T: 051 401 9111 info@ufs.ac.zawww.ufs.ac.za

STOKVELS

21 February 2012

DEFINITION

• Group of people

• Enter into an agreement to pledge regular contributions to a common fund

• Each member can draw from fund for a specific purpose

• On a rotating basis or times of financial need

TYPES

• Contributions stokvelTraditional savings schemeFixed amount of money to a common pool weekly, fortnightly or monthlyMembers would receive the lump sum on a rotational basisFree to use the money for any purpose

• Basic stokvelDiffered from contributions stokvel - also function as a savings scheme that paid out for specific events

• Umgalelo clubs Religious nature Contributions plus 20%

• Youth stokvels Care-taking and upbringing

• Grocery stokvelGrocery or cash coupons (Makro; Unilever)

• Purchasing stokvelPool money used it to purchase big items that could be used by the group to generate an income

• Family stokvelMoney invested in formal bank accounts or financial servicesMoney paid out according to the needs of the familyUsed for buying land or cars, for business investments, or for deposits on bank loans

I

TYPES

• Investment group

Invested money - interest

Money was split but, or reinvested

• Istoki stokvel

Members get turn to host party

Food bought with contributions - sold to guests

Host keeps money

• Party stokvel

Entrance fee would be charged, and food and drink would be on sale

Members then shared in the profits/hosts

• Borrowing stokvel

Lent money at high monthly interest rates (between 20% and 50%) to members and sub-members

• Makgotlas or burial societies

Financial help when familiy member has died

Practical support for the family during the preparations; for example, by helping to prepare

food

• Gooi-goois

Money or in natura contributions

HISTORY

• Rotating cattle auctions (“stock fairs”) of English settlers in the Cape (1800s)

• Discovery of Gold - brought the stokvel concept to Witwatersrand

Terrible circumstances

Funerals

• The National Stokvels Association of South Africa (NASASA) 1988

• Prior to 1994

• After 1994 - support and encourage informal community-based saving groups

HISTORY

• 1996: Ministry of Finance Produced 1996 outlining the government’s position on stokvels

Warned against illegal pyramid schemes posing as stokvels

Returns up to 300%

Pay-outs from members’ subscriptions, without sufficient reserves

• 1996 - Banks Act was amended

Stokvel activities were seen as falling outside of the definition of a bank

Stokvels = legal, self-governing entities, operating outside the regulations covering banks

1999 funds not allowed to exceed R9.99 million

Stokvels also had to affiliate themselves with NASASA

Activities may not fall within the objectives of a pension fund organisation

Accounting records (up to R1 million; more than R1 million up to R9.9 million)

• Sun Multi Serve scheme

Posed as a stokvel

Registrar of Banks froze its funds - R40 million in funds above the limit of R9.9 million

• Other schemes collapsed - R80 million losses during 1996

HISTORY

• 2003

Membership: Female (60%)

Race: 96% were black

Urban/Rural 65% urban-based

Region 50%+ Gauteng and KwaZulu-Natal (KZN)

LSM category76% relatively poor - LSM1 to LSM5

Contributions R50 and R100 per month; R181.

Savings R400 million

HISTORY

• 2011

South Africa has 811 830 stokvels

11.4 million stokvel members in South Africa.

The most popular type of stokvel is for savings, with 47% of respondents making use of this.

It is followed by a burial society stokvel, of which 41% of respondents are members.

Grocery stokvels, which buy in bulk from various retailers at the end of the year, make up 20% of stokvel membership.

Investment stokvels make up 5% of the total stokvel market.

The survey found that the average number of members per stokvel was 27.

Gauteng has the highest penetration of stokvels - 23%, followed by Limpopo at 20%.

The majority of stokvel members (57%) are women.

The average monthly contribution to a stokvel is R210.

BANK ACT

Section 1 of the Bank Act

(i) is a formal or informal rotating credit scheme with entertainment, social and economic functions;

(ii) fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives;

(iii) establishes a continuous pool of capital by raising funds by means of the subscription of members;

(iv) grant credit to and on behalf of members;

(v) provides for members to share in profits and to nominate management, and

(vi) relies on self imposed regulation to protect the interest of its members;

CONSTITUTION

• Example

GET RICH QUICK SCHEMES /PYRAMID

Section 1 of the Bank Act

(i) is a formal or informal rotating credit scheme with entertainment, social and economic functions;

(ii) fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives;

(iii) establishes a continuous pool of capital by raising funds by means of the subscription of members;

(iv) grant credit to and on behalf of members;

(v) provides for members to share in profits and to nominate management, and

(vi) relies on self imposed regulation to protect the interest of its members;

• Stokvels and the Companies Act?

• Is a stokvel a partnership?

PARTNERSHIPS

• Companies Act 1973• Section 30 Prohibition of associations or partnerships

exceeding twenty members, and exemption

• No company, association, syndicate or partnership consisting of more than twenty persons shall be permitted or formed in the Republic for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association, syndicate or partnership, or by the individual members thereof, unless it is registered as a company under this Act or is formed in pursuance of some other law or was before the thirty-first day of May, 1962, formed in pursuance of Letters Patent or Royal Charter.

T: 051 401 9111 info@ufs.ac.zawww.ufs.ac.za