The financial value of stokvels during the Covid-19 pandemic

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By Nyelethi Risenga

In South African communities, belonging to a stokvel has become one of the most important survival strategies. Stokvels have been playing a key role in empowering and enhancing economic stability by being a means of supplement for monthly income, and has also played a key role in helping to achieve gender parity as many women participate in stokvel savings clubs.

The year 2020 however, has brought about new trends in how stokvels have been contributing and managing their stokvel accounts due to the Covid-19 pandemic. This has led to a question as to whether the financial value of stokvels has increased or decreased due to Covid-19.

Stokvel Talk spoke to Sifiso Nkosi, Growth Manager for FNB Cash Investments, who explained that the financial value of stokvels has increased during the Covid-19 pandemic and that this has been driven by continued member contributions and fewer withdrawals done by stokvels during the year. Sifiso further explained that the value of stokvel deposits in 2020 is growing at a rate close to 10% compared to 2019, showing a continued resilience of the stokvel market.

“The growth in the value of stokvels is highlighting the discipline and accountability that saving in a group carries when compared to individual savings,” Sifiso said. The emergence of Covid-19 has however put stokvels at risk and poses uncertainty for their survival.  Sifiso explains that the stokvel market has been very resilient to the challenges presented by Covid-19, with contributions continuing throughout 2020, however it hasn’t been fully shielded from the impact of Covid-19.

“Internal FNB data shows that deposits made in 2020 have decreased compared to 2019. With approximately 1/4 members and stokvels being affected by the loss of income therefore impacting the number of deposits being made”, explains Sifiso.

Stokvels value social contact, which makes it another additional challenge caused by Covid-19 alongside a loss of income. The near-total halt in movement and total halt in social activity during lockdown level 4 and 5 may also have contributed to demotivating stokvel members in being consistent with stokvel contributions.

There however are ways and methods that can assist in keeping the financial value of stokvels at a good level, Sifiso advises for stokvels to choose to hold on to their contributions, even with the challenging economic situation that is currently being faced, this would ensure that stokvels hold onto cash at the time whereby having a cash buffer to navigate this challenging period is important.

Sifiso further advises for stokvel groups to consider diversifying their asset classes that the stokvel invests in, for example, holding contributions in cash (via a stokvel savings account) while directing some of the contributions to longer-term investments such as unit trusts, shares and exchange-traded funds (ETF’s).