Dealing with job losses amongst stokvel members
Over the past few months, stokvel members have been struggling to pay their monthly contributions, says Thulani Mabuza who is the national secretary of South African Burial Societies.
The problem is that stokvels don’t know how to deal with high numbers of members not making monthly contributions. But this global Covid-19 pandemic, which has devastating financial implications on businesses and people’s livelihoods, is a wake-up call for stokvels to consider long-term measures of dealing with members being suddenly unemployed or retrenched.
“Over the years that has been a major shift towards long-term investing, where societies are investing in properties or even vehicles,” he explains. For instance, if we reinvest some of our savings into income-generating activities, such as buying in facilities or equipment we could rent out to funerals, weddings or events. The profits made from these activities could further assist when members don’t have money to make their monthly contributions.”
How Stokvels can support their retrenched members
Here are a few tips on how stokvels can support their retrenched members from Development Economist, Ntombana Mbele.
Reduce retrenched members’ contribution fee by 30 to 50 percent
“This allows members who cannot afford to pay the full monthly fee not to lose their membership during this very difficult time,” Mbele explains. This will still provide a cash flow that the stokvel can invest in and the return can offset the missing 30 to 50% that the member couldn’t pay.
Stokvels can introduce income protection savings as a part of the monthly contribution fee
If the monthly contribution is R100, R20 can be used as an “income protection saving”, this will ensure that when a member loses their job or their ability to pay, those funds can be taken from that “savings” and be used to pay for their contribution until they get to a point where they are financially fit again. This will also act as insurance to keep members in the stokvel.
On the topic of COVID-19 Lockdown, you might be interested in this article: How Stokvels Are Moving to Whatsapp Because of Lockdown.
Stokvels can use Unit Trust programs designed specifically for them from Insurance Houses
The income received from stokvel contributions is guaranteed to earn interest at a risk-free rate with the principal amount — the monthly contributions — still protected from loss.
Mbele says: “Although stokvels are very traditional in how they engage with the formal economy, it is important that they’re educated about the various investment opportunities that have been designed to assist them to safeguard their money whilst making more of it.”