The Great Way to Save Money

Stokvels are hugely popular in South Africa, with an estimated 50% of black adults being part of one. But what are they, and how do they work? They’re essentially invitationonly savings groups where everyone contributes a fi xed sum of money either weekly, biweekly or monthly. One member of the stokvel is paid out each month during their designated ‘collecting period’, which rotates between the contributors.

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The result? A kind of revolving credit scheme, where few contributors default since their stokvel membership is communityor relationship-driven. Stokvels fi rst arose in the 19th century through English settlers trading and auctioning cattle, and still form the backbone of many communities. They’re often set up with a specifi c purpose in mind: to provide groceries over the holiday season, to fund funerals or to buy a car. ‘Stokvels have evolved dramatically over the years,’ says Lindy Mataboge, a stokvel coach. ‘Groups have moved from just burials, groceries and borrowing to more sophisticated stokvels that include entrepreneurial endeavours, investing in property and bond repayments.’

WHY DO STOKVELS MATTER? ‘Stokvels are important because they work through a community structure based on inherent knowledge,’ says Mataboge. This requires less of an education process, making stokvels a far more accessible way of saving money than corporate offerings. With no corporate structure, there’s also less red tape that can often prevent individuals from making formal investments and taking out loans with, for example, a bank.

The stats echo the importance of stokvels in South Africa: according to Old Mutual, 74% of black middle-class individuals they surveyed contribute to an informal savings stokvel or savings club. The National Stokvel Association of South Africa (NASASA) reports that ‘The stokvel economy is an estimated R49-billion in South Africa alone.’ With so much capital in circulation, the rise of stokvels as investment tools is extremely feasible.

CREATING YOUR OWN STOKVEL

Traditionally, you’re invited to join a stokvel by your community . ‘It’s a platform based on trust,’ says Mataboge. ‘We trust you because you’ve been referred by someone. You don’t just pop in without someone knowing someone in the stokvel.’ Once you’ve established the members, it’s important to determine what exactly your stokvel is about. Defi ne what you’re saving for and create clear guidelines as to how the stokvel will be run, when and how it will pay out and to whom. Other things to defi ne in your constitution include who has which responsibility; how much and how often everyone must contribute; the minimum and maximum size of membership; what happens if a member leaves, fails to contribute or passes away; how records will be kept; and how often the stokvel should meet. A stokvel is all about handling, saving and managing money, so it needs to be regulated by an independent board. NASASA – a self-regulatory organisation authorised by the South African Reserve Bank – states that, ‘In terms of the Banks Act of 1990, a stokvel is required to be a member of NASASA or a similar body approved by the Registrar of Banks in writing.’ You need to know that the stokvel you’re in is accountable to a larger organisation. Make sure you and your stokvel are compliant and functioning in a healthy setup.

THE PROS

Being in a stokvel can be very advantageous. Many become more than just a group of savers or investors: they can become a support system and a signifi cant part of your life. ‘When my brother and I were financially excluded from university, it was a huge blow for my mother,’ says Tshidi Pule, 30. ‘She’s the main breadwinner in our family and had singlehandedly funded our education all our lives.’ Thankfully, her mom had been part of a successful stokvel in their community for more than a decade, and the returns were high. With the help of the stokvel, Pule and her brother were able to go back to university. ‘I’m so grateful for that group of women, and I have since formed a stokvel with my close friends because of the success I saw in the one my mom is in,’ she says. There are many more advantages: Q The chance that someone in your family or in your friendship group is part of a stokvel is high, so there’s much first-hand experience to gain from stokvels that have been around for decades in many communities. Q Stokvels are a safety net for millions of South Africans who can’t access credit from formal financial services.

Stokvels can also be an instrument and channel to extend credit to lessfortunate households. Q Money can be pooled, meaning that you have the ability to make a more significant investment contribution than if you were investing by yourself. This can earn better returns. Q Group saving can be more incentivising. It creates accountability that many of us find more motivating than trying to save by ourselves. THE CONS When Nomusa Bhengu joined a stokvel in her community, she was confident that it was the right move. ‘My neighbour had been part of a stokvel for about two years, and she had always raved about the monetary support she received each month,’ she says. So when her journey began, she was excited. However, a few months into her membership, the treasurer and chairman of the stokvel disappeared with all of the contribution money.

‘They were nowhere to be found,’ she says. ‘We always gave them the money as cash, so there was no electronic trail of the money being deposited into an account. We were just told that our money was being housed in our group account, but we had no access to it.’ Bhengu relied desperately on that money, and she is understandably hesitant to join a stokvel again because of this experience. This is why it’s important that your stokvel belongs to a larger body, in order to keep things regulated. Be aware of these further disadvantages: Q If stokvels aren’t run by someone fi nancially knowledgeable, they’re in danger of falling prey to pyramid schemes. Q If members lack fi nancial understanding, the contributions you make together may not give you good returns. Q If the stokvel members don’t have a single vision, they eventually become divided and create arguments and poor returns. Whichever way you look at it, stokvels are an integral part of our country’s economy and – as with anything – the more you know, the better you’ll be able to harness their power for yourself. ‘A Millennial woman can rarely rely on one salary to fulfi l her living costs,’ says Mataboge. ‘Stokvels – if managed correctly – are a way to empower ourselves and to build thriving communities together.’

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