Stokvels, defined by the Oxford Dictionary as “savings or investment [societies] to which members regularly contribute an agreed amount and from which they receive a lump sum payment”, usually at the end of the year, are one of the most common features of the township economy.
They have always had a consumptive nature. In fact, most township residents who are members of a stokvel know it as nothing more than a savings club that gives members the discipline to save monthly, which most members fail to do on their own.
The consumptive nature of these savings clubs meant that, when it was time for members to receive the savings lump sum, the members would decide to buy predetermined items (usually groceries) from a wholesaler like Makro, which enabled them to receive discounts because of the large sum they would be spending with the wholesaler. All the savings would be spent and the process of saving would resume in the new year.
A new breed of township entrepreneurs is now emerging. These entrepreneurs are seeking to leverage the numbers that are involved in stokvels to create a capital base that can be used to launch a business or simply use the yearly savings not intended for spending on perishables like groceries as investments. The National Stokvel Association of South Africa (Nasasa) puts the number of stokvels in the country at over 800 000. But what is really interesting is their combined yearly turnover – R49-billion.
An industry of that size can make a huge change to people’s economic fortunes if entrepreneurs with a vision and a plan to turn the vision into reality are part of the equation. And that is happening already. A considerable number of stokvels have looked beyond buying groceries as the only incentive to keep saving. They are turning these societies into investment clubs. Sure, some of these clubs’ main activities include helping members with funeral expenses, but most are looking at various ways in which they can invest their savings.
Thabisile Gumbi, an entrepreneur based in Johannesburg, has managed to start a stokvel named Africa Growth Fund in partnership with 68 other entrepreneurs. This stokvel is one with a purpose because it has a big vision, namely taking the members’ monthly savings and investing them in student accommodation. The group was able to raise over R500 000 in 2017 – in ten months. The group will be looking at not only long-term goals but also short-term ones, such as helping members establish their own businesses.
The evolution of stokvels into investment societies has the potential to change the face of the township economy because entrepreneurs will now not be limited to the usual formal sources when considering funding options. Increasingly, these clubs are realising that members need to be armed with financial knowledge beyond just saving. Gumbi’s Africa Growth Fund arranges for financial experts to come and share their knowledge of various financial matters with members of the stokvel.
The township economy model that regarded the masses of people in the locations simply as consumers is being changed through these investment clubs. An Ivory Park-based stokvel has brought together businesspeople who save money to leverage each other’s businesses. Township entre- preneurs are not known for a group-buying mentality; this was the sole reserve of consumers using buying groups to get good prices. The evolution of stokvels has now even caused a change in the thinking of entrepreneurs who established the group simply to boost each other’s businesses.
Associations like Nasasa should be empowered to play a bigger and more educational role in helping to ensure that the momentum that is carrying the stokvel evolution forward is not lost. As previously stated in this column, the Grameen Bank, in Bangladesh, was established as a micro- finance organisation aimed at pooling meagre amounts of cash from ordinary folk, but it has revolutionised the small-business finance sector in that country. There is no reason why that finance model cannot be made to work in South Africa; it just needs government’s direction.