Seize the potential in stokvel spending
WITH an estimated annual contribution to GDP of tens of billions of rands, stokvels and burial societies are essential to the livelihood of most citizens.
However, many decisionmakers do not take this segment seriously. This is an oversight that could cost South Africa dearly.
Our economy is unfortunately based on orthodox principles, which are individualistic and exacerbate inequality and unemployment. African culture is collective and elevates group preferences over those of the individual.
People are cooperative, with neighbours sharing successes and setbacks. When a family experiences death, community members come together to offer comfort. When a family celebrates a wedding or graduation, neighbours gather to congratulate them.
Enter stokvels and burial societies. These largely informal schemes are used for rotational savings, burial assurance, the funding of social events, investment in businesses and other communal needs.
Although most of the spending is in urban areas, most of the consumption is in remote townships and villages.
Active economic participation by stokvels can improve lives. To focus on the financial contribution of individuals and businesses alone contributes to lacklustre economic growth because it ignores the 25% (the Statistics SA figure) or 41% (the Cosatu figure) of the population who are unemployed.
The reliance of the masses on only a few people for jobs and livelihoods creates a vicious cycle. Rural and township dwellers, the majority of whom are stokvel and burial society members, mainly make their livings in urban areas.
Their spending there is mainly on rent, food and clothing, which means money is circulated among a few businesses. What these individuals take home is minuscule, and only stokvels and burial societies offer a lifeline.
The potential of these groups to participate actively in the economy is enormous. There are various ingenious ways of stimulating members of stokvels and burial societies to participate actively in the economy. One of the keys to it is backward vertical integration, which involves buying your supplier’s business.
The main supply chains within stokvels and burial societies involve financial services and manufactured goods, especially burial insurance and groceries.
Most stokvel members, as significant buyers, could use their buying power and economies of scale to integrate backwards and own considerable stakes in national retailers, cash-and-carry distributors, insurers, banks, manufacturers and undertakers.
The government, just as it did with cooperatives, needs to educate people about the power of owning their own businesses, whether as shareholders, entrepreneurs or industrialists.
It should also review the decision to do away with mutual and building societies — which are owned by customers, policyholders and bondholders — as a way of addressing the lack of solid investment by stokvel or burial society members.
It is also imperative that businesses, especially those that have stokvels and burial societies as their main customers, should consider them as partners in their supply and value chains, not only as consumers.
Campaigns could educate stokvel members on ways to invest, and encourage them to set long-term goals. It is easy for families and members to pool their money for a posh funeral, but difficult to send a gifted child to university.
Apartheid made it difficult, if not impossible, for black people to own businesses. They used stokvels to survive. Now they need to grab the opportunity and become players in the economy, not just consumers. There’s a multitude of possibilities.
Tseko Shibambu is the CEO of One Contact Mass Market Services, which seeks to be a key player in the mass market sector