- FNB says the stokvel groups banking with it saved more since March than they did in previous years.
- Some have started to use stokvels as a platform to save for emergencies, should things get much worse.
- Some are supporting members who have lost their jobs or had their incomes reduced.
As retirement funds bleed money from people who have lost their jobs and those who've opted to pause saving for their golden years for now, stokvels are on their own island, thriving! Some have in fact saved much more than before since the lockdown began, as members start to build emergency reserves withing these platforms should things get worse, data from FNB shows.
The banking group hosted a webinar on Wednesday where Sifiso Nkosi, head of stokvels and group banking at FNB, said while the company had expected a decline in stokvel savings from March when the lockdown kicked in, stokvels had grown by high double digits compared to March 2019. Initially thinking that this could be because the lockdown began late in March, April and May proved that stokvel savings were resilient as they continued to grow, albeit at single digits. By the end of June, growth spiked again.
"To be honest, it's unexpected data points and we asked ourselves why. Why would stokvels be able to navigate this tough weather?" Nkosi said.
Stokvels are used as emergency funds and support for members who've lost income
He said the feedback they had received from the stokvels was that some members had indeed been affected by the lockdown, through reduced incomes and job losses. As a result, the number of people making deposits had declined. But those in the group who were still able to save, continued to do so and, in some cases, members contributed on behalf of those who could not.
"But the number of withdrawals has actually decreased now in 2020 as compared to previous years. This shows that stokvel groups are deciding to hold on to their money more and longer, which is very interesting," said Nkosi.
FNB said this showed that people were perhaps starting to put aside in stokvels in anticipation of even rainier days because of the pandemic.
Palesa Lengolo, author of Stokvels: How They Can Make Your Money Work for You, said she had observed that, in her stokvel circles, there had been "a lot more" withdrawals from those who had lost their jobs or had salary cuts.
"But something that I really found interesting is that the stokvels are saving even more than their normal stokvel savings. They are [building], almost as an emergency fund, via stokvel contributions. For example, I know a stokvel that will be sustainable for the next three to six months because they had saved their joining fees to cover a stokvel member that has lost their job," she said.
Why are people shunning formal savings for stokvels?
Stokvels have evolved a lot from their traditional roots of saving for December groceries and burial societies. Apart from the investments and property stokvels, Lengolo said there was a growing wave of them being set up to help individuals start businesses, with crowdfunding being one example.
According to the National Stokvel Association of SA, there are roughly 810 000 active stokvel groups in the country, collecting an estimated R50 billion annually. This is in stark contrast to the data coming from formal savings surveys, which constantly show that South Africans are among the world's worst savers.
"It's not a thing that we as a South African society are not savers. We are indeed savers. In fact, we saw massive surge in these last few months with our households' savings growing in the bank. People know they have to put money away, the question is what they put their money away for," said Himal Parbhoo, CEO of FNB Cash Investments.
Parbhoo said the data that FNB analysed from its customers' saving goals showed that people wanted to make their lives more comfortable, and save more towards fixing, building or renovating their homes, followed by saving for cars, and emergency funds.
He said people had aspirations that they want to improve in life and move forward, which partly explains why saving for long-term needs like retirement is increasingly taking a backseat.
"It's about people wanting to uplift themselves," said Parbhoo, adding that stokvels do fulfil many of those short-term aspirational goals as they are there to uplift each other.
He said people's savings preferences were about how far they look and imagine themselves. For most, near-term and more tangible goals - like making their homes comfortable - were what they could visualise.
FNB had observed that, later in their careers, people started to realise that they had not saved enough for retirement and then started taking on a second job if they could.