Not your gogo’s stokvels

You would think that bank accounts, unit trusts and other investment vehicles would have buried stokvels, just as they once buried members and their families. But they are evolving and thriving, improving the lives of members and fulfilling an important social role.

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Stokvels used to be the province of grandparents who set up burial societies to cover funeral expenses.

Over time, however, they have evolved. Today these savings clubs meet a range of lifestyle needs. People set them up to pay for groceries, holidays abroad, birthday parties, businesses, a deposit on a car or schooling and varsity fees for their children.

A recent study conducted by market research company African Response revealed that 47 percent of the SA population belong to a stokvel.

Managing director Mamapudi Nkgadima says their study shows that “there are 811 830 stokvels, with 11.4 million members, and a total estimated fund value of R44 billion”.

One thing that hasn’t changed about stokvels is the social aspect.

They are a “respected backbone of black families”, says Nkgadima.

Lebo Motshegoa, director of Foshizi, a black consumer insights agency which specialises in qualitative surveys into the black emerging markets, says it is part of the “DNA of any township”.

“It offers a sense of belonging to a community and a feeling of wellbeing that you’re supported emotionally and financially.”

Nkgadima explains that stokvels date from the 19th century and started in the Eastern Cape. The name “stokvel” stemmed from the term “stock fairs”, the cattle auctions held by white farmers.

Farmers would get their farm labourers together at these fairs where it became a vibrant place for them to socialise and have fun. Gatherings of this nature seeped into black communities.

It’s believed that burial societies grew out of stokvels. Migrant workers, particularly miners, feared that the expense would prevent them from having dignified funerals which were important cultural events. Burial societies were formed to meet these costs.

The belief that “with more hands things can happen” underpins stokvels, says Eunice Sibiya, FNB’s Consumer Education Programme Manager.

“There will always be a need for stokvels, especially in our culture. And it will survive for generations to come because of its deeds and achievements

“I know of people who’ve achieved their degrees from stokvel money. Their mothers would have been domestic workers and saved like nobody’s business, with dreams of their children going to university.

“People have also managed to start businesses from stokvel money.”

Increasingly, stokvels have found their place among the youth, says Motshegoa. They’re drawn to these group savings schemes because it’s an opportunity to access a secondary income.

“Some may no longer have their parents around. Perhaps some have had to become parents overnight to take care of their siblings. So they need that stability,” says Motshegoa.

It’s also a disciplined way of saving because they are accountable to other people.

Nkgadima says parents are also making a point of inviting their children to join in stokvels.

The youth have realised that they can do things differently from their parents. While parents belong to a burial society, younger members may instead join birthday or investment stokvels and see it as “I can put down a deposit for a car”.

“They’ll look at ways that it can work harder for them,” she says.

People use their stokvels for different reasons, says Sibiya. Being a part of it teaches people to be proactive and to plan ahead.

“I know of people who deposit R3 000 a month in their stokvel account for a trip to Dubai at the end of the year. Taxi members also have their stokvels and pay in serious money to buy a taxi for each member.”

Motshegoa says some people are members of more than one scheme. “They find innovative ways and get creative with the type of stokvel they join.

“For example, at our work we have a January stokvel account. Our HR department deducts an amount from our salary which gets saved into that account. After the December hangover, we have some money to survive January broke time.”

Nkgadima says it is a misconception that stokvels are only for rural people and low-income groups.

“Our research has found that it cuts across LSM (Living Standards Measure) four to 10. It does exist in the higher income earners.”

But stokvels such as burial societies are prevalent in rural areas. In urban areas, investment stokvels are more prevalent, she says.

People have stokvels for things such as birthdays, group get-togethers and tourism purposes. Nkgadima says stokvels have grown because people have seen “the value in the financial muscle of their money”.

Motshegoa agrees. “There are those who pool money to travel locally or overseas. These are your top-notch stokvels who put in serious bucks a month.

“Members are usually people who come from old money or are in their late 40s and have lots of disposable income. And then they go away together. It’s good times with friends.”

As stokvels have evolved, so too has the safe-keeping of money, with members now using bank accounts and electronic transfers, says Sibiya.

It’s a nest egg that’s not sitting at home, where it can be stolen or burnt. It’s somewhere safe. And if there is a crisis, the money is easily accessible. It’s also safer to have more than one signatory to a stokvel account.

“Things can go wrong in stokvels,” says Sibiya. “It gives people peace of mind that they’re using a bank account.”

It was difficult at first to persuade people to use bank accounts and FNB conducted roadshows to educate stokvel members about its advantages.

As the bank had hoped, the fear that members had about banking disappeared and stokvel accounts have picked up momentum.

“The feeling of inequality, that they are not ‘banking material’, goes away,” adds Sibiya.

The “new feet introduced into the banking system” has had a ripple effect as one group tells another.

Members want to be seen as the trendsetters. Says Sibiya: “You must hear how some of the aunties diss one another if one of them is behind with the times, when they have probably just started banking themselves a month before. But they all want to be the innovators, and seen to be celebrating progress.”

The nature and beauty of stokvels is that it encourages savings, something former finance minister Trevor Manuel always emphasised South Africans needed to do to boost the country’s economic growth, says Sibiya.

“We’re really lacking badly in savings in South Africa. I think stokvel accounts make up for it. It encourages a saving culture and instills discipline.”

But there are some things that work against mainstream banks, argues Motshegoa. “When someone dies, stokvels are more approachable and the turn-around time quicker.

“Banks need a death certificate as proof. Stokvels don’t need the paperwork – they know the person who has died and understand that families are grieving.

“Banks also don’t offer friendship, brotherhood and community. With stokvels, people chat and know about each other’s lives,” explains Motshegoa.

“Stokvels are about more than just money. It’s about coming together.”

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DID YOU KNOW?

Market research company African Response says its surveys show that:

47 percent of those surveyed belong to savings stokvels.

41 percent belong to burial societies.

20 percent belong to grocery stokvels.

5 percent belong to investment stokvels.

The province with highest penetration of stokvels is Gauteng at 24 percent, closely followed by Limpopo at 20 percent, then North West at 12 percent and KwaZulu Natal at 14 percent. These four provinces make up 70 percent of the stokvel market.

Birthday stokvels are made up mostly of younger members.

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‘IT TEACHES YOU RESPONSIBILITY’

As a single mother of three children, Busi Fakude, who worked at a cosmetics house, battled to make ends meet.

She wondered how she would manage if a family member died, as funerals were very expensive.

In 1998, she voiced her concerns to a group of friends, all of them mothers. They decided to form their own burial society to allay their fears.

Their 15-member stokvel was called “Rebabaletswe” which means “We’re being saved by God”, says Fakude

Each person contributed R150 a month, R50 for the undertaker, R50 to be kept at a bank and the other R50 paid to the person whose turn it was to host their monthly meetings.

For Fakude, the burial stokvel was a godsend. She was unemployed when her mother died in 2004, and the burial money covered the expenses of her mother’s funeral.

Two years ago, she also joined a groceries stokvel. No matter how difficult times get, Fakude makes sure she contributes her portion each month.

“You pay even if you can’t afford it because at the end of the day you want your family to be happy. It teaches you responsibility,” she says.

The groceries stokvel has come in handy. Members pay in R160 a month and in December money saved is withdrawn from the bank to buy groceries in bulk at a wholesaler.

The groceries are then divided among the members.

Fakuke says her share lasts her about three to four months.

This has helped her financially because in January, she’s able to use her money to buy school uniforms and other essentials.

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‘IT’S LIKE A SOCIAL CLUB’

Domestic helper Elizabeth Kgmotso, 46, belongs to two stokvels – savings and groceries. These group contributions have made a huge difference in her life.

Nine years ago, Kgmotso and nine fellow domestic workers from Westdene got together after work to discuss starting a groceries stokvel, which would help them in January when everyone was broke.

“It was difficult to buy groceries as well as the stuff kids need for school,” says Kgmotso. “But with the stokvel providing the groceries, I can now pay school fees and buy books. I have two kids in high school and I’m able to pay for everything. Everyone has benefited.”

Each month, members pay R220 into the groceries stokvel and R100 into a savings account.

There are an additional 18 members in the groceries group, while 20 men and women are in the savings stokvel.

In December, members buy groceries in bulk at wholesalers, spending R45 000.

They then share out the foodstuffs such as sugar, cake flour, rice, cooking oil, washing powder, bath soaps, tinned fish, baked beans and chicken as well as groceries such as toothpaste and body lotion.

The groceries last for several months.

“From February I start paying into the stokvel again, and then from June I start buying groceries from my own pocket.”

Members of the stokvels meet monthly with their chairlady and two secretaries, and minutes of the meeting are kept.

“This is also time to catch up with one another and talk about our lives and our kids. It’s like a social club,” says Kgmotso.