Stokvels: the force behind township economy’s vitality

Stokvels are a typical feature of township life. They are as South African as braai, biltong and bobotie.

These rotating savings schemes have been the lifeblood of many social occasions such as birthday parties, weddings and funerals for decades. 

According to the South African Pocket Oxford Dictionary (1991), “a stokvel is a women’s entertainment club or syndicate; pooling of funds and mutual aid”.

This is an old definition, which suggests that in the early years of stokvels, women – particularly wives and the elderly – were behind pioneering the stokvel sub-culture in black communities.

A relatively current definition can be found in Tsotsitaal: A Dictionary of the Language of Sophiatown (2003) by sociologist, Louis Molamu.

He defines it as “a type of credit union in which a group of individuals enter into an informal agreement to contribute a fixed amount of money to a common pool weekly, fortnightly or monthly. The money can be drawn either in total, or part of it on a rotational basis by the members”.

The word is derived from “stock fairs’ – rotating cattle auctions that began in the early nineteenth century Eastern Cape by the 1820 British Settlers. 

However, the roots of the stokvel concept can be traced to the pre-colonial times in African communities.

Villagers worked together as families in a communal spirit of mutual cooperation for common goals. This was particularly more pronounced during the ploughing, sowing and harvesting seasons when villagers came together to work the land on a rotational basis.

The ancients had an indigenous system the Sotho/Tswana people called letsema, a co-operative farming practice informed by the spirit of ubuntu, sharing and communal living.

This rotational system was intended to guarantee more yields and therefore increase chances of the community’s survival during drought.

This tradition of caring, sharing and helping one another endured and survived the period of colonial conquests, subjugation and land dispossession.

In the 1930s burial societies emerged on the Reef among black migrants who preferred to be buried in the countryside on their ancestral lands. The funds covered costs of transporting the deceased.

An interesting feature of these burial societies was its leadership.

For instance, in the thirties Dr James Moroka, a medical practitioner from Thaba Nchu and the eighth president of the African National Congress, formed the Goodwill Burial Society to help the needy with burial costs.

His initiative resonated with many black communities nationwide. A 1944 survey on Western Native Township indicated that two-thirds of households in this Johannesburg freehold settlement were members of burial societies.     

During the marabi era, a shebeen and jazz culture that thrived in the thirties in the Johannesburg slums of Doornfontein, Sophiatown and Pimville (Soweto), stokvels became an essential part of black urban life.

Following the forced removals of inner-city slums and western areas in the thirties and fifties to what later became known as Soweto, stokvels found new ground to survive and thrive. Many shebeen owners depended on stokvel contributions to keep their illicit liquor businesses afloat.                 

According to Andrew Lukhele, 63, founder of the National Stokvels Association of SA (Nasasa) and author of Stokvels in South Africa (1990), during apartheid days the government and white private sector couldn’t tell the difference between stokvels and shebeens.

Both are based on a social setting where music, food and drinks play a central role and therefore the lines could be easily blurred.

“Police used to accuse us of running or supporting unlicensed alcohol businesses,” Lukhele remembers.

“It was particularly difficult during the state of emergency as gatherings of many people in one space were prohibited. Stokvel members could be arrested for plotting the downfall of the government.”

The Reserve Bank was under the impression that stokvels were competing with banks. Lukhele recalls a time when he and members of his stokvel were summoned to the bank’s headquarters in Johannesburg to explain themselves.

“We made it clear that although stokvels were savings schemes, they were not banks. In fact they were rather surprised when we told them that we were using services of approved banks.”

Following this encounter, he was appointed a member of the standing committee for the revision of the Banks Act at the Reserve Bank.

According to Lukhele, there are approximately 810,000 active stokvel groups consisting of more than 11-million members who invest an estimated R50bn annually.

At least 40% of the country’s black adult population belongs to a stokvel or two.

Born in Bridgeman Memorial Hospital (now Garden City Clinic) in Brixton, Johannesburg, Lukhele was raised in Diepkloof, Soweto, and says like most urban dwellers, he took stokvels for granted as a subculture of black social life.

However, he says things changed when he was employed as a research assistant at the National Institute for Personnel Research (NIPR), a branch of the Human Sciences Research Council.

He was doing field work for a project on the economics and business entities in the black community.

The research armed the former schoolteacher and lecturer with valuable academic insight concerning the workings of the informal sector and particularly the magnitude of the stokvel economy.

It’s against this background that Lukhele decided to form an association that would act as a mouthpiece for the interests and aspirations of stokvel members.

The result was the launch of the Soweto Stokvel Association on 14 February 1988 (Valentine’s Day) at Funda Centre in Diepkloof.

The meeting was attended by movers and shakers in the black business and banking sector, notably Gaby Magomola, then CEO of the African Bank.

Magomola pledged on the bank’s behalf to help the new venture with loans and logistics.   

“I suggested that we call the new organisation the Association of African Credit Unions but several people at the meeting thought that the name obscured the cultural overtones and connotations of stokvels. So to maintain the cultural origins of the concept, we decided to call ourselves the Soweto Stokvel Association.”

Dr Ellen Khuzwayo, a notable community leader, activist and president of the National Black Consumer Union provided the association with office space.    

Lukhele says at that stage he was not a member of any stokvel but all that changed and over the years he has joined a good number of them, notably Bondtitis, formed to deal with bond housing challenges in the Marimba Gardens, Vosloorus in the late nineties.

Due to growing demand and national interest, the National Stokvels Association of SA (Nasasa) was established in the same year with Lukhele as chairman.

On 25 August 1988 at the A-Train Night Club in Orlando West, Soweto, Nasasa, in partnership with Perm Bank (previously known as the Permanent Building Society) launched the first club account for stokvels.

For the first time in the history of stokvels, a stokvel group could open an account in its name.

Today, the majority of commercial banks offer a club account to stokvels, thanks to this early product.

Just a month after the launch of the club account, Lukhele decided to resign at NIPR “as I realised there was obviously a vacuum that I could fill in the community”.

Since then he has worked tirelessly to promote the stokvel movement and contributed significantly in enhancing its image in the corporate and financial sectors.    

In addition to the book, Stokvels in South Africa, he has also published a report with the University of Pretoria titled Three Decades of Stokvel Banking and authored Wits University Business School’s case study titled the Stokvel Sector – Opportunities and Challenges.

He is a founder member of the Foundation for African Business and Consumer Services (Fabcos) and former director of Future Bank (a joint venture between Wesbank and Fabcos).

In 1990, he was the youngest in a six-member delegation of business leaders who were invited to the US on an observation mission.

The others were veteran anti-apartheid activist and BEE pioneer, Dr Nthato Motlana, Solomon “Stix” Morewa (football administrator), James Ngcoya (president of the South African Black Taxis Association, Dr Ellen Khuzwayo and Jeff van Rooyen, president of the Association of Black Accountants of South Africa.

Other highlights of his achievements include being selected as one of the World Economic Forum’s Top Hundred 1996 Global Leaders for Tomorrow.