PRETORIA – Imagine a person who diligently builds a concrete wall for forty-eight weeks and only tears it down after fifty-one weeks for some reason or other. For three weeks he reminisces about how good he feels about his great achievement that he had constructed a wall all year-long. But when he is asked where the wall was, he finds it hard to pinpoint exactly where the wall stood. Nonetheless, he wakes up a few weeks later and starts to build a wall that he’ll bring down again after fifty weeks.
This person has been doing this for the rest of his life, year in year out.
This scenario represents a stokvel. Rudzani Mulaudzi says stokvels “are made up of 5-20 people who contribute an agreed periodic amount to a central 'collective savings vehicle' known as the central pot.” A stokvel runs for a predetermined period, say one year, and each member receives a lump sum of the combined contributions at least once during the savings period. Normally, these stokvels are done from January to December, and payments are made at the end of the year. Members start again in January and get paid in December. This yearly cycle goes on for years non-stop but many years later there is no tangible benefit to them or their families.
The nature of stokvels in the present form is such that once people have received their lump sum, the party begins. Money gotten from stokvels is spent on alcohol, meat, clothing and other unnecessary consumables. This spending generally takes place in just two weeks during the Christmas holiday period. It is part of the national culture to celebrate conspicuous consumption and reckless spending. Thanks to bonuses and stokvel payouts.
Stokvels were meant to provide some financial relief for families when they were started many years ago. But now they are the biggest cost rather than saving. Short-termism, alcohol and parties destroy the potential value of stokvels - they resemble the destruction of a wall that took a long time to build.
Bad habits that undermine the culture of savings
Some uncomfortable things have to be said for many of us to reflect on bad habits that undermine the culture of savings in South Africa, especially in the black community at large. Drunkenness is a huge problem whether we like it or not - the money we spend on unholy waters is a huge expense to the country’s economy and families. Alcohol is a very lucrative business and binge drinking is a huge problem in South Africa. Alcohol is said to be responsible for high road fatalities and other forms of violence that occur during the summer holidays. Alcohol consumption rises sharply during this period.
It doesn’t matter how the economy is doing, alcohol expenditure keeps rising. Data from the South African Wine Industry Information & Systems (Sawis) indicated that South Africans in 2016 “consumed a combined 4 billion litres of alcohol in 2015, totalling R96.5bn worth of booze.” Most of this alcohol is guzzled during weekends and special times of the year, and the December holiday period is usually the peak period. What is disturbing that this is hard-earned money and savings that people could have been put to better use to improve themselves, individually or as a group?
Maurice Smithers, the coordinator of the Southern African Alcohol Policy Alliance (SAAPA) says, "Alcohol is normalised and glamorized in society." For example, during the build-up to the 108-year celebrations since the founding of the African National Congress (ANC), the Northern Cape government announced that it will extend alcohol trading hours in a region that is already beset with problems related to alcohol consumption. There is a growing call for the ban of alcohol adverts in South Africa. South Africa can draw lessons from Russia, which a few years ago strictly regulated alcohol sales and marketing and this has reduced consumption with 43% and increased life expectancy with more than 10 years.
Sintax not a deterrent
For South Africa, the introduction of such regulations could not only result in the obvious but it will hopefully lead to improved savings. But what is discouraging is that there is no evidence to suggest that this will help. For example, one person argues, “cigarette adverts have been banned and in the past 10 years cigarette companies have increased sales by over 500% in South Africa.” And for a long time to date, sin tax on alcohol and cigarettes does not deter people from either drinking or smoking. The problem lies with the national culture and behaviour, that is where change must begin.
Private bank Investec reported in 2019, “South Africa is stuck in a low savings rut.” As much as saving is an individual choice and the economy isn’t doing well, our collective effort help resolve some of the longstanding problems of economic exclusion and poverty. However, we are yet to realize the true value of a strong culture of saving over the long term. The presence of stokvels isn’t helping the situation, especially how they are approached. They are mysteriously called savings or investments although when their timelines are just short term and focused on perpetuating a consumer culture rather than encouraging stokvels to become building blocks for a different economy.
Some disturbing facts about stokvels. About twenty-five stokvels are burial societies which payout in case of death. Many others are for different purposes like groceries, holidays, Le Creuset pots and other purposes. What is clear is that most stokvels are short-term in nature and driven by consumerism rather than long-term savings or investment. It is for this reason I view them as a waste of time and energy under the harsh conditions of the Sahara desert. For as long as there is no long term goal intended with the money, the culture of ‘hand to mouth’ in our society will continue unabated. Mulaudzi argues that although stokvels generate R50bn each year, the members “reap the little reward.” This money can easily buy a large company like Woolworths (market value of R49bn), argues Business Insider SA.
To understand why the problematic manner in which South Africans approach stokvels or what they should be doing, an example of a saving scheme in Kenya is used to illustrate the point. Samuel Abuya of Africa Global News reported in June 2019 that a group Kenyan women raised almost $1 million that completed the 102-rooms apartment. “Instead of sharing the contributions, [the women] opted to deny themselves and bought land, and did the 5-storey apartment with more than 100 rooms which will be hosting students from the neighbouring colleges and universities,” added Abuya.
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Improved creditworthiness
For these women, the new building is a major step forward for the women since they can now venture into new opportunities that will be backed up with this building which will serve as collateral. In summary, their creditworthiness has immensely improved which allows them to access better and bigger financing from banks and other institutions. The members were not eager to build the wall for long periods and only to destroy it again. They were not concerned with instant gratification that comes with groceries, groceries and clothes but they used their numbers and patience to achieve what would have been impossible if each member tried to reach that sum of money. Pressures to engage in unsustainable spending was low in their minds.
Moving away from just enjoying speaker-rattling piano sounds like the sole objective for stokvel members, some change is needed to transform their attitudes and to get them to bigger things. To attain this, Mulaudzi suggests, “While transitioning from consumers to investors may not be easy for stokvel members, it is important that they begin to recognise their ability to leverage their collective strength to secure the advantages of being one of the biggest buyers in the economy.” With over 820 000 stokvels with a combined membership of 11.4 million people, it is surprising that black people still complain about economic exclusion and dominance by whites of the economy.
Investments from stokvels can help to build privately-owned schools, universities and hospitals as well as help to educate family members without queueing for costly student finance at the beginning of each year. Imagine if individuals were to open a stokvel for education over a ten year period without withdrawing money to buy booze, so many children would not be burdened with debt.
Attitudes of the black majority
Attitudes of the black majority strengthen the white owned-economy and white monopoly capital because it fails to recognize the power it has. That is sophisticated politics. Without ownership of any form, the black majority will continue to exist in the peripheries of the white-owned economy and white businesses will become ever stronger from the collective naivety of the black nation. Nedbank’s Sisa Cikido concurs, “We believe that by helping stokvel members to use their existing savings to grow more wealth, we can make a real contribution to changing the face of the economy and building broad-based wealth.” This is not to suggest that the arguments advanced in this article will be a panacea for all our economic problems.
Business science has long neglected usage of African languages and custom to explain simple theories of savings and investment. To turn around stokvels and how they are presently used, African proverbs simplify this task.
In Nguni, there is a saying that “ inja iyawaqeda amanzi ngolimi” (a dog will finish a bowl of water licking it little by little). And BaPedi say, “ nonyana phakuphaku e bea lee le tee” (a hasty bird only lays one egg; meaning: success comes from focussing on your work, and not from running around trying to do everything). These proverbs are important since they teach “the practical wisdom relating to perseverance and persistence.” It is encouraging to learn that some burial societies are already looking at investing excess savings in bonds, unit trusts and property, according to Mizi Mtshali who is the CEO of the National Stokvel Association of SA (NSASA).
We must always remember that: Bana ba motho ba kgaogana tlhogwana ya tsie!
Siyabonga Hadebe is an independent commentator on socio-economic, politics and global matters based in Pretoria.