ATC110330: Report on Oversight Visit to Western Cape & KwaZulu-Natal focusing on impact of financial services co-operatives funded by South African Micro-finance Apex Fund’s

Economic Development

Report of the Portfolio Committee on Economic Development on its oversight visit to the Western Cape and KwaZulu-Natal focusing on the impact of the financial services co-operatives funded by the South African Micro-finance Apex Fund’s, dated 30 March 2011


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 Europe, against the backdrop of the Industrial Revolution and significant social change. These co-ops were seen as social and economic alternatives to the impacts of emergent industrial capitalism.


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. Western Cape Financial Services Cooperatives


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 Cape Town area. Members are in various areas around the metropole, which include: Belhar, Khayelitsha, Gugulethu, Retreat, Kraaifontein, Kuilsriver, Bellville, Atlantis etc. Their main office is in Bellville and branches there is branches in Gugulethu, Khayelitsha and at University of the Western Cape (UWC).


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


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



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 Delft and she also plans to start distributing various hair care products.  



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, Cape Town. They have 3 operating branches located in Cape Town, Somerset-West and Kraaifontein. Tetla currently has 8 fieldworkers, 1 loan verifier, 4 field supervisors and 3 central office staff. The accounting and IT support is subcontracted.


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


Number of borrowers

1 410

Total loan outstanding


Total loans disbursed since inception


Repayment rate



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. KwaZulu-Natal Financial Services Cooperatives


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 Durban.  The savings and investment club was formed as an outreach project of the church targeting women living in the previously disadvantaged areas of the eThekwini Metro areas.  The club was opened to women living in disadvantaged areas of eThekwini Metro areas irrespective of their religious and political persuasion.  The club’s main objective when it was formed, was to empower women coming from previously disadvantaged areas by encouraging the culture of savings and investment. The objective of the institution, as it registered as an FSC, has evolved to be to empower women by encouraging the culture of saving and provide affordable loans to members.


The institution is currently operating from an office located in Commercial City Building in Durban. The FSC operations are run by three staff members.


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 Harding. It is about 2 hours drive fromDurban. KwaMachi FSC was established in 1999 as a savings club where members put their savings together with an intention to withdraw their funds at the end of each year. The institution introduced small scale loan products after they were registered with FINASOL (a defunct regulatory body).


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 Singisi Forest to whom they supply aprons for their staff.


4.3. Siqalumnotho Financial Services Cooperative


Siqalumnotho Financial Services Cooperative operates in Madadeni Township in the town of Newcastle, which forms part of the Newcastle LocalMunicipality under Amajuba District Municipality. The institution used to operate from Sizakancane Hotel at Madadeni Township, and have moved to Lutheran Church in Madadeni Township. The institution has identified offices at The Checkers complex at Madadeni Township and is on the verge of signing a lease agreement.


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 Madadeni Township.


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

  • Siqalumnotho is the only financial services cooperative (FSC) in the Newcastle region.
  • Current services provided for Siqalumnotho FSC only includes savings. The aim is to extend the services to loans as well.
  • Samaf provided the FSC with a R200 000 on-lending and capacity building loan. The R200 000 was utilized for operations (e.g. securing offices, equipment etc.)
  • A concern of the committee is the fact that Samaf will provide further funding to the FSC once more savings have been mobilised (which will be used as a criteria for the grant). If the FSC does “not prove itself”, it may not receive further funding from Samaf.
  • A provincial forum, consisting of the Small Enterprise Development Agency (SEDA), Samaf and the Provincial Department of Economic Development was started, but no further development materialised after this.
  • The FSC is running the risk of non-payment of its loan from Samaf.
  • The FSC struggled to secure proper offices (they had a mobile office). Efforts to secure property from the local municipality were unsuccessful.
  • Challenges of the FSC include: operations and marketing


5. Findings

  • Development of a savings culture – from the clients visited (all of them are saving at the various FSCs) it is evident that the creation of a savings culture in South Africa is crucial for economic development.
  • Importance of savings – clients (especially those in the rural areas) who saves with an FSC is in a position to access funding to start their own business which could lead to an improvement in their socio-economic conditions. The money they borrowed are used to meet their basic needs, e.g. food, shelter, health, education etc.
  • “Second Tier” banking industry – FSCs have created a “second tier” in the banking industry.
  • Role of FSCs in economic development – members of the FSC are in a position to establish a micro-business both rural and urban areas which has raised their standard of living.
  • Funding provided by Samaf – Samaf provides capacity building grants to FSCs, provides these members with training on various skills like leadership and management skills, record keeping, importance of savings and basic financial management.
  • Assistance to vulnerable groups – the development of FSCs provides financial service to vulnerable groups including woem, the youth and the disabled. This has helped to elevate their status in society through economic and asocial empowerment.
  • Interests charged by FSCs – interests charged differs by the various FSCs, in other words there is no consistency with regard to the rates charges, e.g. some charge rates per month and others per year.
  • Application of Samaf rules and regulations – the application of Samaf rules and regulations differ from province to province.


6. Recommendations

The South African Micro-finance Apex Fund (Samaf) should endeavour to ensure that its lending criterion is standardized in all provinces.

  • The Economic Development Department should investigate and examine the possibility of regulating Samaf.
  • Some of the visits to FSCs and clients will be unannounced.
  • When conducting its oversight visits in the future, Samaf needs to arrange separate meetings (as identified by the committee) between the committee and the clients, and between the committee and the FSC.
  • Samaf should brief the committee on its costs and procedure structures to the FSCs and of the FSCs to the clients.


7. Conclusion


The Committee wishes to thank the acting Chief Executive Officer, Mr K Naidoo, the Provincial Manager of the Western Cape, Mr M Alard, and the Provincial Manager of KwaZulu-Natal Mr T. Madlala, for their assistance during the oversight visit and for making the visits possible.


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.



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