Stokvels: Modernizing Traditional Saving Methods

If you grew up in a South African township or suburb, you know the scene: It is a Saturday afternoon, the kettle is boiling, there are biscuits on the table, and a group of “Gogos” or aunties are sitting in a circle with notebooks and cash. This is the Stokvel in its most traditional form. For decades, these gatherings have been the financial backbone of our communities, helping families pay for funerals, school fees, and December groceries.

But if you think stokvels are just for your grandmother, you are missing out on one of the most powerful wealth-building tools in the country.

I’m Nolan, and today we are going to talk about how this age-old tradition is getting a massive upgrade. We are seeing young professionals, investment bankers, and tech-savvy entrepreneurs taking the concept of stokvels: modernizing traditional saving methods to buy property, invest in the JSE, and build generational wealth.

The “Stokvel Economy” is estimated to be worth over R50 billion annually. That is not small change; that is a major economic force. Today, we are going to explore how you can leverage this communal power to supercharge your own journey towards mastering personal finance in SA.

What is a Stokvel? (And Why It Still Works)

At its core, a stokvel is a “Rotating Savings and Credit Association” (ROSCA). It is a group of people who agree to contribute a fixed amount of money to a common pool weekly, fortnightly, or monthly.

In the traditional “rotational” model, members take turns receiving the lump sum.

• Example: 12 friends contribute R2,000 each per month.
• Total Pool: R24,000.
• Result: Every month, one member gets R24,000 cash to do something significant—renovate a kitchen, pay a university deposit, or buy a car.

Why does it work? It works because of social pressure (accountability). It is easy to skip a debit order to your own savings account when you are broke. It is much harder to look 11 friends in the eye and say, “Sorry guys, I spent my contribution on a weekend away.” That social contract is the secret sauce of the stokvel success.

The Evolution: From Groceries to Assets

While the “Grocery Stokvel” (saving up to buy bulk food in December) is still popular, the modern stokvel is shifting focus from consumption to investment.

1. The Property Stokvel

This is the hottest trend right now. Property prices in SA are high, and getting a 100% bond is tough.

• How it works: A group of 10 people contribute R5,000 a month (R50,000 total).
• The Strategy: Instead of paying out to individuals, the money accumulates in a trust or company account. In a year, they have R600,000. They use this as a deposit to buy a rental apartment cash (or with a small bond).
• The Yield: The rental income is split or reinvested to buy Property #2.

2. The Investment Stokvel

Why save cash that loses value to inflation? Investment stokvels pool money to buy shares on the JSE, cryptocurrencies, or livestock.

• The Tool: Platforms like EasyEquities now allow for “Club” or “Partnership” accounts where groups can invest together.

3. The Holiday Stokvel

Travel is expensive. By saving R1,000 a month with a group, you lock in that Mauritius or Cape Town trip in December without going into credit card debt.

Going Digital: The End of the “Cash in a Tin” Era

In the old days, the treasurer kept the cash in a biscuit tin or under a mattress. This was dangerous (theft risk) and inefficient (no interest earned). Stokvels: modernizing traditional saving methods means going digital.

1. Specialised Banking Products

Almost every major bank in SA now offers specific accounts for stokvels (often called “Society Schemes” or “Club Accounts”).

• FNB Stokvel Account: Offers no monthly fees and competitive interest rates.
• Standard Bank Society Scheme: Allows for multiple signatories to approve transactions, preventing fraud.
• Nedbank Club Account: Offers tiered interest rates—the more you save, the more you earn.

Nolan’s Tip: Never, ever keep stokvel money in a personal account. If that person dies or their account is frozen by the bank (e.g., due to a judgment), the stokvel money is gone. Always open a dedicated Club/Society account with at least 2 or 3 signatories required to release funds.

2. Apps and Fintech

There are now apps dedicated entirely to managing stokvels.

• StokFella: This is a brilliant South African app that helps you manage meetings, track payments, and even invest your pool into approved opportunities. It takes the administrative headache out of the process.
• Franc: While an investment app, it is great for groups looking to access money market funds easily.

The Legal Side: Don’t Skip the Constitution

Friendship ends where money begins. I have seen best friends stop talking because of a stokvel dispute. To modernise your stokvel, you need to run it like a business, not a hobby. You need a Constitution.

This is a document signed by all members that clarifies the rules:

1. Contributions: How much? By when?
2. Payouts: Who gets paid when? (Draw numbers out of a hat to be fair).
3. Defaults: What is the penalty if someone pays late? (e.g., R100 fine).
4. Exits: What happens if someone wants to leave the group halfway through the year? Do they forfeit their money?
5. Death: If a member passes away, does the payout go to their spouse?

You can download free constitution templates from the National Stokvel Association of SA (NASASA) website. Being a member of NASASA also adds a layer of credibility to your group.

Case Study: The “Sandton Savers”

Let’s look at a fictional but realistic example of a modern stokvel. The Group: 5 young professionals (aged 28-35). The Goal: Build an emergency fund and invest. The Contribution: R2,000 each per month (Total R10,000).

• Structure: They don’t do a payout rotation.
• The Split:
  • R5,000 goes into a Money Market account (for emergencies/yield).
  • R5,000 goes into an EasyEquities account buying ETFs (Exchange Traded Funds) like the Satrix Top 40.
• The Result: After 5 years, they aren’t just saving; they are compounding wealth. They have a diversified portfolio that outperforms a standard savings account, and the social pressure keeps them consistent.

Risks to Watch Out For

As stokvels modernize, scammers have modernized too.

• Pyramid Schemes in Disguise: If a “stokvel” promises you 50% returns in a month if you recruit 3 friends, run. That is a Ponzi scheme (like the infamous MMM). A real stokvel only pays out what is put in (plus legitimate interest/growth).
• The “Treasurer” Trap: Never let one person have sole control of the PIN, password, or bank card. Fraud happens when temptation meets opportunity. Always require dual authorization for payments.

How to Start Your Own Modern Stokvel

Ready to gather your squad? Here is your step-by-step plan.

1. Recruit the Right People: Don’t just pick your drinking buddies. Pick people with similar financial goals and discipline. You want “reliable,” not “fun.”
2. Define the Goal: Is it for groceries? Property? Or just a rotational cash injection? Be clear.
3. Draft the Constitution: Use the NASASA template. Agree on the rules before money changes hands.
4. Open the Bank Account: Go to the branch together (usually the Chairperson, Secretary, and Treasurer need to FICA).
5. Set the Schedule: Decide on monthly meetings (can be on Zoom/WhatsApp) to share proof of payment and discuss the balance.

Community is Wealth

In the Western world, personal finance is often seen as a lonely pursuit. In Africa, we know that we are stronger together. Ubuntu—”I am because we are”—applies to money too.

By embracing stokvels: modernizing traditional saving methods, you get the best of both worlds: the discipline and community of our heritage, combined with the efficiency and growth of modern financial tools.

So, call your friends. Put the kettle on. And start building your empire, one contribution at a time.

FAQ: Modern Stokvels

Do I pay tax on stokvel payouts? Generally, if the stokvel is a simple savings club (contributions come from after-tax salary and you just get your money back), the payout is not taxable income. However, interest or capital gains earned by the club might be taxable if they exceed the annual exemptions. It is best to consult a tax practitioner for large investment stokvels.

Can a stokvel get a loan? Yes. Some banks and specialized lenders (like mediated through StokFella) offer loans to registered stokvels for enterprise development or home loans, provided the group has a solid track record of saving.

What is the best bank for a stokvel? It depends on your needs. For pure savings with no fees, shop around for “Club Accounts” at Capitec or FNB. For complex investment structures, you might need a business account. Compare the “tier rates” (interest rates) carefully on sites like RateCompare.