The National Stokvel Association of South Africa estimates that there are some 810,000 stokvel groups in the country, comprised of approximately 11.5 million members, who collectively save around R50 billion a year. Personal finance website JustMoney.co.za outlines the opportunities that this form of collective saving offers and considers how stokvel groups can best manage their affairs.
What is a stokvel?
A stokvel consists of a group of people who enter into an agreement to contribute a set amount of money towards reaching a specific goal.
Members contribute a fixed sum to the common pool on a regular basis. They each receive a lump sum, in rotation, which they can spend as they wish, for example on school fees and uniforms at the beginning of the year.
Some stokvels are more niched, and may for example focus on bulk meat purchases, or cushioning members against the high costs of funerals and “after tears” parties. Other stokvels develop from modest beginnings into established businesses that arrange large social events, rent out marquees for funerals, and engage in other initiatives.
Joining a stokvel is usually based on a personal referral, notes JustMoney spokesperson Athenkosi Sawutana. “If you are interested in joining a stokvel, it’s a good motivation to get your affairs in order. A reputable group will vet you thoroughly before inviting you to become a member. Build your credibility and prove that you can contribute regularly.”
Most stokvels are managed by members who are adept at stretching limited funds. There are, however, ways in which stokvels can ensure better governance and improved financial returns, says Sawutana. To this end, JustMoney offers the following tips.
Establish good governance: Reach consensus on your group’s goals. Appoint a chairperson and treasurer and take minutes at gatherings. A constitution, or written set of rules, will help you to remain focused on your goals and provide reference points should problems arise.
Safeguard your funds: Some stokvel members are wary of banks and formal institutions. They retain savings in cash, making them vulnerable to theft or household fires. Shop around for a suitable bank account with a reputable institution and check your statements regularly.
Maximise account benefits: Financial institutions compete for unbanked stokvel money. Many offer accounts specifically for stokvels, such as group savings accounts with member benefits that include discounts on school supplies and groceries, and burial cover for members. Compare offerings before investing your savings.
- Read a JustMoney article on stokvel-friendly accounts.
Negotiate bank fees: The more funds you have, the more you can negotiate for the lowest possible fees, or even no fees.
Take advantage of special offers: Many retailers offer special benefits for stokvels. These may include free grocery delivery within a certain radius if sufficient money is spent monthly. Also look out for stokvel events with exclusive discounts, a shopper to assist the stokvel buyer, and assistance with dividing up groceries.
Move from saving to investing: Many stokvels are set up to meet members’ basic needs, but consider building up sufficient savings to beat inflation. Ask your bank or another reputable institution for advice before committing your hard-earned money. A unit trust, for example, allows the withdrawal of funds at any time, as there are no set investment periods.
Learn from your network: Joining a stokvel is an informal way to learn about generating money and making your funds stretch further. Improve your financial literacy and share your own knowledge with other members.
Seek professional advice: Consider speaking to a professional financial adviser before your group makes any major investment decisions. Con artists abound, and stokvels are among their targets. Only deal with well-known institutions that have established track records.
Lawyer up: It’s always better to avoid problems than trying to fix them later. Before signing an important document, it could be worth asking a lawyer to look at it. You may be eligible for a free initial legal consultation or legal assistance.
Due diligence: Before taking on a new member, investigate them thoroughly. A candidate should be well known to you, or highly recommended by a friend. Ask for supporting documents to ensure they have the means – and intention – to contribute.
- Read an article from JustMoney about the secrets of a successful stokvel.
“A stokvel is a good way for many people to save regularly,” says Sawutana. “Knowing when you are due to receive a payment will also enable you to plan your spending more effectively.
“Educate yourself on money matters, exercise caution in your business affairs, and only deal with people you know and trust,” she says.
JustMoney.co.za, established 15 years ago, is a trusted voice within the personal finance sector. The website offers articles, money management tools and a wide range of financial products and services. Over 200,000 South Africans subscribe to the newsletter to stay informed and become financially savvy. Find the website here.
