Publications
Partners
The word ‘stokvel’ is often used very loosely by people trying to legitimise a scam. At no point did United African Stokvel (UAS) ever operate as a stokvel. It was an investment fund that promised unrealistically high returns and appears to have been working as a pyramid scheme.
Other scams that have claimed to be stokvels include Money Up, which promoted itself as a grocery stokvel. In 2021, it was found guilty of running a pyramid scheme. The Tshwaranang Community Stokvel in the Free State swindled people out of about R8 million between 2017 and 2019. It scammed its members by claiming to provide returns of between 30% and 50% within 30 days.
As Busi Skenjana of Stokvel Academy explains, a stokvel is a community of people who come together with the intention of saving money collectively.
READ: Payment breaks come at a cost most won't be able to afford
They identify their objectives and select the appropriate investment vehicle. A stokvel that aims to pay out at regular intervals may select an interest-bearing bank account to deposit the contributions into.
A stokvel whose members want long-term growth may consider investments such as property or shares.
“In essence, a stokvel is a community. There is always a clear starting point where they met and [it’s evident] who the founding members are.
“There is a constitution and a clear set of rules. While there may be a referral system, it is the existing members who bring along friends or family [to join]. It is a close-knit community,” says Skenjana.
She explains that, in a traditional stokvel, members identify potential investments. Someone is nominated to investigate the investment opportunities and the stokvel members discuss the pros and cons of each.
The treasurer is then given the mandate to invest.
UAS never operated in this way. It was anonymous, the investors did not know each other, there was no constitution or a set of rules, and the nature of the investments was never disclosed. The founder, Darren Langbein, simply used the word ‘stokvel’ to bypass financial regulations and appear to be legitimate. For it to operate as an investment fund, it would have had to be registered with the Financial Sector Conduct Authority (FSCA).
Palesa Lengolo, the author of Stokvels: How they can make your money work for you, says that, while anybody can start a stokvel, the question should be whether it really is a stokvel or the founders are disguising it as one.
“But people don’t ask the questions, they just want quick money and only come forward when the money dries up, which doesn’t help the authorities much,” says Lengolo.
She added:
Skenjana says there are many types of investments that a stokvel may get involved in. These include buying shares directly, or investing in managed funds, property and even in a member’s business.
READ: Criminal syndicates can hack your phone and banking app in minutes
An example she uses is of a stokvel whose members clubbed together to invest in a delivery motorbike. They then shared the profits. Because the members know each other, there is a constitution and a set of rules; this is a stokvel.
If you invest using a platform such as Fedgroup or SV Capital to buy motorbikes, cattle or vegetables, those are investments, not a stokvel.
A digital platform such as StokFella provides stokvels with investment opportunities. But it is not a stokvel, it is a platform used by the stokvels. Once again, stokvel members discuss the investment opportunities and decide whether they wish to invest.
They make the decision as a collective and understand the risks they are taking. Apart from the fact that UAS did not operate as a stokvel, there were many warning signs that it was not legit.
Skenjana said:
She adds that a common feature of all these scams is their ability to package themselves to look attractive.
It is important to note that the stokvels are unregulated by the FSCA. Although there is the National Stokvel Association of SA (NSASA), it is an association, not a regulator.
A stokvel does not have to be a member to be legitimate and being a member of NSASA does not provide members with any protection.
When a stokvel makes an investment decision, it is important for the members to understand the risks involved. Not all investments work out, but there is a difference between a legitimate investment that carries risk versus one that is a scam.
“If you do not have the skill to analyse the authenticity of the alleged investment company, you should contact the FSCA,” says Skenjana.
Don’t get caught out by those who abuse the word ‘stokvel’. You need to know the community and have a good understanding of how the returns are generated.
And always know that, if it sounds too good to be true, it is a scam.
