SIMON BROWN: I’m chatting with Sifiso Nkosi. He is stokvels and group savings head at FNB Cash Investments. Sifiso, I appreciate the early morning. Stokvels – I think many of us think of them as something which our aunts or maybe our gogos did, but actually the National Stokvel Association [of South Africa’s] data shows that it is massive. It has millions of members. There are almost a million stokvels – and R50 billion a year is being contributed. This is giant.
SIFISO NKOSI: You’re correct, Simon. The stokvel market is a huge, huge market, as you’ve mentioned close to a million stokvels and over 11 million members. So it’s a proven and tried and tested method of savings. The question and discussion should be around how we harness that savings power to ensure that all South Africans, and I guess Africans on the continent, can use this platform to get to their financial journey.
SIMON BROWN: Yes, because I think [when] we think stokvels, we probably think ‘savings’. We probably also think some ‘burial’, but there are grocery stokvels. My sister was involved in one at work, which was a birthday stokvel.
We don’t want to take it away from the aunties and the gogos, but we want to expand it to the broader world. We can set them up at work … in places of worship, we could do it in a family unit.
SIFISO NKOSI: That’s very true. I think there are different types of stokvels, and often when we speak we kind of have one term that encapsulates all the different groups. But, as you’ve mentioned, there are more traditional types which have started off as burial societies so that you can give a good send-off to a family member who passes on. There have been grocery stokvels which have helped [members] buy groceries in bulk, therefore reducing costs.
But what we see is a lot of the younger people and the newer generation are now taking the same principles of trust, taking those principles of discipline, and using this method to then diversify into areas that were previously not considered areas for stokvels.
If you look at some of the examples, [there are] things like the purchase of property for rental income, investing in franchises, [and] investing in stocks, shares, bonds and different asset classes.
So yes, you’re right that we can take a tried and tested method that we all identify with and we can then use it for different methods. Those savings methods are always going to change, depending on what the need is.
SIMON BROWN: I want to come back to property and investing in a moment, but you had two key words there, which are that ‘trust’ and that ‘discipline’. It’s the social cohesion. If I’m doing it on my own, I can sneak out. But almost if I’m doing it with friends, with my community, perhaps with family, it kind of adds some peer pressure to it and brings in that discipline. The important part is also [bringing] that trust to the equation.
SIFISO NKOSI: Exactly. When we look at the fact that members are spending their hard-earned money and putting it away with a group of individuals, that trust is critical. You want to make sure that when you’re putting aside that kind of income you’re protected, but most importantly [what] you speak to is the discipline. So I can save by myself [but] I can dip in before the end of the month and use the money.
However, when I’m in a broader group I get held to account and I have to answer to a bigger group. So, as you say, it’s a great method for families, for colleagues, for friends, very popular among places of worship as the different groups within a particular place of worship will be saving using this means.
So I think it’s tried and tested in that the social pressure ensures that everyone reaches their financial goals. That also becomes the power to say ‘we’ve built this trust and we are all making our way towards our financial goals’.
SIMON BROWN: And that investment part is interesting, because stokvels I think we’ve again traditionally thought of as sort of savings vehicles, and typically fairly short term. The ‘burial [society]’ is perhaps a little different from that, but certainly others were focused on saving.
But this is moving into the realm of what we would colloquially call an investment club. The stokvel investment club is the same sort of thing in many senses if that grouping is around buying a buy-to-let or something, and again pooling the assets, making it easier on one individual.
SIFISO NKOSI: That’s absolutely correct. So we do see that the trend is towards moving to investor-type clubs. It’s quite interesting that you find two types of groups. Some groups identify as a stokvel. They say ‘we started off as a traditional stokvel, but we’ve now gone up the investment continuum and we’ve started to look at different property classes’. Recent research that we’ve done through a third party also shows that there are groups that are doing this already, but they just don’t call themselves stokvels.
So I think the concept of group banking, group savings and group investments is key to what we are discussing here.
And, like you said, the benefits of being in a larger group is the ability to acquire assets much quicker, [and] being able to get a higher rate of return because you are pooling those funds.
So I think it’s a big market that has been under-served and that we are looking to understand a bit more, so that we can give the right financial solutions and investment options to these groups.
SIMON BROWN: I’ll bet you some of those aunty and gogo stokvels probably are investing in property. We just thought they were talking burial societies. Some of them might be landlords. We’ll leave it there.
Sifiso Nkosi, stokvels and group savings head at FNB Cash Investments, I appreciate the early morning.