Banks and retail outlets are scrambling to get a finger in the up to R45bn stokvel pie, an 80-year old saving tradition unique to South Africa. Why are they doing this?

What is a stokvel?

Andrew Lukhele, founder and President of the National Stokvels Association of South Africa (NASASA) describes the typical stokvel as:
“A type of credit union, or communal buying group, in which a group of people enter into an agreement to contribute a fixed amount of money to a common pool weekly, fortnightly or monthly, to be drawn in rotation according to the rules of the particular stokvel. This traditional savings scheme is unique to South Africa and was birthed in the black townships and rural areas where people joined to save money, receive financial assistance as well as emotional support and friendship.”

Types of stokvel

The main types of stokvels that have evolved over the years include:

    • Savings stokvels
    • Burial stokvels
    • Grocery stokvels
    • Education stokvels
    • Birthday stokvels
    • Family stokvels
    • Investment stokvels

Alive and thriving in the 21st century

Today stokvels are alive and thriving. In fact, they have gained such clout that banks and retail outlets are scrambling to get a finger in this financially lucrative pie.

Stokvels are recognised as legal, self-governing entities, operating outside the regulations covering banks and “anecdotal research shows that the value of the stokvel industry is up to R45bn”, says Elizabeth Lwanga-Naziri of the South African Savings Institute. According to the African Response report, over 11.4 million people belong to an estimated 811 830 “registered” stokvels in South Africa.

Even the Government has taken note and are now offering housing loans through agencies such as the National Urban Reconstruction and Housing Agency (NURCHA) for people earning less than R2000.00 a month who have a proven track record of saving through schemes such as stockvels.

Some stokvels have started buying shares to improve their portfolios and others are investing in properties, “a lucrative market where most people and companies can make a lot of money”, says Nico-Louis Minnie, Head of Wealth Platforms at Liberty.

Who’s laughing all the way to the bank?

The stokvel members of course!

Busi Skenjana, CEO of Brand Support Keys (BSK) and a stokvel expert, remarked in an interview published in Stokvel Voice that in her view “banks still don’t take stokvels seriously and they are not user friendly. In some areas, stokvels actually want to operate their own bank.”

Of course this doesn’t mean stokvel members don’t use banks, she said. “Some do use online banking services for cell phone charges and other fees and there are also stokvels that keep their members’ money in banks.” The money is usually withdrawn at the end of the year to buy groceries, cars and household appliances.

Retail sector on full alert

Retailers have also cottoned on to the “hidden” financial resources owned by the stokvels and are going all out to help them spend it. Some offer large discounts on bulk buying for stokvel parties and special events and some even offer no deposit, no interest deals on motor cars etc.

Pros and cons

When asked about some of the pros and cons of stokvels, Skenjana pointed out that apart from the social and financial support, one of the main pros of stokvels was the fact that they were now able to beat the consumer price index amid rising food prices, simply by buying food in bulk at the right price and store. “My dream is to see stokvels playing a significant role in the country’s economy rather than being just consumers”, she added.

Asked about the challenges stokvels face, she pointed out that one of the main problems they were encountering was their vulnerability to exploitation. “Stokvels are largely about money, so they’re often exposed to companies that claim that they can help them create wealth. Due to a lack of financial knowledge, some stokvels end up losing money to these companies”, she said.

 

Sources
Angi, L. Banking on collectives. Retrieved from: http://www.chinafrica.cn/english/business/txt/2013-12/01/content_579970.htm
BSK Marketing. 2013. Retrieved from: http://www.bskmarketing.co.za/Stokvels.html
Investment in stokvels gaining ground. 2014. Retrieved from: http://www.fin24.com/Savings/Get-Saving/Investment-stokvels-gaining-ground-20140709
Nene, G. Flying the stokvel flag high. Interview with BusiSkenjana published in Stokvel Voice,Issue 21: the property issue. Retrieved from: http://www.bskmarketing.co.za/
Savings/Investment vehicles: The South African Savings Institute. Retrieved from: http://www.savingsinstitute.co.za/sivehicles.htm