If you have an existing savings club with a group of friends that you want to take to a new level, creating an investment club to build wealth is a great strategy.

Twelve years ago the Ya Rona club transformed itself from an informal savings club, which facilitated a social gathering of friends, to a long-term, sustainable investment club.

“We reached a point where we did not want a stokvel where we just bought alcohol; we wanted it to be sustainable. Soon more people started to join who had the same kind of thinking,” says Kgaphola, chairman of Ya Rona (Ours) which currently has eleven members, all of whom are professionals who either have their own businesses or hold senior positions.

In 2001 the club re-formed to provide both a short-term and longer-term savings element. “Although we decided we did not want to be a traditional burial society or stokvel, some members were attached to the stokvel idea so we split the contributions into two parts,” says Kgaphola.

Each member contributes R1100 per month to the club. This amount is added to the club’s share portfolio but in January each year those members who wish to draw on their short-term savings are entitled to withdraw up to R6600 (equivalent to R550 per month) – this is usually used to pay school fees. Those members who do not need the funds simply leave them to grow in the investment fund.

Kgaphola says initially it was a challenge to convince members to invest in shares. “We had to educate members about shares; there were fears about how safe their money was. We also had to shift the mindset that we wanted to grow the money, not just pay it out”.  Those members who stayed and bought into the club’s vision have been rewarded – over twelve years the share portfolio has grown to nearly R1 million. “I don’t know many clubs who have assets of nearly a million rand,” says Kgaphola.

How it works

The constitution

Ya Rona has what Kgaphola describes as a “watertight” constitution. “A constitution is very important; it sets the ground rules so you don’t operate on a whim which could lead to disputes”. Ultimately the constitution is the guiding document for all operational matters of the club and is proactively amended to address new realities. Kgaphola says the constitution contains clear and unambiguous guidelines on how money gets collected and contributed and how the funds are to be invested. It also deals with auditing and the distribution of savings as well as how dividends from shares are re-invested.

The constitution also addresses issues such as when a member does not pay or wishes to leave the club; when a new member wishes to join or a former member rejoins and what happens when a member dies.

Monthly meetings

The club has strict rules and attendance of the monthly meeting is compulsory. “People must contribute to the design and promotion of the club. You have to have active members,” says Kgaphola. Members have to have paid before they attend the meeting or face a 10% penalty.

Each member takes turns at holding the meeting at their home where various issues are discussed including the financials. Investment ideas are also discussed – for example, at the moment the club is investigating buying property.

The club also incorporates an element of entertainment where the annual family holiday is discussed. “We all go away together once a year with our spouses. The money is not from the club but it is organized at those meetings”.

The bank account

The bank account has three signatories. The signatories must report back at each monthly meeting to confirm that transfers have been made. They also have an internal auditor who goes through the club’s spreadsheets to confirm that what is on the spreadsheet is reflected in the bank account. Members used to bring cash to the meetings, now they transfer the money electronically into the club’s bank account, which saves on bank charges.

The investment

The club has employed the services of a stockbroker who has a mandate to invest the club’s money. “The broker selects some shares and gives us a choice. We agree on what shares we will invest in, so the club maintains the right to say ‘yes’ or ‘no’ to a share”. Apart from the share portfolio the club members also invest in BEE share schemes in their personal capacity.

Providing for the future generation

Ya Rona has recently formed a junior club for the members’ children which will be launched in December when the children are on school holiday. The junior club is designed along the same lines as the main club and will receive guidance from the main club’s executive committee.

“We realized we started late ourselves so we have now brought our children together in a club,” says Kgaphola. Not only is it a way to create wealth for the future generation but it is also an opportunity to teach the youth about money and saving for goals.

The members’ children range in age from one year old to 25 years old. Those children who are already working will contribute themselves and be part of the decision-making process while the parents will contribute on behalf of the younger children. In recognizing the need to provide financial education to as many young people as possible, the club has decided to open the junior club to any child who wishes to join as long as they are prepared to adhere to the constitution.