstanding |
R1,5m |
|
Total
loans disbursed since inception |
R16m |
|
Repayment
rate |
97% |
Visiting Tetla’s clients
a. Mrs
Nosakhele Doris Feya - New and Second
Hand Clothes Hawker
Ms Feya was employed by a micro
entrepreneur who was selling clothing in town.
When that business closed down she heard about Tetla and joined a
group. She used her loan finance to
purchase second hand clothing and sold these door to door. Her business grew and she added fast selling
items like ladies underwear, kitchen towels and children’s toys. She received
her first loan of R900 in 2008 and her current loan is R3 000. She sells from a stall at a street corner and
at pension points during pension days.
She has two children and one of them is studying business management at
a local college.
b. Ms
Yandisa Mlangeni - Gas Cylinder Refill
Ms Mlangeni is a single parent who
studied business management and wanted to start a different type of
business. She operates from a container
where she sells gas to the community.
She received two loans from Tetla and used these to increase her
stock. She wishes to acquire a bakkie to
enable her to deliver gas to clients in the evening because that is the busiest
time and she loses sales because she cannot operate at that time.
c. Ms
Yoliswa Christina Msawuli - Dressmaker
Ms Msawuli sells fried fish and makes
pillows and comforters. She operates
from home. She sells her products to
local people and Zimbabwean hawkers.
d. Ms Celiwe
Sobetwa - Fruit and vegetable hawker
Ms Sobetwa has a stall where she
sells from. Through her business she
supports 7 people.
4.
4.1. KwaZulu Ladies Empowerment
KwaZulu Ladies Empowerment Financial
Services Cooperative was established in August 2007 as a savings and investment
club by a group of women who are members of a church called Charisma Worship
Centre in
The institution is
currently operating from an office located in
The joining fee was originally set
at R50 per member when the savings club was established. The joining fee was
eventually changed to R200 per member. The institution has savings products of
R50, R100, R150 and R200 per month per members.
The savings products were designed with a view to cater for the
different income levels of the members. It is compulsory for savers to be a
member first before they start saving with the FSC. The non refundable joining fee is R200.
The application for the license to trade as financial services
cooperative was approved in April 2009 by the Registration Regulation
Stabilizing Committee (RSSC) of Samaf and was issued a deposit taking
licence by Samaf and a cooperative certificate by CIPRO.
In 2009, the board of the FSC took a
decision to introduce loans products for eligible members. The loans products
were introduce in October 2009. The motive to introduce loans products to
members was twofold; one was to start generating income through loan interest
in order to develop the business financially.
The second reason was to pilot the loans offerings in order to learn
from the experience and thus prepare themselves for future business
activities.
The FSC’s membership as at end of
December 2010 was 485 with a savings value of R259 041. The members are women who
are operating informal businesses, working and earning low income (below R3 500)
and social grant recipients. These
members are living in previously disadvantaged areas of eThekwini Metro
areas. The FSC has managed to provide 42
loans of which 45% was for business enterprise.
Visit
to one of KwaZulu Ladies’ clients
Dineo
Khumalo – tuckshop, concrete block making, selling of livestock
The business of Ms Dineo Khumalo is
situated at her home in Mpola in Marianridge. Her business consists of a tuckshop,
concrete block making, selling of livestock which includes goats, sheep,
chicken and cattle.
She is a regular saver of KwaZulu
Ladies Empowerment FSC and she joined the institution in 2008. KwaZulu Ladies
Empowerment FSC provided her with a loan of R20 000 in October 2009 which she
used to buy stock worth R4 000 and she used the balance to purchase building
material to improve her house. The loan term was six months; however she
managed to repay it in less than six months.
She subsequently borrowed an amount
of R25 000 payable in twelve months from KwaZulu Ladies Empowerment FSC in
March 2010. This loan was used to buy stock. She repaid the loan in ten months.
She has borrowed an amount of R30 000 in January 2011 to purchase stock and
improve her house.
4.2. Kwa-Machi Financial Services
Cooperatives
KwaMachi FSC is located at KwaMachi
village which is approximately 30km away from the nearest town of
The institution was issued
a deposit taking licence in 2009 to comply with the registration requirements.
KwaMachi FSC has a fully functional board which holds board meetings monthly.
KwaMachi FSC also holds Annual General Meetings and the last one was held on
the 28th September 2010. The institution has employed three staff
members (a manager, a savings teller and a loan officer).
The institution is offering savings
and microloans to its members. Each member pays a joining fee of R30, and
members are encouraged to save a minimum of R50. Each member has a savings
book, and loans are issued to members based on their savings. The micro-loans
provided range from R100 to R10 000. The institution is also offering money
transfers from commercial banks to the member’s account at KwaMachi FSC.
The relationship between KwaMachi
FSC and Samaf started in 2006 when Samaf funded KwaMachi FSC by providing the
institution with a total funding of R1.3 million which consists of an
on-lending fund of R480 000 and a capacity building fund of R860 000. KwaMachi
FSC has utilized the capacity building fund for training, cover operational
costs, acquiring office furniture and office equipment.
KwaMachi FSC has grown its membership from 327 in September 2007 to 785 in
December 2010 which reflects a growth of 140% in just over 3 years. The
institution had a savings value of R401 256 in September 2007 and it was R521 907
in November 2010 and the slow growth could be attributed to the economic
depression suffered in 2009 and the 2010 public service strike. The December
2010 savings dropped to R328 697 due to withdrawals for usual festive season
spending. The cumulative disbursement since inception was 104 loans in
September 2007 valued at R156 676 and has grown to 683 loans in December 2010
valued at R1 563 250. The loans were
issued from R360 000 which was disbursed from the Samaf loan of R480 000.
Committee
observations:
·
The profit which KwaMachi makes is ploughed back into
the loan which they’ve received from Samaf.
·
Monthly reports are forwarded to Samaf.
·
KwaMachi FSC visits potential clients to assess the
viability of their business before the loan is provided.
·
Board members do not receive a salary, but receive a
payment of R400 after 6 months, which basically acts as an incentive to attend
meetings.
·
There are various other commercial banks, which the
FSC can utilise (they are currently utilising First National Bank). The
delegation is of the opinion that other services and products offered by other
commercial banks must also be investigated, where the FSC may save banking
costs. Postbank can also be an option.
·
Interests to clients of the FSC are charged at 5%.
Interests that the FSC is paying to Samaf is 4,4% per annum.
·
The FSC do not provide loans above R20 000.
·
The building extensions are paid for from the profits
made by KwaMachi FSC.
Clients visited
Mrs B
Madiya - Happy Days Poultry Project
The poultry project is
led by Mrs B Madiya, which was started by volunteers in the area of KwaMachi.
The project started by selling 250 chickens per month to the local community
before they received a loan from KwaMachi FSC. They complemented their income
by selling chicken mash and sawdust. They received their first loan of R20 000
from KwaMachi FSC in 2007 and their sales have grown to 1000 chickens per month.
They sell their chicken to local shops and supermarkets. They have employed
three fulltime employees. They have expanded their business into cultivating
vegetables. Their vision is to establish a chicken abattoir.
Mr
B Mpofu – Tuckshop owner
Bongani Mpofu was
unemployed after finishing matric and he opened a spaza shop to generate
income. He started the spaza shop by buying stock of R1 000. KwaMachi FSC
provided him with a loan of R4 000 in 2007 to assist him to buy more stock. He
again borrowed an amount of R10 000 in 2008 to extend his spaza shop. This loan
was also used to acquire equipment which included a snooker table, a jukebox
and installation of public phones. He also sells airtime and prepaid
electricity cards. He has employed two people after receiving the second loan
from KwaMachi FSC.
Mr
K Mteshane - Focus Tavern
Mr K Mteshane was
unemployed after finishing matric and he decided to open a Tavern in the Phumza
ward 10 of KwaMachi. KwaMachi FSC provided him with a loan of R3 000 to buy stock.
He received a second loan of R5 000 in 2008 which he used to buy a snooker
table and a jukebox. He borrowed an amount of R30 000 in 2009 to extend his
building and to buy more stock. He has managed to employ three people who work
for him permanently.
Thobekani
Sewing Centre
This is a group project
which was started in 1990. The group had one sewing machine when it started the
project (at this stage only aprons was produced). The group was operating from
a rondavel, due to the lack of financial resources.
KwaMachi FSC provided
the project with a loan of R3 000 in 2006, and this loan was used to buy sewing
material. The loan assisted the project to grow its business, by buying more
sewing machines and sewing material. Their product range grew to include
curtains, table cloths.
KwaMachi FSC provided
the project a further loan of R5 000 in 2008, and the project added more
products in its range which included school uniforms. They have managed to
build a six room building from which they are currently operating. One of their
customers is
4.3. Siqalumnotho Financial Services
Cooperative
Siqalumnotho Financial
Services Cooperative operates in
Siqalumnotho FSC was established on 28
February 2009, supported by organisation called CORD a consultancy
appointed by the Department of Agriculture KZN to mentor small scale farmers to
operate their businesses successfully. Siqalumnotho FSC was previously known as
Ncedisizwe Saving Club and the name was eventually changed to Siqalumnotho FSC
after SAMAF requested the FSC to change its name, because the name Ncedisizwe
was used by SAMAF former client. The aim was to prevent confusion regarding the
name Ncedisizwe. The institution was initially formed to service small scale
farmers but they have widen the net to include micro enterprise, and low income
earners. The institution was formed with the objective of addressing the
challenge of access to finance faced by the community members of
Siqalumnotho FSC was registered as
financial services cooperative in June 2010. The institution had a membership of
266 in December 2010 with a savings value of R15 314, after starting the
savings activity in August 2010 with a minimum savings of R50 per member. The
institution has not started to issue loans, and loans will be issued after the
institution has been trained on loans management, as well as after enough
savings have been mobilised that will be used to
pilot loans. The institution has
eleven board members who were elected in an Annual General Meeting held on the
4th of May 2010. Board
meetings are held monthly.
An application of Siqalumnotho FSC
for savings mobilisation of R200 000 was approved by SAMAF in December 2010
which will be used to develop policies to operate an FSC, train board and staff
members, installation of accounting systems, produce financial statements,
render internal and external auditing services, develop management systems to
record loans and savings transactions, purchases of office equipment and
furniture and subsidising operating costs.
Committee
observations
5. Findings
6.
Recommendations
The South African Micro-finance Apex
Fund (Samaf) should endeavour to ensure that its lending criterion is
standardized in all provinces.
7.
Conclusion
The Committee wishes to thank the
acting Chief Executive Officer, Mr K Naidoo, the Provincial Manager of the
The Committee would also like to
thank all Financial Services Cooperatives, and their clients which the Committee
visited for sharing their experiences with the Committee.
Report to be considered.