Edition: September / November 2015

Taking stok

History lesson

Andile Mazwai* provides an insight into the historical
background and modern-day relevance of a multi-faceted
movement frequently misunderstood.

Acommon assumption in the business sector is that stokvels are rotational savings and credit associations (ROSCAs). This is true in that stokvels do take the ROSCA form where members of a group pool funds on a monthly basis and give the pooled funds to a member on a rotational basis. However, stokvels also include: savings and investment clubs; burial societies; grocery clubs, and other group formations that come together to pool funds for a common purpose.

Stokvels exist throughout the world. They are not a uniquely South African creation. In Bangladesh, for instance, stokvel practices by women were used as the building blocks for what is now the hugely successful Grameen bank.

In SA, though, the history of stokvels is special. It’s captured in the book Stokvels in South Africa by Andrew Lukhele, current chairman of the National Stokvel Association (NASASA). The term “stokvel”, he points out, dates back to the early nineteenth century when black farmers and labourers attended “stock fairs”. Here they exchanged ideas, displayed their entrepreneurial skills and gambled the resources they had.

With the discovery of gold on the Witwatersrand, black workers were brought in as miners. They brought the “stokvel” with them and used the concept in the formation of burial societies. Due to deplorable working conditions, many miners died. To address the need for transportation of deceased colleagues’ bodies to their home villages for dignified burial, surviving miners pooled their funds for the purpose.

Later, in the 1920s and 1930s, rural women began moving to the cities. As many black workers and miners lived below the poverty line, these women formed stokvels to supplement their incomes. Stokvels were used as a form of social security.

Mazwai . . . embedded culture

Then, in the 1980s, the apartheid government felt threatened by stokvels’ activities. It was uncomfortable that stokvel members were getting together – in groups in undisclosed locations – to pool funds. Wanting stokvels not to continue meeting for the collection and storage of public wealth without a bank licence, it held them to be illegal.

Lukhele took up the cudgels on behalf of stokvels. He approached the SA Reserve Bank to argue that the black community could not in fact access formal banking, as this was a privilege of the white community, and that stokvels played a vital role in the black community to serve as a savings vehicle and perform a social-security function.

SARB welcomed Lukhele’s submission. This led the passing of an exemption from the Banks Act for stokvels belonging to a recognised association. NASASA was then formed. It is a self-regulatory organisation authorised by SARB. In terms of the Banks Act, a stokvel is required to be a member of NASASA or a similar body approved in writing by the Registrar of Banks.

At the 1994 advent of democracy, many believed that stokvels would cease to exist as black communities would henceforth be able to access formal banking.

But between 1994 and the present, the number of stokvels has actually grown. Why? First, stokvels are more than merely a solution to the inability to access formal banking. They are a social activity. Many stokvel groups meet to pool funds for a common purpose and to socialise as friends. They have become part of the fabric of black and increasingly South African society.

Second, more people in SA now have access to incomes that they can contribute towards collective saving for a purpose. Saving in a stokvel also provides people with scale which they can use for more favourable investment options. Stokvel savings can be used, for example, to obtain bulk-buying discounts in the purchase of groceries.

In SA, stokvels have many forms. Essentially, a stokvel is any instance where a group of people who know each other, come together to pool funds for a common purpose. Many people aren’t even aware that they’re participating in stokvels when they’re called something else. For instance, there are some clubs which pool funds to purchase goods in bulk at Christmas; other clubs do the same for investment on the JSE, and still others for members’ travel.

Some stokvels are short-term savings vehicles for the purpose of consumption e.g. groceries. Others are long-term savers e.g. for investing and for burial societies which only utilise their funds in the instance of death.

Today the stokvel market is worth an estimated R49bn. This is a significant agglomeration of SA short and long-term savings. As NASASA is the only stokvel association approved by SARB, it is the largest player in this industry with over 110 000 registered stokvel groups. Noting in particular the short-term savers for consumption of items such as groceries, they are a lucrative segment for the private sector in the space of fast-moving consumer goods.

For any queries, visit www.nasasa.co.za or call 087 702 4696. We’d be happy to help.