Taking your business to the next level can be tough, but enlisting the help of other like-minded business owners is easier than you think. By Rebekah Kendal

Turning to the bank for a loan may seem like your only option, but more than 11.4 million people in South Africa do things slightly differently. Stokvels – which provide an informal way of saving or investing money – are built on trust between friends and associates. According to the National Stokvel Association of South Africa (Nasasa), there are more than 811 000 such groups in South Africa, saving a collective R44 billion a year.

One such group is the Boksburg Vosloorus Food and Beverage Association, formed in 2009. The group is made up of 90 members, all of whom are entrepreneurs – mostly liquor traders – operating in the Vosloorus area.

Neo Khoaripe, who handles communications for the association, says: ‘Group discipline is always better than self-discipline. When you save with the group, you know you can’t just rock up and withdraw your money, but have to adhere to the set withdrawal season.’

A lump-sum payout
The group is a multipurpose stokvel that has an investment element and a rotational element, giving members the opportunity to grow their businesses with a lump sum of money.

‘We meet on Thursday, every week, and each member contributes R500,’ explains Neo. ‘Of the R500, R300 per member is given to the host of the day to help their business grow. Proceeds from the remaining R200 per member are spent on buying refreshments and food, which are prepared by the host, and then the remaining portion pays for the running costs of putting the event together.

‘We also have a savings plan in which every member contributes a minimum of R100 per week that will go towards our group savings plan. Those savings become accessible to our members in January, annually.’

Collectively, the Boksburg Vosloorus Food and Beverage Association invests at least R9 000 each week, or R36 000 a month. By investing money together, members are able to use mainstream investment vehicles and earn more interest on their money.

‘The only difficulty or challenge we face at the moment is that the banks don’t give us a good return on our investment, but we’re currently working on finding a better way of investing our money elsewhere.’

By the book
As well as providing a means of structured collective investment, the weekly meetings also provide an opportunity for entrepreneurs to network regularly and build relationships with other business owners in the industry.

Given that there are 90 members in the Boksburg Vosloorus Food and Beverage Association, a lot of money (R45 000 without the investment portion) is exchanged every week. The stokvel has a finance team, managed by the treasurer, who does all of its banking.

Although stokvels are based on a foundation of trust, it is important they are run properly so money isn’t misspent. Most stokvels have constitutions that govern how money is contributed, collected, invested and distributed. Constitutions should also cover what happens when a member misses a contribution or if a new member joins the group.

Funny business
Where there is money to be made, you will no doubt find fraudsters, and the stokvel sector is definitely no exception. According to Miziyonke Mtshali, chief operations officer at Nasasa, the fraud you’re most likely to encounter comes in the form of pyramid schemes.

‘This is an unsustainable business model that promises people very high returns on little investments and effort,’ says Miziyonke. ‘They are get-rich-quick schemes that usually require you to pay a membership fee for the rights to sell a product, and for you to recruit other members in order to earn money.

‘At least 85% of the people who join pyramid schemes will fail, and 100% of pyramid schemes eventually disappear, fail or are forced to shut down. A very small percentage of those who join a pyramid scheme will make any money… And this won’t be you!’ Miziyonke says.

Don’t be tricked by common fraudster tricks
• An obligatory membership fee – usually under the guise of an admin fee – is asked for

• Your ‘admin fee’ may go towards buying stock of a certain product that you’ll be required to sell to the public

• You’ll have to recruit members in order to make money. The more you recruit, the more you will supposedly earn

• You’ll be promised high returns, and told you can earn hundreds of thousands of rands a month.

Report fraud

Before you join a stokvel group, it is a good idea to check they are registered with the National Stokvel Association of South Africa (Nasasa). All stokvels are legally required to be registered. If you suspect the group is fraudulent, you can report them to Nasasa on 010 007 2129 or info@nasasa.co.za.