BrownSense, a 100 000 strong Facebook group propagating black business solidarity in South Africa, has set its eye on launching a banking operation that promises to amass more than R1 billion in capital over the next five years. It sets out to focus on funding black small and medium sized enterprises (SMEs).
The BrownSense movement feeds from and into the ‘black bank’ aspirations sweeping through the country. South Africa has in the recent past been hit by a wave of emerging, new generation and community based banking type operations that come out of gaps, dissatisfaction if you like, from the mainstream banking offerings. List of names in this movement include The Young Women in Business Network financial cooperative and KCB (on path to become Khanya Cooperative Bank).
The BrownSense aspiration is unique in promising an enterprise funding focused operation. The aspiration is communicated in a Facebook post issued by BrownSense founder, Mzuzukile Soni. The post says the BrownSense platform can be leveraged to start a stokvel type operation -a financial cooperative- which could be groomed into a bigger financial movement. Leveraging from the BrownSense movement “We could start applying for the ultimate dream of this group, a black bank run by the people,” says Soni.
The post invites BrownSense members to join the stokvel which will invest in small black owned businesses. “Basically we all contribute R100 a month after paying a R100 joining fee. The proceeds will then be used to buy assets that will be collectively owned by Brownies from The People’s Fund.”
Adds the post “The money will be evaluated monthly for what campaigns are available and how to divide the money across the campaigns to own the most number of assets.
“The proceeds from the assets will then be kept as a form of capitalisation for the next five years. All moneys paid into the stokvel are tied in for the next five years. You can pay the R100 monthly or R1200 for the whole year or R6000 for the five years.
“There are currently 100 000 of us, which means we could easily finance R10 million worth of assets on The People’s Fund a month.”
The post adds that “The assets on The People’s Fund have an average return of 20% year on year. At the end of the five year period, we will register a cooperative bank with all of the returns. If all of us participate, we would be capitalized to R1.2 billion. Meaning we could start applying for the ultimate dream of this group, a black bank run by the people.”
The post adds that “All of this will be done on the StokFella app, which is also available as a .mobi site. Stokfella, a 100% Brownie owned business, is a registered FSB provider with FSB number 48812 and is really easy to use.”
It adds that “All the businesses on The People’s Fund are audited by SnB Charted Accountants & Auditors (Practice Number 966205), a 100% Brownie owned auditing firm.”
There are a couple of questions about the nature of this operations which still need to be answered. We have sent these questions to Soni and will update this story when we get answers.
The critical questions relate to the incorporation and security of funds that would be invested into this operation: They are:
- We would want to know the exact legal form/type/incorporation that the entity will take? Will it start as an informal stokvel or a cooperative financial institution, a cooperative bank, a private equity fund or something else.
- Knowing this will then answer another critical question: Under which regulatory financial regime will this entity fall into?
- How will the rights of a single investor be structured in relation to the whole? Will it become a one man one vote type of an operation (like cooperative banks) or something else?
- What informs the estimate of 20% average return on investment?
Our questions have been answered and carried in the following feature: