Vumelana Advisory Fund works in the field of land reform by creating public-private partnerships that ensure communities that have been awarded land under the land reform act are indeed able to make productive use of their land.
“In making land productive it would make the communities’ restored rights real,” says programmes manager Mazwi Mkhulisi. “It also helps alleviate the consequences of asset destruction and ensures that they benefit from their new ownership by using it to create employment, income and skills for their community.”
He explains that in order for this goal to be achieved, communities need access to finance; the necessary skills to manage the business; and markets for the resultant goods and services. This poses a challenge for communities from traditionally dispossessed backgrounds, which do not have ready access to these essential resources.
“The most immediate remedy to that problem is to help communities to forge partnerships with parties who do have access to those resources,” says Mkhulisi. “Vumelana thus provides advisory services to structure commercially viable partnerships between communities and investors who have access to the resources needed to create jobs, income and skills for the communities to do so on a commercially viable and sustainable basis.”
Vumelana was established in 2012 as a nonprofit, public benefit organisation. According to Mkhulisi, the department of rural development and land reform intends to adopt the Vumelana model. The model is based on a pilot project run as part of the Business Trust between 2005 and 2010. A hybrid model of recovering some costs and raising donations ensures overall organisational viability.
“Land reform is a moral imperative and a constitutional obligation. Properly managed it can create assets for the poor, stabilise relationships, and promote development. Poorly managed it destroys assets, impoverishes communities, and undermines local economies,” says Mkhulusi.
During the period since Vumelana’s inception until June 2016, the projects supported have increased from five to 44. Ten partnership agreements have been facilitated, mobilising an investment value of R247-million, creating 534 jobs and positively impacting on more than 9 000 households while maintaining over 55 000 hectares of land under productive use.
“While the value of community private partnerships is being demonstrated, the future of land reform is uncertain,” explains Mkhulusi. “There are disagreements about what land reform should try to do: restore rights, change the pattern of land ownership, improve livelihoods, create a small-scale farmer class, or de-racialise commercial agriculture. There are also disagreements about priorities and the relative roles of the market and the state, and the public and private sectors.”
The South African dilemma is that the process of land reform has not been rapid enough to meet the expectations of the people post liberation. Unfortunately, much of the redistributed land has become economically inactive, resulting in asset and job loss, and ultimately posing a threat to the economy.
“Private capital and new land participants must be brought into the process to enable the mobilisation of resources and ensure sustainable benefits for land reform beneficiaries,” he says. “In order to do that, partnerships with investors and operators with access to financial and other markets are required.”
Such partnerships take time because the risks are perceived to be too high. Vumelana strives to reduce the risk for all stakeholders by: providing independent, professional advice at no cost to the community; brokering agreements with communities while carrying the cost of the advisory services and bearing the risk in the event that no agreement is reached; and mobilising private capital for the implementation of sustainable partnerships so as to alleviate the drain on state funds.
Vumelana bases all deals on the guiding principles of mutual benefit for communities and investors; community control by means of community bodies making key decisions; commercial sustainability with respect to financial viability and positive social impact and risk management, in so far as ensuring that the risks are carried by parties that are able to accept them; and independent advice and fair and firm agreements.
Stokvels: A new way to finance your home?
Special mention: Masakhe Amakhaya Stokvel
This Masakhe Amakhayaf oundation utilises the stokvel method to enable those who earn more than the threshold for subsidised housing, but do not earn enough to qualify for a home loan to become homeowners.
Stokvels are popular in South Africa, with an estimated 89 000 in operation. Stokvels have different constitutions depending on their purpose, but are generally used as a form of group funding with each member receiving a turn to be the beneficiary.
“We are a stokvel; we contribute towards giving a house to a member every month for 60 months, then the contributions will be invested in black businesses in terms of shares and investments,” says chairperson Siphiwe Bala.
The foundation was established in 2015 and focuses its efforts on the middle class population, offering a unique alternative to the mortgage trap. The approach adopted could well prove to be the solution to many people’s housing woes.
Bala recalls that after observing that the average middle-class family rents a home to the value of R8 000 per month, the stokvel was initiated as a way to secure a home for each contributing family every month for a period of five years, while creating job security for black-owned building enterprises contracted to do the construction for a period of at least five years.
“A group of 60 will ensure 10 permanent jobs and five temporary jobs, and we are planning to have three groups running concurrently, thereby tripling the number of jobs. At the end of each fifth year we would have at least 60 citizens with a home and no bond,” said Bala.
The stokvel and construction of the houses is managed by BMB Dynamics Construction Company in partnership with the local community and workforce. In this way, the revenue benefits the community who are either part of the stokvel directly as members, or part of the greater community as relatives of the members.
Each member of the stokvel has a voice, as each member is involved in the decision-making process. A joining fee of R 10 000 is required to secure membership. These funds are used for administration costs and daily running expenses. A monthly contribution of R7 000 by each of the 60 members ultimately secures each member a home to the value of R400 000.
Due to the nature of the stokvel, true community upliftment is possible in that labour is sourced from the membership community, thus contributing to skills while simultaneously serving as a platform for social interaction. This enables a true boost to the local economy in that the monetary investment is multiplied directly within the community.
Masakhe Amakhaya ClucStokvel is committed to total co-operation between the stokvel members and BMB Dynamics Construction Company. Transparency is the foremost value.
The stokvel has a tangible, direct benefit to the community by giving middle-income earners the opportunity to become homeowners without being tied into a 20-year bond.
The project has been in operation for slightly more than a year now. Bala says: “The company is taking stokvel and introducing another dimension to the stokvel zone: sustainable financial independence, skills, jobs and investments for SMMEs.”
The business strategy is simple; the company keeps the stokvel running and construction continues.
With a simple yet effective approach to the advantages of group funding in a new context, Bala said the executive committee are in a process of finding the right programme so as to secure a certain amount of additional financial support.
Building strong local economies that are ultimately self-reliant has long been regarded as an effective means of ensuring sustainable socioeconomic growth. This project holds the potential to become an alternative sustainable development model placing power firmly in the hands of the people by alleviating the debt trap.