AS we approach the festive season, and there can surely be no better time to recognise the power of an age-old African community savings mechanism: the stokvel.

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Stokvels have been the savings ‘engine room’ for South African communities through apartheid and into democracy, and they remain very effective today, even within the context of the country’s troubling poverty.

According to research R44 billion is saved collectively by 820 000 stokvels in South Africa each year, and more than 11 million South Africans are currently members of stokvels. In addition, according to the National Stokvel Association of South Africa, our ‘stokvel market is worth more than some of South Africa’s largest businesses.’

The vibrancy of local stokvels is one of the reasons why most of the major financial brands have launched specific accounts and services to meet their needs. Although the stokvel has traditionally been a cash-based community savings tool, today a whopping 41 percent are considered ‘banked’ and use, at the very least, a transactional account.

‘There are a lot of money management options out there for stokvel leaders to consider,’ says Nkazi Sokhulu, co-founder and Chief Executive Officer at South Africa’s pioneering Credit Life Insurance brand, Yalu.

‘These range from opportunities to take advantage of the better interest rates paid by investment accounts to shopping discounts offered by bulk buying. There’s no question that with smart decision making the group’s money can be made to work harder, but for this to be true there has to be a careful analysis of costs versus rewards.’

Sokhulu emphasises the importance of examining the fine print of any financial product for additional costs, including hidden monthly membership charges, along with additional line items buried in obscure terms and conditions text.

‘This is the golden rule for all financial products,’ he says. ‘You can win or lose a lot in the fine print – and if you have never even read this text or understood it, there’s a good chance your collective could be losing money.’

Sokhulu goes on to explain that individual stokvel members might also be able to put away more money than they think. The key again lies in understanding fine print of financial products such as Credit Life Insurance, which members most likely pay for on their credit facilities. ‘As always, information is crucial,’ explains Sokhulu.

‘As most stokvel members are already aware, there are only two ways to improve your financial situation: spend less, or save more,’ concludes Sokhulu. ‘In both areas, paying attention to all the details of financial products and services can have a big impact on the individual, and therefore the group. If as a broad South African society, we improve this skill, our stokvel heritage will grow stronger than it already is.’

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