Stokvels are a brilliant and proudly South African way of saving and collaboration. When understood properly and used as the powerful tool that they are, stokvels can bring much social and economic change.
Financial literacy champion Palesa Lengolo has assisted and empowered a lot of stokvels on their journey to financial and investment wellness. She is also the author of the award-winning book Stokvels – How they can make your money work for you.
As a stokveller herself, we sat down with her to discuss some of her experiences, the rise of digital stokvels, legislation and other matters affecting the stokvel industry at large.
Where does your passion for stokvels originate from?
I grew up in a home where my mother was part of different stokvels. That’s how I got introduced to them.
As a single parent, the money from stokvels helped my mother put us through school and that’s how I grew fond of the model.
When and how did your journey of working with stokvels begin?
In my first job, I dealt with pension fund administration. We would invest on behalf of pension funds. As the years went by and I studied how pension funds work, I realised it sounded and looked exactly like a stokvel.
I started thinking of my mom’s stokvel and wondered why stokvels don’t invest. I just got curious and researched what stokvels do in Gauteng. That’s when I came across the Stokvel Academy. This was seven years ago.
I asked the academy if they also incorporate financial literacy in their work with stokvels. I told them I’d like to volunteer to do financial literacy, but specifically investor education. It was my wish to see stokvels starting to invest.
That’s how I got introduced to the stokvels in Gauteng. As they say, the rest is history.
You’re a firm believer in stokvels as SA’s secret weapon. Why is this?
The stokvel industry is worth R50bn. It’s the second largest after the taxi industry.
But it’s a very old model. For such an old industry, there hasn’t been much happening. How many people do we know that can say they built wealth through a stokvel?
About 80% of the industry is still consumer-based or rotational; meaning not much (in terms of building and creation) has been happening in the industry throughout the years.
Fortunately, there’s a revolution taking place recently. People are starting to realise the power of collaborating financial resources for better things. There’s a lot that can be done for social change, but most importantly creating jobs and actually wealth out of stokvels because they do indeed have the power to do that if used for those purposes, not just consuming.
According to you, in what ways have stokvels been a game-changer?
I’m an investor through and through. What I’ve learnt through experience is that when investing alone, I may not be able to reach my desired goal.
For example, if I want to raise R50,000 to invest in something, I may not have that R50,000. But if I come together with four of my friends and we each take out R10,000, we can actually get into an opportunity. So stokvels enable access to investment opportunities.
Do you believe stokvels are generally taking advantage of all the benefits and adequately using them for their growth and success?
No, stokvels also enable the collaboration of skills and resources. There is so much value in coming together with other people who have different skills. This is a big benefit of being in a stokvel, which some stokvels still don’t take advantage of.
Network too, you meet a lot of people. For example, if there are 10 of us, we each come with our own different network. I’ve met lawyers for something different while doping normal stokvel business.
What are some of the weaknesses of the stokvel industry, which you have witnessed throughout the years?
The industry has taken forever to progress and be open to change, while other industries are keeping up with whatever is happening and adapting to that.
Stokvels tend to stick to traditional ways of doing things even when change would actually benefit them, and that makes them hard to work with.
Over the years, stokvels have also worked in silos. Many of them still do. It’s such a huge industry and each stokvel is doing its own thing. Collaboration can bring so much change. Operating in silos has put the industry on a back-foot.
In your experience and the research you’ve conducted, what are some of the disadvantages that come with being in a stokvel?
Democracy, as great as it is, can be a disadvantage, especially where great ideas are concerned.
The admin of stokvels can also be quite a lot. Imagine there are 50 of us and all our Identity Documents and proof of addresses are needed.
Another thing that can serve as a disadvantage is misalignment. If there is no alignment in terms of the common goal, that causes havoc and disagreement in the stokvel.
With the rise of digital stokvels, how can people protect themselves online?
There’s a lot of scams that disguise as stokvels and that’s why people need to be very vigilant. Your own due diligence is very important.
Ask the necessary questions. You’d want to know what the stokvel does. If they’re investing, what are they investing and where exactly? Is there a constitution in place? Is the bank account in somebody’s name or in the name of the stokvel?
Do you need to recruit people and is the dependency of the stokvel on recruiting people?
A genuine stokvel doesn’t depend on any recruitment. The primary work of the stokvel should not be recruitment.
How can people best manage being part of multiple stokvels? What tips can you give?
For cash flow purposes, I’d advise that people don’t join multiple stokvels that all work on a monthly basis. If you are able to pay a once-off lump sum for the monthly ones, do that.
Make sure you have a limit for the contribution required because as a person, you also have other responsibilities.
What is the importance of registration and stokvels ensuring that they abide by legislation?
Unfortunately, many stokvels don’t take registration as seriously as they should, but registration is part of compliance.
Legally, there are two institutions that have been mandated by the Reserve Bank to look after stokvels. These are the National Stokvel Association of SA and National Stokvel Body of SA. Any stokvel can belong in either of the two in order to be registered and compliant.
Is there specific criteria for the type of stokvels that have to be registered?
To be compliant as per the notice of the Reserve Bank is that if you are contributing more than R100,000 per annum, ideally it is recommended that you belong under one of the regulatory bodies.
However, it doesn’t mean that if a stokvel is not registered under either or the two organisations then they’re doing something illegal.
I would recommend for all stokvels to get registered. Registration puts them under good compliance for non-members. In an industry full of scams, you’re better off registered.
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