Stokvels, alive and thrive in SA

2016-11-24 06:01
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IT is common knowledge that stokvels have collectively built up a significantly large pool of funds.

Many people are aware that this old-fashioned way of investing and borrowing has survived, even thrived, modernity, such as it is, in South Africa, but most will be surprised to hear that the value of the pot is R45 billion a year.

Some historical accounts of the origins of stokvels claim they can be traced to the early 19th century and the rotating cattle auctions held by British settlers in the Eastern Cape, known as stock fairs or “stokvels” to the locals, who would pool resources to trade livestock.

Since then, stokvels have existed as groups of people bound by a common cause, such as friends, family or colleagues, pool financial resources for the benefit of the group.

The savings are used to help members pay for everything from burials and celebrations to school fees and groceries.

Groups such as burial societies typically have about 50 members, while investment and grocery stokvels tend to have between 10 and 20 members.

Speaking to African News Agency, the National Stokvel Association of SA (Nasasa) spokesperson Nomsa Mazwai said: “The history of stokvel groups is as old as the story of gold in South Africa.”

During apartheid, stokvels were a key savings and credit mechanism for the disenfranchised masses.

They performed additional social functions, cementing existing relationships and creating new ones, including giving migrant labourers and displaced people an avenue into social networks.

In the late 1980s, the apartheid government, recognising the power of stokvels, tried to ban them.

Nasasa was formed in 1988 out of resistance to this and in a bid to secure legal representation and protection for stokvels.

Today Nasasa, a self-regulatory body, is approved by the Registrar of Banks, with its members enjoying protection under the Banks Act of 1990.

Little has changed to the basics of the system over the years despite it having grown to a massive market today, with an estimated membership of 8.6 million people.

One change that is starting to take root, however, is that many stokvels are investing their money in more modern ways, such as unit trusts.

“In 1994, with the entry of a democratic society and a removal of the barriers to entry in the banking industry, an assumption was made that stokvels would no longer have a purpose.

“However, instead, we have seen an increase in the prevalence of stokvels in South Africa,” revealed Mazwai.

“We can now be assured that stokvels are part of our social culture in South Africa and a form of social security, which will continue to exist in the foreseeable future.

This is the reason why fast- moving consumer goods companies, banks and the financial services industry have come to accept that to grow their businesses, they need to speak the language of stokvel groups.”

The financial industry is responding by creating specialised products such as Investment Solutions’ three new unit trust portfolios aimed directly at the traditional collective savings market.

So specialised, in fact, that the leading South African fund manager, which has R321.5 billion assets under custodianship, launched these portfolios in partnership with Nasasa.

Many financial services groups have tried in the past to get their hands on the loot but, says Alexander Forsyth-Thompson, project leader of the Investment Solutions stokvel initiative, most of these attempts failed because the focus was on selling traditional products.

Stokvels are generally well- organised with very little defaulting on contributions.

These groups are stable because they are deeply rooted in existing and valued relationships in the community.

“People do not default on contributions because of the discipline and peer pressure stokvels create.

“This means they are a successful alternative to formal savings,” says Forsyth-Thompson. - Supplied.

Value of the stokvel pot is
R45 billion a year. Savings are used to help members pay for everything from burials and celebrations­ to school fees and groceries. Groups such as burial societies typically have about 50 members, while investment and grocery stokvels have between 10 and 20 members

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