Experts predict the popularity of stokvels in South Africa is about to skyrocket, as the country enters an unprecedented period of economic uncertainty. Finance Minister Enoch Godongwana’s proposed budget could be tied-up in red tape until May 2025, threatening financial stability.
In his proposal, the minister wants to enact two consecutive 0.5% VAT increases by 2026. Stokvels might be the only saving grace for elderly, poor and disabled residents who are living near the poverty line. For those who are unfamiliar with stokvels in South Africa, they are like a home-grown savings club, based on principles of trust and community.
STOKVELS IN SOUTH AFRICA
It’s no wonder with South Africa in the cusp of a cost-of-living crisis that stokvels have evolved into a multi-billion-Rand industry. The term ‘stokvel’ comes from ‘stock fair’. When the first English settlers arrived, they ran rotating cattle auctions. Quickly, South Africa’s indigenous people adopted, but adapted, the concept into a rotating credit association. From day one, stokvels were a uniquely pragmatic solution to financial exclusion under colonialism and apartheid.
With the majority of South Africans systematically denied formal banking during apartheid, stokvels emerged as an entirely parallel financial system. The earliest stokvels were documented in the late 1800s. And, during apartheid, they became critical survival mechanisms. Community members could pool resources for basic necessities, education, funerals and emergencies. Therefore, the uniquely South African creation represents one of the most successful indigenous financial ecosystems in the emerging world.
HOW DO THEY WORK?
Local stokvels operate on a simple basis – regular contributions from all members that create a collective, rotating fund. It is the very embodiment of ubuntu, you could argue. According to the National Stokvel Association of South Africa (NASASA), there are nearly one-million stokvels registered in the country. And 12-million residents (roughly one in five South Africans) have a collective share in an estimated R50-billion annually.
Central to the stokvel edict is the specific purpose of the savings club. Therefore, there are many to choose from:
- Savings: Accumulated savings are distributed equally at year-end or for holiday expenses.
- Rotating: Each member receives their entire collected sum on a rotating schedule. Ideal for large lump-sum investments/purchases.
- Burial: Informal funeral cover in the event of unforeseen tragedy/expenses.
- Investments: Pooled resources are invested into property, businesses or stock market.
- Groceries: To purchase bulk groceries at discounted rates, typically before a major holiday.
GOING GLOBAL
Moreover, the uniquely South African phenomenon is going global. Similar informal savings systems are popping up worldwide. Susus in Ghana, Tandas in Mexico, Hui in China, and Pandeiros in Brazil. Similarly, these once-traditional systems are now influencing mainstream banking, too. In the United States, apps like eMoneyPool and Cashare have digitised the rotating savings concept. Likewise, financial technology companies like Esusu and Cofundie have built platforms doing more or less the same thing. Locally, major banks like Standard Bank, Nedbank, and FNB now offer specialised accounts for stokvels.
BUT ARE THEY SAFE?
Registered stokvels in South African operate under NASASA. The association demands stringent governance at all times. Including detailed info on member contribution requirements, distribution schedules, and penalties for non-compliance. The social accountability aspect of stokvels is perhaps it’s most powerful safeguard, and their ability to reinforce saving discipline. What began as a survival mechanism under oppression has evolved into one of the most remarkably adaptable indigenous savings solutions in the world.
ARE YOU A STOKVEL MEMBER?
Let us know by leaving a comment below, or send a WhatsApp to 060 011 021 1.
Subscribe to The South African website’s newsletters and follow us on WhatsApp, Facebook, X and Bluesky for the latest news.
