Andile Mazwai: Financial disruptors – R45bn in Stokvels, 11m people

Andile Mazwai, CEO of the National Stokvels Association of South Africa tells Tim Modise that stokvels have played an important role in the lives of the black community for decades and continues to do so for many citizens who work in the informal sector. He says NASASA provides members with an opportunity to speak with one voice when dealing with the financial institutions and the government. He estimates the membership of stokvels to be 11 million and the size of savings at R45 billion.

Mr Andile Mazwai, thank you very much for talking to us – as the CEO of the National Association of Stokvels of South Africa. I appreciate your time.

Mr Modise, thank you very much for having me.

Well, it’s interesting that you are now working with the stokvels. What is the size of the stokvel community in South Africa?

From stock broking to stokvels – it’s not that far. We estimate in terms of groups, there’s about 800,000 different groups that are out there. As a number of individuals – about 11.5 million individuals, who participate in stokvels and in terms of Rands and Cents – it’s about R45bn, which is collected in any given year, and that is typically the same amount of money which is saved in any given year.

Now, the financial system in South Africa – does it recognise the stokvels as a community on its own or does it deal with them as just individual members?

It’s probably the latter. Years ago, our chairman Mr Andrew Lukhele, went and created the first stokvel bank account. This was with a bank called Perm, back in the days, in the early 90’s, because no one understood. When you walked into a bank to open an account – are you an individual? Are you a company? Are you a closed corporation? He says no, you are a stokvel. They created that. Of course, all other banks now have such accounts. A lot of the money, it’s about half of it, actually goes into these bank accounts. A frustration that we see and in answering your question is often there isn’t more that is given to the group, beyond a place for safekeeping of money.

Read also: Exorbitant bank charges cripple small savers’ chance to escape poverty

Now, the history of stokvels goes back more than a Century, I believe.

Yes.

What is it about stokvels that makes difficult for financial institutions, including stockbrokers or financial advisors, to understand about stokvels?

I think the first mistake is that people think stokvels are somehow different, or unique or South African. A stokvel is a human experience. By definition – it is when a group of people get together and pool their money for a common cause, and we’ve all done that. Whether we are going to have a braai or we are going to go and watch the rugby overseas, or we are going to put a child through school, or we are going to buy groceries. A group of us, who are known to each other, decides we are going to put this amount of money, and when we achieve our financial goal, we are now going to execute on whatever that thing is. As an idea – it’s a very easy one. What makes it unique to South Africa is how prominent it is as a savings mechanism.

In other parts of the world, you don’t think about it. You just get together with your mates, you put your money aside, and then you spend it on whatever you are going to spend it on because many South Africans, historically, were excluded from the financial sector – it was difficult to, even open a bank account and even more difficult to get a loan from the bank. Then a stokvel became a place where people could save money, as well as access credit.

Now, with that kind of background and history one would have thought that the stokvel movement, if you will, in South Africa would have been a very influential voice, especially in the new dispensation in democratic South Africa. That the needs of those people, who are and have been members of stokvels, would be, in a way, sort of regulated and they would have a chance to form their own bank. It could be a cooperative bank, for instance. Why is that not happening?

It’s a very difficult question to try to answer because many people believe they already have the answers. Go to any of the commercial banks and they’ll tell you. They have a stokvel account that’s open. They welcome stokvel members. They invite them in. They’ll take their money. They’ll give them advice, yet in our experience, it’s the felt pain that the banks aren’t getting. They think they’re solving a perceived pain. You open an account and they’ll give you free internet banking. That is not a felt pain of stokvels. They are not demanding free internet banking. Rather what they are saying is that as an individual member I want to borrow money from the bank. The bank takes them through a credit scoring sheet and says, “Sorry Mr Mazwai, you’ve been blacklisted. You don’t qualify for a loan” but Uma’s wife says, “But I belong to this stokvel that has collected R187,000.00 that has been deposited at this very institution.” The bank says, “Sorry, we can’t look at that. That’s a separate account to the one that you are coming for.” There is a misalignment of what it is that people want and what it is that the institutions are giving.

Read also: GG Alcock: A massive untapped market under SA business executives’ noses

What is the benefit of being a member of a stokvel? The intention may have been good in the past and people had to pool their resources together, to assist one another. Now, with the proliferation of banking products, as much as it’s difficult to access loans and so forth, so what would the benefit be if you join a stokvel and what are you likely to gain?

Solidarity. We are now in November. I am sure that you had a New Year’s resolution at the beginning of the year. Do you even remember what it was? How successful were you in doing that thing that you said you would do, and that’s what a stokvel does to you. At the beginning of the year you may say, “I have a goal and I’m going to buy a house this year and I’m going to collect a deposit of R50, 000.00 and I’m going to do it by putting R500.00 per month, for ten months.” On your own, you may do it in month one, two, three, and four. After a while, you may then not have the discipline to carry on but when you share that goal, with people who are important to you and you commit to it, and you meet every month. The likelihood of you being disciplined, through the solidarity, means that by the end of the year you would have collected that R50, 000.00 whereas, on your own you wouldn’t have been able to do it.

As NASASA, the National Association of Stokvels – how many members do you have, did you say?

We now have 110,000 groups that are registered on our database.

Right, for those members, and you’ve interacted with them. What is it that they would like to see change, if any change were to happen in the financial systems of South Africa?

They want everything. They want a NASASA bank. They want a NASASA insurance company. They want a NASASA everything. What they really want is just to be heard. There are so many products, which in their design exclude people on a structural basis. An example is the way in which people consume airtime. The majority of South Africans buy airtime before they talk – it’s prepaid. Yet, when you look at what you pay for prepay versus a contract, it’s usually much higher. The question is but why. Why don’t people then just simply say to themselves ‘I will no longer have a prepaid deal?’ I’ll have a contract and when you look at it, you drill down, and you come back to the same problem of the credit score that says you must have a green bar coded ID. You must have a payslip. You must have all sorts of documents – proof of residents, you must not have a blacklisting, and many South Africans fail on that score. These are the frustrations that they have and they are saying to us, at NASASA, how can you solve these bread and butter issues? Don’t come with fancy things. Solve our everyday bread and butter issues.

Now, you have spent time with the members, over 100,000 stokvels. That are your member substantial number there.

Yes.

What is it that is there that they can influence? It’s a big number of people, right and are they influencing anything out there, or is it just the solidarity, feel good, get-together association?

Our pitch to them is a very simple one. We say you have joined your group because you believe that in your group you will achieve more than you will on your own, and solidarity proves that. They’ve done that. We now say come and join NASASA. We will not charge you anything for registration. There is no membership fee. Join NASASA and together surely we will achieve more. We tried it. We went to one of the corporates and we said we are here to talk to you about our members, and they turned around to us and said, “Surely you mean our customers.” This is the problem the stokvels have had. When you walk in as an individual stokvel group, into any commercial relationship, they’ll over ever see you as one group. What NASASA wants to do is to say ‘once we come together we can then speak as one voice and say we are now representing all of these groups. How can we now begin to change the terms of engagement, such that they begin to suite the individual, rather than suite the corporate’?

On the regulatory front – if there were some of the regulations out there or even the laws that you would like to have changed. What would those be?

Fortunately, we operate in a very clear regulatory environment. NASASA is the Regulator. It’s a self-regulatory organisation and we operate, reporting to the Central Bank. There is one piece of legislation, which we really applauded, except for the fine detail. This is the encouragement of savings through the tax-free account. It allows individuals to enjoy the benefit. It doesn’t allow for the pooling of that benefit, so that in my group, my stokvel we are six, we can’t say we all have a R30, 000.00 tax-free benefit. Let us then put it together and make it R180, 000.00. That is the piece of legislation, which if we were to change, it would make it much easier for stokvels to save the way they do.

Now, you are the CEO. Obviously, you have a bigger vision for the Association itself. A few years down the line what is it that you’d like to see that you would look back and say I think, as an Association, we’ve achieved something and we have transformed the landscape, or at least have empowered the members?

It may seem like a small thing, Tim but one of the things that we’ve learnt and one of the pilots that we’ve come up with is to say we want people to get into commercial arrangements that makes sense to them. When you read mini-contracts, be it a cell phone contract, a bank account, or any contract. When you try to translate that contract into vernacular there are just certain things as concepts that don’t make sense. Unfortunately, these things then set people up for failure. An example is a concept of lateness. [Lang] in Xhosa – there is no concept of late. I cannot say as a Xhosa, “I am late.” The closest I can come to say, [Lang] – “The time has passed me.” The emphasis in my language is that I have performed but this incidental thing called time has passed me.

Yet, when I get into a commercial contract if I am late, if I owe you money on the 25th and I pay you on the 26th, I am already in default and I am penalised for being late. I am not saying this is the reason why people are being blacklisted. I’m saying that the way contracts are drafted cannot be translated into vernacular and they set people up for failure. Where rather you should change things around and have them or give them the opportunity to rather, succeed than to fail.

Going forward, in the short term, what are you working on?

The important things that we have done, 2015 has been a good year for us. We’ve now proven now that our magazine works. We are publishing 50,000 magazines every second month and that is a commercial thing. We are collecting advertising and it is working for us. We have our membership up to 110,000. The other big success of course was we piloted a TV series on Soweto TV. We flighted 13 episodes. It is really taking what we are doing in the magazine and putting it out there in video format and our members really responded very well to that. The key thing that we now want to achieve, going into the New Year, is to have that thing that is then going to bring our people together. That thing might be an app. It might be a card. It might be whatever it is that makes the stokvel member identifiable that when they walk into a store or into a corporate, they can say I am a member of this association, which therefore entitles me to X, Y, and Z. That’s the big goal for 2016.

Andile Mazwai, the CEO of the National Association of Stokvels of South Africa. Much appreciated, thank you.

Thank you, Tim.