NASTASSIA ARENDSE: We are talking stokvels, which for many people have become a sought-after investment vehicle to maximise their savings. So we want to talk about what stokvels can do to make use of their group buying power. We’ll be having that conversation with Tshepo Moloi, who is the founder and CEO of Stokfella.
We’ll be taking you stock-related questions on 011-731-8500. Tweet us @moneywebradio or SMS 34701.
Tshepo, thanks so much for your time and welcome.
TSHEPO MOLOI: Thank you. Good evening to you and to your listeners.
NASTASSIA ARENDSE: Let’s unpack, first, the phenomenon that’s happening within the stokvel industry. When we are talking numbers and perhaps even the volume of investments there, what are we looking at?
TSHEPO MOLOI: The industry itself has been estimate to be [worth] between R25bn and R44bn. So it’s quite a big industry. It has not formalised 100%. You are looking at around 400 000 groups, roughly 8.5 million stokvel members, out there. The majority, 80%, are black households.
So it is quite a big industry, probably second to the taxi industry.
NASTASSIA ARENDSE: In terms of regulation, do stokvels have to affiliate themselves with an organisation that regulates and makes sure that they are doing everything accordingly?
TSHEPO MOLOI: From a regulation perspective, there is an organisation called NASASA, the National Association of Stokvels South Africa. Ideally, that’s whom stokvels should affiliate themselves with. And, from that perspective, the legislation also sort kicks in for the stokvel.
If you look at it from a legislation perspective, a stokvel is a group of individuals who come together for a common purpose to contribute almost up to R100 000. But for us we like to see stokvels as a culture, a culture among people who seek to change each other’s lives.
Your previous guest talked about 10% food inflation. Already that impacts the lower man on the street, and stokvels can change such things.
NASTASSIA ARENDSE: There is always that confusion – where people say we wonder whether a stokvel is a pyramid scheme. I’m sure there is a fine line between a stokvel and a pyramid scheme. What’s that one misconception that we have about stokvels?
TSHEPO MOLOI: I think perhaps let’s ask ourselves what a pyramid scheme is. A pyramid scheme is where you put money in, but there is no underlying asset, yet you get a return. There is no such thing as you get 35% back interest in one month. So there are those triggers that trigger a concept of a pyramid scheme, whereas with a stokvel there is no particular way of saying that. You actually put your money in a savings account, a club account, or even an investment account, and that investment has an underlying asset that performs and will give you a certain return for your stokvel.
Another thing about stokvels is that they are usually a closed loop, so to speak. This is between family members and close friends, whereas a pyramid scheme is just an open-loop scheme and anyone and everyone can join.
NASTASSIA ARENDSE: And when you say close friends and family, I understand the common thread there is trust, like there must be an element of trust for us to go into this together.
TSHEPO MOLOI: Yes, definitely. That is the ultimate thing about stokvels – do I trust you, my friends or my brother or my sister, to contribute your portion of this agreement that we have? Yes, there is a constitution in place, but arguably it comes back to that level of trust, the level of friendship. That’s what a stokvel is about. Just the basic foundation is trust.
NASTASSIA ARENDSE: We are approaching the festive season and a lot of people are going to be tapping into the stokvel, basically buying groceries or whatever is needed. How do we get to a point – or have we already reached that point – where stokvels are evolving in terms of what they are investing in or what the common goal is?
TSHEPO MOLOI: It’s quite difficult to say whether we are evolving or not because, if you look from a stokvel research perspective, not much research has been done besides to tell you that there are so many stokvels and there are so many types of stokvels. But it hasn’t been done for so long that you start to see a common trend.
Perhaps let’s just touch on what has been done from a qualitative perspective. About 15% of stokvels are actually savings and investments. The majority are burial societies. Then come your groceries, which you just touched on.
But now if we bring it closer to what we’ve seen when people use our application, we see that 65% of stokvels that register on our system are investment stokvels. So it just shows you that as a wave, but that wave is probably digital. If you now overlay that with who uses digital, you are looking at your younger generation, you are looking at your average, maybe 25-year-olds to 45-year-olds. It’s not to say that the older generation doesn’t use digital, but just to tell you that there is a movement shift based on the new generation.
NASTASSIA ARENDSE: We’ll get to that now. You have an app that’s called Stokfella. Tell us a little bit more about that, because it connects very appropriately with the digital side.
TSHEPO MOLOI: I guess the question is Financial 101. You need to see your money and understand your money to know what you are doing with your money. When we looked at stokvels themselves, they are money locked in the book. They record their information in the book and it’s usually dependent on one or two or three key individuals – your chairman, your treasurer and your secretary.
The trend is that stokvel people don’t actually see their money. From that perspective, the next step when we come in as a stokvel, as the app itself, is to actually allow all members to be transparent with their stokvel, to see that money, to unpack what their stokvel is all about, to manage their payments, manage their collections, as well as manage their meetings and minutes. Once you do that, then you start understanding where your stokvel is going, who hasn’t paid, who has paid, and how much you owe as an individual member. So that’s where the solution, Stokfella, comes in.
NASTASSIA ARENDSE: We have questions here by SMS. This one is from Thembi in Greenstone, saying: Where can my stokvel invest to maximise our savings over a year? Can Tshepo give us at least three options?
TSHEPO MOLOI: There are a couple of places where you can invest. I guess the first important thing is to get yourself a financial advisor, because every stokvel has got a definite objective, and objectives have different risk appetites. So it’s quite difficult for me to tell you you need to go here and here and here, because w don’t understand your stokvel itself.
At the present moment I think the first important thing is probably to have a club account which you can control as a group. And the second-best thing is to get yourself a financial investor [advisor?] who underlies your stokvel and what you guys are planning to achieve, your goal. There are different types of investment options out there. You have to choose one that works for you as a stokvel. So it’s quite a difficult question that Thembi is asking.
NASTASSIA ARENDSE: Here is another question that someone would like you to answer. This is Joy from Pretoria, saying is it wise to cash in on our stokvel now, or wait until January? Is there ever a best time?
TSHEPO MOLOI: That is a good question. I don’t think there is a best time. It all depends on your objective as a stokvel. Let’s assume that you are a holiday stokvel and in December you are going to go and enjoy a trip to Durban or wherever it is that you guys are going. That’s the time you will cash out.
But with such difficult times in the market, we would advise you to actually save more and not really cash out. Perhaps cash out that 30% because, at the end of the day, you get to work hard as a stokvel to get to that part of that 100% that you guys have got, But the last thing you want to do is cash out, because the best thing you can do for your stokvel is what everyone calls compound interest. The longer you stay in your investment account, the better that compound interest works for you. So you want to stay as long as probably three to five years in a stokvel.
NASTASSIA ARENDSE: Because we are talking about this phenomenon, and people are not really understanding it, I’ve seen banks offer sort of tailor-made accounts that are for stokvels as well – in that way of assisting people to grow their money. Are we seeing banks saying, okay, try getting to the stock market or unit trusts or whatever the case may be, or a different investment vehicle with the money that you are saving as a particular stokvel?
TSHEPO MOLOI: Not to my best knowledge. What I can tell you about is the average return that banks give. It is about 3.6% from that club account or that savings account or that stokvel account, whatever you want to call it. Yes, in some banks that account is linked to their money market, where the interest will be higher, based on the rand value of your stokvel that you have in that account. But on average it’s about 3.6% that you get.
Now, if you look at inflation, I think it’s above the Reserve Bank target at the present moment and already you are on the back foot. So it is important for stokvels to start learning about the concept of inflation, the concept of compound interest, and to start targeting that as a stokvel itself. You can have a burial society or a grocery society – it really doesn’t matter, because the fundamentals are that you are putting money away.
NASTASSIA ARENDSE: We’ve got a question from Tshidi in Tembisa, asking if there is a Fica system that stokvels can use as a resource to trace participants in case members run off.
TSHEPO MOLOI: That is a good question. In fact, that’s one of the things we are building from our system perspective, where we would Fica the chairman, because we’ve seen and we’ve heard stories where chairman disappear with money. So we are able to track such individuals from the stokvel solution, because you provide us with your ID number, you provide us with your phone number. So from that perspective we can track who you are and we are able to assist to a certain degree.
But I think the most important thing is that you should always get the authorities involved, your police involved if such things happen. That’s your source where you should start.
NASTASSIA ARENDSE: Or know your customers. Here is another question, saying: We’d like to know, apart from monetary stokvels, what other suggestions does Tshepo have?
TSHEPO MOLOI: Apart from monitoring the stokvel?
NASTASSIA ARENDSE: The monetary stokvels, I suppose. Maybe stokvels that are a little more sophisticated and they invest towards education or something like that.
TSHEPO MOLOI: It’s a bit of a difficult question because it’s not clear to me.
NASTASSIA ARENDSE: Perhaps let’s do it this way. Outside of burials and the ones that are for consumption, what other trends are we starting to see stokvels invest in?
TSHEPO MOLOI: Okay, that’s a clearer question, thank you. You start seeing stokvels that help each other to get out of debt. There are stokvels that say, okay, we are all in debt, how can we help each other out of debt? You start seeing stokvels that say we want to buy assets, property, for example, so how do you go about doing it? So they save towards that asset – property, for example. Other assets are a vehicle, so you see such trends as well.
So stokvels at home are starting to take a shape where they actually listen to their members and try to implement what their members are asking because, after all, it is a one-voice constitution.
NASTASSIA ARENDSE: And can I join more than one stokvel?
TSHEPO MOLOI: Yes, you may join more than one stokvel. It all depends on how big your pocket is, I guess.
NASTASSIA ARENDSE: I suppose. But do you see a point where we are going to start understanding what this phenomenon is, and won’t be as confused as most people probably are about how this work?
TSHEPO MOLOI: I think that’s part of what we do, part of the journey that we are trying to take. We are trying to unravel and unpack this hidden economy, one could say. It’s been hidden since the 19th century. So we are trying to say, okay, right, this the voice of the man in the street, this is how the man in the street actually saves.
So how about we use technology to unpack it and understand it? Yes, qualitative information is good, going and asking questions , but the truth is we need more quantitative [information] and this is where come in as Stokfella.
NASTASSIA ARENDSE: We’ll have to leave it there, Tshepo. We’ve got more questions coming in, but I suppose this is another part of the conversation we can have with you and perhaps with members of NASASA, as you mentioned earlier. The question was how to choose a stokvel and what factor one needs to consider. But we’ll certainly have that conversation.
From me, Nastassia Arendse, and the rest of the Moneyweb team, and of course Tshepo Moloi, the founder and CEO of Stokfella, that’s it for now.
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