Johannesburg resident Noks Shoko has a little something to help soften the “Janu-worry”. In 2016 she and three friends every month diligently stowed cash in a stokvel account at their bank. They withdrew the money in December and each member of the group got their cash plus the interest accrued.
Shoko makes up one of a growing number of today’s stokvel users. It’s a practice that goes back to the 19th century, when farmers and labourers would gather to socialise and pool money to purchase livestock at stock fairs.
The first modern stokvel was conceived in 1932 as a “Bantu burial society”, according to the National Stokvel Association of South Africa (Nasasa).
For years, these groups — also called mohodisanas, social clubs, gooi-goois, investment clubs or makgotlas, depending on where you go and the type of stokvel you’re talking about — were a way for people to pool cash together in an ungoverned, unstructured environment.
Today’s stokvels are increasingly geared at investing in the formal economy.
The majority of stokvels are “no longer about putting money under the mattress”, said Nasasa chief executive Andile Mazwai in an interview on the organisation’s website.
“People will put aside a fixed amount of money, and they will invest that money wisely — whether into shares, property or a money market account,” said Mazwai.
Nasasa estimates that about 11.5-million South Africans participate in stokvels, which number about 800 000. And, says Nasasa, R49-billion in our economy is saved annually by these groups — that’s roughly the City of Johannesburg’s budget.
Tshepo Moloi, the founder of StokFella, an app created to help South Africans run and participate in stokvels, said 60% of stokvels are investment focused, 18% are savings clubs and the remaining 22% are grocery stokvels and burial societies.
The app gives users access to a directory of local stokvels and the terms for joining them.
“New users also have the option to start and manage their own stokvels,” said Moloi. “The system allows users to track funds owed to them and submit a claim to withdraw funds from the group.”
StokFella is a response to the changing nature of stokvels, according to Moloi. “StokFella is looking to revolutionise a 19th-century practice into a modern, tech-savvy sector that allows everyday South Africans to participate in the economy of the country,” he said.
Formal meets informal
Stokvels are traditionally spontaneous arrangements between friends who know and trust each other. Social capital is arguably their strongest driver of success.
“To me it is better than when you do it yourself because you are committed,” said Shoko. “If you’re doing it by yourself then you might get to the end of the month and think, ah I will leave it for this month. But if you’re part of a group, you’ve got a kind of a push so that you tend to make it happen.”
A 2007 study conducted by Hulisani Moliea for the University of Pretoria found that the “success of stokvels is that they are driven by a purpose which is beyond money; they exist to assist the members improve their lives. The members take the rules seriously because they do not want to disappoint each other,” wrote Moliea.
“Trust and social capital were found to be critical in ensuring success. The [interviewees] said that stokvels forced them to save through peer pressure, and they appreciated the relationships that they were able to foster.”
Stokvels are typically governed by a few informal rules and penalties for noncompliance are arbitrary and self-imposed.
“I remember there was one person who just kept quiet and didn’t pay for three months,” said Shoko.
“At the meeting we said, fine, you don’t have to pay, but you must leave your money in the account until the end of the year before you withdraw it. And then next year you can’t participate.”
None of the members of Shoko’s stokvel are required to sign any documents. The rules are decided upon in a collective fashion and are implemented by “everybody” as opposed to one designated person in the group.
This leads to a variety of risks. Everybody has a neighbour who has been duped out of money or unwittingly scammed into pyramid or Ponzi schemes. According to Moloi, “maladministration and mismanagement of funds” do happen and, in some instances, organised crime. “Members’ homes can be targeted should it be known that large amounts of cash are held on premises, or [they could be] robbed to and from depositing funds at the bank,” he said.
And then there are the smaller disappointments. Shomane Mathiba recently lamented on Twitter: “We need new leadership in our food stokvel. WTF am I supposed to do with six 1kg peanut butter tubs and six 700ml bottles of tomato sauce?!”
The government has made efforts to regulate and oversee stokvels. The Banks Act of 1990 requires every such group to register with Nasasa or a similar industry body approved by the Registrar of Banks. Nasasa provides its members with a suggested constitution with which to govern their operations.
Some stokvels also lend money to their members, at an interest rate agreed upon by the group itself. This opens up further risks and regulatory requirements. Every organisation that acts in a lending capacity is required by law to register with the National Credit Regulator. Industry practitioners say the push to get stokvels formally registered has been slow going.
Hennie Ferreira, chief executive of industry body Microfinance South Africa, said regulation of this sector of the market needs to be tempered by pragmatism.
“We think if we take high-level regulations we are doing consumers a big favour, but ultimately the red tape we are creating is pushing people away from the institution,” said Ferreira.
Stokvels should be monitored and overseen, said Ferreira. But a different set of regulations to formal banks might more appropriately apply.
“I’m not advocating for roguish behaviour; I’m advocating for relevant, realistic regulations,” he said.
Stokvels are addressing a gap that the formal economy is failing to do, according to Ferreira. “It is physically impossible for banks to provide small short-term loans to people in the deep rural areas. You try to formalise certain behaviours and financially you’re excluding certain people.”
His comments are bolstered by Moliea’s research: “Those who had no access to formal financial institutions found that the stok-vels gave them access to funds that they would not otherwise have, thereby making it possible for them to achieve a higher standard of living,” she wrote.
Ferreira said people believe South Africa doesn’t have a savings culture. “What’s happening in the world of stokvels doesn’t get formally recognised. But to a large extent, stokvels are actually part of the fabric of society. Let’s take those good savings habits and see how we can harmonise them with the formal system.”