STOKVELS 21 February 2012

Each member can draw from fund for a specific purpose Definition Group of people Enter into an agreement to pledge regular contributions to a common fund Each member can draw from fund for a specific purpose On a rotating basis or times of financial need

TYPES Contributions stokvel Traditional savings scheme Fixed amount of money to a common pool weekly, fortnightly or monthly Members would receive the lump sum on a rotational basis Free to use the money for any purpose Basic stokvel Differed from contributions stokvel - also function as a savings scheme that paid out for specific events Umgalelo clubs Religious nature Contributions plus 20% Youth stokvels Care-taking and upbringing Grocery stokvel Grocery or cash coupons (Makro; Unilever) Purchasing stokvel Pool money used it to purchase big items that could be used by the group to generate an income Family stokvel Money invested in formal bank accounts or financial services Money paid out according to the needs of the family Used for buying land or cars, for business investments, or for deposits on bank loans I

TYPES Investment group Invested money - interest Money was split but, or reinvested Istoki stokvel Members get turn to host party Food bought with contributions - sold to guests Host keeps money Party stokvel Entrance fee would be charged, and food and drink would be on sale Members then shared in the profits/hosts Borrowing stokvel Lent money at high monthly interest rates (between 20% and 50%) to members and sub-members Makgotlas or burial societies Financial help when familiy member has died Practical support for the family during the preparations; for example, by helping to prepare food Gooi-goois Money or in natura contributions

HISTORY Rotating cattle auctions (“stock fairs”) of English settlers in the Cape (1800s) Discovery of Gold - brought the stokvel concept to Witwatersrand Terrible circumstances Funerals The National Stokvels Association of South Africa (NASASA) 1988 Prior to 1994 After 1994 - support and encourage informal community-based saving groups

HISTORY 1996: Ministry of Finance Produced 1996 outlining the government’s position on stokvels Warned against illegal pyramid schemes posing as stokvels Returns up to 300% Pay-outs from members’ subscriptions, without sufficient reserves 1996 - Banks Act was amended Stokvel activities were seen as falling outside of the definition of a bank Stokvels = legal, self-governing entities, operating outside the regulations covering banks 1999 funds not allowed to exceed R9.99 million Stokvels also had to affiliate themselves with NASASA Activities may not fall within the objectives of a pension fund organisation Accounting records (up to R1 million; more than R1 million up to R9.9 million) Sun Multi Serve scheme Posed as a stokvel Registrar of Banks froze its funds - R40 million in funds above the limit of R9.9 million Other schemes collapsed - R80 million losses during 1996

HISTORY 2003 Membership: Female (60%) Race: 96% were black Urban/Rural 65% urban-based Region 50%+ Gauteng and KwaZulu-Natal (KZN) LSM category 76% relatively poor - LSM1 to LSM5 Contributions R50 and R100 per month; R181. Savings R400 million

HISTORY 2011 South Africa has 811 830 stokvels 11.4 million stokvel members in South Africa. The most popular type of stokvel is for savings, with 47% of respondents making use of this. It is followed by a burial society stokvel, of which 41% of respondents are members. Grocery stokvels, which buy in bulk from various retailers at the end of the year, make up 20% of stokvel membership. Investment stokvels make up 5% of the total stokvel market. The survey found that the average number of members per stokvel was 27. Gauteng has the highest penetration of stokvels - 23%, followed by Limpopo at 20%. The majority of stokvel members (57%) are women. The average monthly contribution to a stokvel is R210.

BANK ACT Section 1 of the Bank Act is a formal or informal rotating credit scheme with entertainment, social and economic functions; fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives; establishes a continuous pool of capital by raising funds by means of the subscription of members; grant credit to and on behalf of members; (v) provides for members to share in profits and to nominate management, and (vi) relies on self imposed regulation to protect the interest of its members; · Is a formal or informal rotating credit scheme with entertainment, social and economic functions In such a "common-bond" credit scheme, a group of people enter into an agreement to contribute a fixed amount of money to a common pool periodically. This money, or a portion thereof, may be drawn by members either in rotation or in a time of need. Although mutual financial assistance is the main purpose of stokvels, they also have valuable social and entertainment functions. Under the operations of GRQ schemes, however, persons may invest fixed amounts with a scheme for a limited period and then qualify for payouts of exorbitant returns on their investments. · Fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives Stokvels and credit unions go to great lengths to admit only reliable and trusted members, following personal recommendations, since continuity and credibility are crucial to the working of such operations. Therefore, stokvels and credit unions are often formed by neighbours, people working in the same place, members of the same family, members of the same community or members of a church congregation. Any member of the public throughout South Africa may, however, become a member of a GRQ scheme by simply paying membership fees. Owing to the methods of operation of GRQ schemes, the recruitment of new members in large numbers, regardless of the existence of any common bond between such members, is crucial for the viability of such schemes. · Establishes a continuous pool of capital by raising funds by means of the subscriptions of members GRQ schemes allow persons to invest single amounts in such schemes for a limited period, in return for exorbitant payouts on the amounts invested. Since payouts are funded from the contributions of new members, GRQ schemes depend to a great extent upon the recruitment of new members. GRQ schemes can therefore maintain a continuous pool of capital only by the continuous introduction of new members and the utilisation of such members' membership fees and investments. · Grants credit to and on behalf of members GRQ schemes do not grant credit to and on behalf of their members. · Provides for members to share in profits and to nominate management The structures of GRQ schemes do not allow for profits in the true sense of the word. Although purported constitutions of GRQ structures may provide for the nomination of management by its members, often the size, duration and spread thereof appear to render such nomination impractical. · Relies on self-imposed regulation to protect the interest of its members One of the most serious problems facing stokvels and credit unions is the problem of defaults. In the case of a stokvel, a common category of default is a member's failure to maintain regular periodic payments. Therefore, stokvels rely on carefully selected members, who are known to other members of the group, for their survival. For purposes of self-regulation, stokvels are required to be members of the National Stokvels Association of South Africa ("NASASA"), and credit unions are required to be members of the Savings and Credit Co-operative League of South Africa ("SACCOL"). GRQ schemes neither require that members maintain regular payments into such schemes, nor do they rely on carefully selected members for their survival. Because of the nature of GRQ schemes, such schemes ostensibly do not qualify for membership of NASASA or SACCOL.

coNSTITUTION Example

Get rich quick schemes /Pyramid Section 1 of the Bank Act is a formal or informal rotating credit scheme with entertainment, social and economic functions; fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives; establishes a continuous pool of capital by raising funds by means of the subscription of members; grant credit to and on behalf of members; (v) provides for members to share in profits and to nominate management, and (vi) relies on self imposed regulation to protect the interest of its members; · Is a formal or informal rotating credit scheme with entertainment, social and economic functions In such a "common-bond" credit scheme, a group of people enter into an agreement to contribute a fixed amount of money to a common pool periodically. This money, or a portion thereof, may be drawn by members either in rotation or in a time of need. Although mutual financial assistance is the main purpose of stokvels, they also have valuable social and entertainment functions. Under the operations of GRQ schemes, however, persons may invest fixed amounts with a scheme for a limited period and then qualify for payouts of exorbitant returns on their investments. · Fundamentally consists of members who have pledged mutual support to each other towards the attainment of specific objectives Stokvels and credit unions go to great lengths to admit only reliable and trusted members, following personal recommendations, since continuity and credibility are crucial to the working of such operations. Therefore, stokvels and credit unions are often formed by neighbours, people working in the same place, members of the same family, members of the same community or members of a church congregation. Any member of the public throughout South Africa may, however, become a member of a GRQ scheme by simply paying membership fees. Owing to the methods of operation of GRQ schemes, the recruitment of new members in large numbers, regardless of the existence of any common bond between such members, is crucial for the viability of such schemes. · Establishes a continuous pool of capital by raising funds by means of the subscriptions of members GRQ schemes allow persons to invest single amounts in such schemes for a limited period, in return for exorbitant payouts on the amounts invested. Since payouts are funded from the contributions of new members, GRQ schemes depend to a great extent upon the recruitment of new members. GRQ schemes can therefore maintain a continuous pool of capital only by the continuous introduction of new members and the utilisation of such members' membership fees and investments. · Grants credit to and on behalf of members GRQ schemes do not grant credit to and on behalf of their members. · Provides for members to share in profits and to nominate management The structures of GRQ schemes do not allow for profits in the true sense of the word. Although purported constitutions of GRQ structures may provide for the nomination of management by its members, often the size, duration and spread thereof appear to render such nomination impractical. · Relies on self-imposed regulation to protect the interest of its members One of the most serious problems facing stokvels and credit unions is the problem of defaults. In the case of a stokvel, a common category of default is a member's failure to maintain regular periodic payments. Therefore, stokvels rely on carefully selected members, who are known to other members of the group, for their survival. For purposes of self-regulation, stokvels are required to be members of the National Stokvels Association of South Africa ("NASASA"), and credit unions are required to be members of the Savings and Credit Co-operative League of South Africa ("SACCOL"). GRQ schemes neither require that members maintain regular payments into such schemes, nor do they rely on carefully selected members for their survival. Because of the nature of GRQ schemes, such schemes ostensibly do not qualify for membership of NASASA or SACCOL.

Stokvels and the Companies Act? Is a stokvel a partnership?

PARTNERSHIPS Companies Act 1973 Section 30 Prohibition of associations or partnerships exceeding twenty members, and exemption No company, association, syndicate or partnership consisting of more than twenty persons shall be permitted or formed in the Republic for the purpose of carrying on any business that has for its object the acquisition of gain by the company, association, syndicate or partnership, or by the individual members thereof, unless it is registered as a company under this Act or is formed in pursuance of some other law or was before the thirty-first day of May, 1962, formed in pursuance of Letters Patent or Royal Charter.