Vuka Trustee Hamilton Madlala showing off the new bank card delivery vehicle delivering low-cost Wizzit Bank cards to Savings Union Members.
In the US credit unions were formalized in 1962 and by 1984 they owned 65% of all commercial property in the US. Can you imagine the overall economic impact in Africa if local collective savings groups were empowered to do the same?
Today we had a chance to connect with Natalie-Ann Powell, the founder of Vuka Trust. Her organisation has developed a program which provides a management and administration system for informal Savings and Business groups – from Co-operatives to Stokvels or “Village Banks” and can be linked directly into the banking infrastructure of any country.
Tell us about yourself and how you ended up working on Vuka?
“I started and ran a successful marketing and sales company – predominantly in the insurance space – for many years. I started the company young and at 25 I realized I had achieved that list of “goals” one makes growing up, a house, car, etc… but didn’t feel like I had reached my purpose or my passion. Soon after that, the group that inspired the research into Vuka arrived on my doorstep.”
What attracts you to the project and why do you think it has so much potential?
“Firstly, its profitable. With reasonable charges, the business generates a significant return, which then enables the Vuka Trust (as 51% owner of the project) to contribute those funds back into communities. I love the vision of a project that sustains itself and does not have to be dependent on donor funding.
Secondly, this project only makes available to Africa what has been available in the US and in most parts of Europe for years! The potential of collective savings and business groups has a proven track record globally, but has never been successfully supported and advocated in Africa – with an African flavor. The people of Africa naturally form collective savings groups and business units – but without adequate support and guidance, these groups never deliver their true potential. This project changes all of that.”
How is your venture different than existing/competing markets solutions?
“There are no competitive solutions at all. Our first efforts in 1998 were to look for a solution that we could make available to groups that would need it – but since there was nothing, we were left with no choice but to create our own solution. After years of research, and now 5 years of active operation, we know that what we have developed not only works but is entirely unique – even in environments where we assumed there were solutions in place – like the UK, where we’ve recently learned there is nothing available like this offering.”
Can you tell us about the major milestones to date?
“Since we had no template to work from, we started with the paperwork and a generous and infinitely capable lawyer donated months of his time to assisting us to form the legal framework of the project. Parallel to this we got involved in products that were addressing other expressed needs of the same market and to get a sense of what the market really needed. We met with existing Stokvels, Co-ops and groups of individuals wanting to create businesses and got to understand the dynamics of their groups. Once we had a workable constitution and framework in place a developer volunteered to construct a data-base platform for the financial back-end system. And then finally a bank emerged with a low-cost solution that was willing to work with us. Each of these were significant steps along the road.
Once the pieces were in place, we installed our first Savings Union and presented the concept to 36 employees of a Government Department. We were stunned with the resulting 800+ phonecalls we received from the uncles, cousins, nieces, nephews and parents of those who wanted to attend that first presentation. Our second and third installations each got easier and now at 18 operating groups our team clicks through its processes like clockwork. There is not an issue or challenge that we have not encountered in the last 5 years and we now have upfront parameters in place to deal with all of them.
Our next milestone was the award of the grant from the South Africa government. That took many meetings with teams of consultants from various different government divisions – all pulling the software, the model and the processes apart. Winning the grant was the first official recognition from Government that it truly did support the Collective Savings group environment and this was a “win” on so many levels. Shortly after receiving the Grant documents, a contributor agreed to sponsor the first phase of the Grant and that submission and claim was another significant milestone.
In between all of this, the recognition of the International Trade Center, UNIDO and the Common-wealth Business Counsel were all significant milestones as I was invited to speak at various Africa Development summits on Collective Savings/Business Groups in Africa. The delegates agreed that this model addresses real challenges in Africa and was a significant confirmation for our work.”
What have been the major challenges/barriers you have had to overcome?
“In the early years finance was the significant challenge. Private sector saw the degree of public benefit in the model and suggested we apply for donor funds somewhere. Donor organizations saw the significant profits the model would make and directed us back to the Private Sector. It took us a while to narrow down the range of appropriate investment for the model – especially considering that the business is structured to be majority owned by the Vuka Trust 1) to ensure the ongoing integrity of the model and 2) to protect the model against “buy-out” by financial institutions that may see it as a possible threat. We know now that the investor we seek is either an individual or independent organization that is a Social Entrepreneur and can understand that delivering positively into communities can also be profitable.”
You are looking for funding, how much do you need and how will this allow your venture to progress?
“At this stage we are looking for R3.6M or 360.000 Euros. This will enable us to complete the online software which is already 1/3 developed and launch it. Upon launch – we have accumulated commitments from groups whose potential membership base exceeds 1.4 million individuals that we could never have reached through our offline/manual operations.
Once we have our systems launched, and we have secured more than 10.000 memberships to our online system, we have commitments from large-scale investors willing to invest funds of 3 million Euros and upwards. This growth capital will enable the next development phase where we intend to take the business model and expand into other countries. We have secured commitments in 5 Africa countries for local in-county partners. We would also like to investigate the possible application of the model in certain European markets.”
Why should an investment in your venture be made?
“Our model projections are conservative. We have in our projections assumed a take-up of 500 000 members over 5 years. Since there are presently 16.3 million active stokvel members in South Africa today, that estimation is really low. But if we just achieve that – the ROI for the Investor (who would take up 50 shares in Vuka SUMS for the 360.000 Euros) would be at least 1.5 million Euros within 5 years (400% return!). One could quite rationally double that return based on the potential market and the numbers of the client groups already secured. And that is only South Africa – at least the same return should be achievable in each other country we reach across Africa.
But we would hope than an investor would not only be motivated by the returns, but the significance of the impact this model has on the lives of ordinary African people. Access to low-cost loans and high returns on savings is just to start – then a successful model of financial education and the delivery of true economic empowerment.”
What are you offering as a return to the investor?
“We have found that each investor has their own model for investment so of course we are flexible in how the offering is put together. Generally speaking we are offering fifty shares (5%) of the Vuka SUMS Company for the investment requested. Ideally on a capital-equity basis but we are willing to discuss a debt-equity agreement.”
Where do you see the business in 3 years?
“With offices throughout South Africa and in at least 12 other African Countries. Ideally we see the business model as a place where great co-operation, mentorship and support could be delivered to communities – but the costs of that would be absorbed through the Vuka Trust’s shareholding in the model. By creating a highly profitable platform, we hope to attract superior IP and support to the model to ensure that all Savings Union and Co-operative members that make use of this product can benefit from the experience and knowledge of individuals attracted both by the public good, but also the returns.”
What role does VC4Africa play for you?
“It is a challenge in this day to narrow down a target investment group. On most such sites there are hundreds of possible investors and they have such a range of focuses. We feel VC4Africa provides an automatically pre-qualified group of investors that are familiar with Africa, not intimidated by it but see the potential of the African continent, and that is already a significant step forward in the process of finding the perfect match. We also feel that moving forward, this initiative will make an excellent service-partner to our own work with entrepreneurs, Co-operatives and communities and are so impressed at the work and dedication that has gone into developing this platform.”
A final message to fellow members of the community?
“The business environment gives out mixed messages all the time – persevere and go against the grain – but don’t swim against the current. Success is hard they say, but surely if you identify a real need and find a way to provide for that need then the demand-supply dynamic will work for you and not against you. This has been the key to the success I have achieved in business – finding a real, demonstrated need and matching it to a great supply. In the first part of my career, that was all my company did and we made fortunes doing so. The Journey of Vuka changed that – here we saw a real, glaringly obvious need – that was not being supplied anywhere – and that incongruity baffled us. So we went about the task of creating the product to answer this need.
So to entrepreneurs I say – find a need and find a way to supply it with grace and ease and success will undoubtedly be yours!”
What can we learn from your business?
“To anyone wishing to do business in Africa – I have a secret to share. Only a few of us know this secret but its precious and of inestimable value. Africa is not the “poor cousin” of any world. Africa is the precious well-spring of the world – its true beauty and wisdom has just not been discovered yet. In the west they glorify the individual, in the east, whole nations are placed above all else – but in Africa it is the collectives that make us strong. Extended families, communities and groups of committed individuals are stronger together than any one person is as an individual. And this is just the first of the many pearls of wisdom Africa has to share with the rest of the world. Prepare to be surprised at the abundance that Africa has to offer!”
Thanks! We look forward to following your progress and to hearing the reactions, thoughts and questions from fellow members of VC4Africa. Certainly, we agree the collective is a powerful mechanism that is too often overlooked. It’s great to see entrepreneurs tapping into such promising foundations. See Natalie-Ann’s profile and check out her venture.