Saving through stokvels

Saving through stokvels

Millions of South Africans are saving and investing their money through stokvels. Here’s what they’re all about and how you can be a part of this thriving movement

Blog_MoneyMattersMarch2016If you’re working towards a goal that needs a large capital input, being a part of a stokvel can be an effective and fun way to save some money. Historically, they were a way for black South Africans, migrant workers and displaced people to form social networks, get credit and pool their money. Today, they are bigger than ever, helping countless ordinary South Africans fulfil their extraordinary dreams. There are now an estimated 800 000 stokvels in South Africa with a whopping R45 billion in their coffers, according to the National Stokvel Association of SA (Nasasa).

Group effort, big rewards

Stokvels can be a way for undisciplined spenders to save money by forcing them to be accountable to a larger collective. Speaking to Tim Modise on BizNews.com, Nasasa CEO Andile Mazwai said solidarity was one of the benefits of being a stokvel member. ‘At the beginning of the year, you may say, “I have a goal – I’m going to do it by putting away R5 000 per month, for 10 months”. On your own, you may do it in month one, two, three, and four. After a while, you may then not have the discipline to carry on.’ However, when you share that goal with people you have committed to, Andile says, you’re more likely to be disciplined and achieve your goal.

Different goals, different folks

There are several different types of stokvels, and these serve a range of different purposes.

There’s usually a minimum of 12 members in a group, although there are sometimes smaller groups. 65%
of stokvel savings cater for burial societies, 30% for savings, 21% for groceries and four percent for investments, according to market research firm African Response.

Alexander Forsyth-Thompson, the project leader of Investment Solutions’ stokvel initiative, says stokvels are well organised and very rarely do members default on contributions. This is because the groups are made up of people who have existing and valued relationships in the community. ‘People do not easily default because of the discipline and peer pressure stokvels create.’

Stokvel dos

Ready to form a stokvel with a trusted group of friends and community members? Go for it! But first, draw up
a constitution with a set of rules. This should include:

• The amount of money to be contributed

• How often and in what manner the money will be collected

• How the money will be used or invested

• Under what conditions the money can be withdrawn

• What happens if a member fails to make a contribution or wants to leave the stokvel

• A list of applicable penalties for late contributions

• What happens if a member dies

• What happens if a new member wants to join.

Next, get every member’s details, signature and declarations down on paper. You will also have to open a bank account for your stokvel. Most South African banks recognise stokvels and have special accounts for them. Choose the best one for your group’s needs and have more than one member listed as authorised signatories. It should be set up that none of the signatories can make withdrawals without the signature of the others.

Those in the know 

Still not convinced? We chatted to three professionals, Eyethu Bikitsha, Bokolo Emihle and Silondiwe Ndlovu, about their experiences.

What are you planning on doing with your payout?

Eyethu: I will use my contribution to renovate my house.

Bokolo: I have quite a bit of debt I need to clear out, so most of my money will be used for that.

Silondiwe: I’m going to treat my family to gifts. I’ll save the remaining bit for the rest of the year.

How much do you usually get?

Eyethu: I get a minimum of R12 000 every six months.

Bokolo: Last year, I made R11 000.

Silondiwe: I have just started out, so I make R8 000 this year.

How many are you in the stokvel?

Eyethu: We are six people.

Bokolo: We are a group of 12 ladies.

Silondiwe: We are five in the group; we all work for the same company.

Why do you take part in a stokvel?

Eyethu: I use it as a way of saving – it takes discipline to be able to save towards a goal.

Bokolo: It’s an easy way to save money – the money is not easily available, as it would be if you kept it in your bank account. And it helps you to budget well.

Silondiwe: It is a great way to save money, and it teaches you to be disciplined with your spending.

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