The accumulated savings of co-operative societies, an indigenous type of credit union, are estimated to be equal to the assets of one of the largest banks in South Africa. Sam Muofhe has developed a way to aggregate and reinvest the wealth of these societies so that they will bring dramatically increased benefits to the black community.
The New Idea
There are approximately 100,000 mutual aid societies operating in the country with an estimated 2 billion Rand in savings. Sam Muofhe has just created the National Association of Co-operative Societies of South Africa (NACSA) to establish a national framework that will enable these mutual aid societies (such as burial societies, women's clubs and rotating credit unions) to use their vast and presently under-utilized sources of private capital for the development of the black community.
NACSA will aggregate and invest the savings of member societies more advantageously than commercial banks and will channel a portion of the savings capital into small, community-based enterprises. NACSA offers a funeral scheme to its member associations with benefits currently surpassing other local societies. Similar to an insurance policy, these include coverage for the member's entire family, including parents and parents-in-law, an after-care payment and life-long membership. NACSA will use a portion of the premium to establish an education trust to provide scholarships for members' children and to provide training to member societies in literacy, administration, and finance.
The response to NACSA has been tremendous because NACSA allows burial societies to pass on the risk factor and maintain their traditional functions in caring for the bereaved. NACSA's approach to empowerment builds on the existing strengths of co-operative societies by providing technical and financial expertise, training, and the framework and vision for generating economic opportunity for its participants.
Cooperative societies have their origins in ubuntu, an African tradition of sharing and mutual aid. Operating in South Africa since the 1930s, burial societies were established when thousands of male workers migrated to the gold mines where cramped, unsanitary conditions resulted in rising numbers of deaths. Cholera, smallpox, tuberculosis, and typhoid were so prevalent that blacks established burial societies to help them meet the high cost of funerals which play an important role in black culture.
Women in rural areas were left to fend for themselves and their children. In the absence of public welfare or assistance, or even access to private financial institutions, rural women
formed various types of co-operative societies to supplement meager incomes. Today they constitute the largest membership of mutual aid societies.
Today, burial societies continue to play a vital role in the black community, ensuring that traditions surrounding the death of a member are observed. Their social and financial functions operate pretty much the way they did in the 1930s. The stakes in the 1990s, however, are vastly different from those in the 1930s. Estimates suggest that co-operative societies nationwide generate more than R200 million every month. Of the estimated 24,000 mutual aid societies in metropolitan areas, 29 percent consist of burial societies which account for 43 percent of a total R52 million collected from members each month.
These vast sums of money sit in the bank accounts (often at little or no interest) until death occurs to a member. Money will not be touched even if, for example, a member cannot afford to pay her children's school fees, or if she wants to start a business and has no initial capital. The burial society has no individual or collective investment control over its savings. No mechanism or financial institution exists that will channel and direct accumulated savings to the advantage of the individual societies or to the black community at large.
By accumulating the wealth of a critical mass of mutual aid societies, Sam is able to negotiate lower premiums and better insurance benefits than any individual society can offer. Moreover, by charging a monthly payment at the rates currently paid by burial society members, Sam's organization invests the "surplus" in a variety of productive ways, thereby generating further benefits for individual society members.
NACSA is currently in the process of forming an investment corporation of which member societies will be shareholders. A portion of the return on investments will be channelled back into black business development, particularly in related industries such as funeral parlors, hearses, and coffin manufacturing. NACSA also plans to establish catering businesses that will complement burial services and provide tents, tables, and food. Other services will include the establishment of an educational trust and a legal advice center to train associations to administer deceased estates. NACSA will also establish a monthly newsletter to communicate with members.
NACSA currently operates under the auspices of another new organization Sam founded, the Centre for Black Economic Empowerment (CBED). Sam has spent more than a year in the field sharing with cooperative societies the idea of consolidating and mobilizing their previously untapped resources. With a membership of more than 800 societies, Sam anticipates within the next five years, that at least 3,000 societies (approximately 150,000 people) will affiliate nationwide.
Since childhood, Sam has actively challenged the various instruments of apartheid. In grammar school he organized protests against the government's attempts to create ethnic-based schooling in the black townships. Later, Sam was a key figure during the 1976 Soweto uprisings and was a central organizer of student revolts against the use of Afrikaans as medium of instruction. After being released from detention, he mobilized black attorneys to take on political cases and worked as a liaison officer for a prominent firm of attorneys.
Sam worked in the field of literacy for five years and himself speaks eight (chiefly South African) languages. Before entering law school, (he is in his final year), Sam worked as a journalist for a progressive educational publication.
Sam's interest in burial societies was piqued at the time his uncle passed away. His uncle formed a burial society in the 1950s and contributed to it monthly for almost 40 years. When he died, the society only offered R800 towards funeral expenses, a tiny return on his uncle's investment. The family rejected the contribution and would not allow the burial society to be present or display their flags at the funeral. Regretting his anger at the members of the society who were honorable, Sam began thinking about the systemic problems with burial society operations.
In 1984 he started three years of research into the socio-economic situation of urban blacks. He then spent two years doing fieldwork on burial societies and issues of black economic empowerment. In 1991, Sam launched the Centre for Black Economic Empowerment, which recently gave birth to NACSA.