In recent years, contemporary forms of stokvels have changed the way we view property finance. The latest Old Mutual Savings and Investment Monitor, released this week, suggests a parallel property finance market might even emanate from the rise of property stokvels.
This potential for disruption is enormous, the report says, considering the size of the stokvel market has grown to an estimated R49billion, with more than 800000 groups and 11.5million members.
Old Mutual’s head of research, Lynette Nicholson, says: “What started as an alternative savings mechanism outside of formal financial systems is today a significant force. And there’s no reason to believe property finance is immune to millions of individuals pooling their resources for the benefit of stokvel members.”
Stokvels, Nicholson notes, are not only familiar in black communities; they also help to retain ownership and money within communities.
“The true power of these schemes is reflected in the numbers - of both membership and their combined contributions,” she says. “The largest group that was surveyed, of more than 550 members, accumulates a staggering R24m a year from monthly contributions that range from R3500 to R15000.
“While that group may be an outlier in terms of size and volume of contributions, it’s not uncommon for members to contribute around R2500 a month. A group with 100 members can therefore easily reach an annual investment of R3m and a group of 30 can accumulate R900000 a year off relatively modest monthly contributions.”
Tebogo Motshwane, who is doing research into stokvels for his doctoral thesis, says modern stokvels have evolved and are focused on investment: whether it’s clubbing in to buy an Uber vehicle as an income-generating asset and ending up with a jointly owned fleet of vehicles; or for a group of members who accumulate funds, meet with investment bankers to speak about growing their investment book, or getting into the property market.
“Here, we have very affluent people, who participate in property, travelling and investment stokvels. They trade shares and build equity in business.”
Stokvels, though, are based on trust, no matter the social status: they don’t allow just anyone to join. The rules of the game are laid out from the start, with constitutions, outlining terms and conditions, including fines and penalties.
“It’s common for stokvel membership to be built around community members who have lived together for many years, sometimes for multiple generations. Imagine an individual that has grown up in a community, where (others) know almost everything about them, their family, where they work and live.
“It is highly unlikely that the particular individual would be willing to scam someone in that community because the consequence of such betrayal would be far reaching, not only for the individual but also for the people whom he/she cares about.”
But stokvel scams remain rife and with large sums of money involved.
Silindile Leseyane, who is listed on the StokFella app, says: “Stokvels are mostly based on trust, it doesn’t matter whether it’s for property investments, school fees, burial, big-ticket items or income rotation and the members are usually closely acquainted such as family, friends, colleagues or community members.”
Leseyane warns if you do not know those you are investing with, you must do thorough due diligence on where your money is going and who will be responsible for managing it. “Using platforms like StokFella is great in creating trust and transparency among all members as members have full visibility of the funds 24/7 and all members receive notifications once the funds leave the stokvel account on StokFella.
“I would also add before you invest, read through the constitution to make sure that you understand the objective of the property stokvel as these vary as wildly as the property investment spectrum does.”
Some might do it to save up for a deposit on the member’s homes; others to co-own property, buy homes, land, build and sell units, etc.
“Also, if you will be entering into the ‘buy for each other’ stokvel, safeguard yourself by making sure that all the properties are registered in an entity such as a company (registered Pty Ltd where all the members are shareholders) until all the properties have been bought and then they can be transferred to the individual members,” Leseyane says.