Deciding which option is best comes down to your group’s financial goals and the time frame in which you’d like to achieve them, explains Tyvision Media
Stokvels are an important part of the fabric of SA’s culture: more than 11-million of us belong to more than 800,000 of these traditional groups.
According to Tyvision Media — a company that empowers stokvels and burial societies to make informed decisions and reach their financial goals — one of the most common misunderstandings for stokvel members is the difference between saving and investing.
Saving refers to the act of having a particular financial goal, and then putting money aside towards achieving that goal.
For example: stokvel A has 10 members who each contribute R100 monthly. They deposit R1,000 per month in a bank account from January to December with the goal of giving each member R1,200 at the end of the year.
Investing, on the other hand, refers to the act of committing money to earn a return (profit). Simply put: it’s when you “buy” something today that will generate value and be worth more at a later date.
For example: stokvel B invests its money in shares (buys shares) with the hope that the price of these shares will appreciate over a period of time. For instance, if they buy shares at R100 per share in 2024, they hope the share price will increase and they’ll be worth R160 each by 2029.
One of the main differences between saving and investing is therefore the initial goal and purpose. The time frame in which the stokvel hopes to achieve this goal — and members will have access to their share of the funds — also comes into play:
- Short-term savings and investments are made to achieve financial goals within a period of 12 months or shorter, and so the money needs to be easily accessible. An example would be stokvel A’s plan to collect contributions from its members each month from the start of the year, bank them and distribute the funds at the end of the same year.
- Long-term savings and investments are made to achieve financial goals over a longer period of time, typically a minimum of five years. An example would be stokvel B’s plan to invest in shares in 2024, but only sell those shares and so have access to the funds in 2029.
Long-term saving and investing introduces other important considerations for stokvels:
- Do members of the group want the stokvel to exist beyond themselves? If so, they need to discuss continuity.
- Given the general purpose of growth for stokvels, they ideally need to ensure there are plans in place to enable this, such as having processes that allow younger members to join. Once younger members have joined the group, matters relating to succession and adaptability need to be agreed upon.
- Change is a constant and with the advent of new technologies, the ways to save and invest are continuously changing. For stokvels to survive and grow, it’s essential to keep up to date with such changes and understand how technological advancements can benefit the group.
When deciding whether to save or invest — or do both — stokvels therefore have to discuss and agree on their purpose, goals and the time-frame in which they want to achieve those goals. They also need to fully understand the financial choices they are making and their implications, which is why it’s advisable to consult an expert before making any monetary decisions.
Lack of access to financial information and poor administration issues are a challenge for most stokvels. Tyvision Media can assist groups with administration and provide the relevant, credible and reliable information they need to make the best possible decisions to reach their financial goals.
Do you or your stokvel have financial questions you need answered?
Tyvision Media can help: simply fill in this online questionnaire or submit your questions, along with your contact details, the name of your stokvel and the town in which it’s based, via email (admin@tyvisionmedia.co.za), WhatsApp or voice note (081 596 1065/067 742 0534).
If your group wishes to ‘live on’ beyond its founding members, these are the four important things it must consider, says Tyvision Media
Will your stokvel or burial society continue to exist after the current membership? Should stokvels and burial societies exist for one “generation” only or should they be intergenerational and be continued by next generations? These questions raise the important issue of succession planning.
Succession refers to “new” people being given a chance to take over and continue the existence and functioning of a stokvel or burial society; it’s when there’s a constant change in leadership and membership from one generation to the next.
While succession planning refers to creating a strategy and setting up processes that will enable the stokvel or burial society to continue existing and benefiting individual members beyond the founding leaders.
The goals of a particular stokvel or burial society determine the level of importance of succession planning for that group.
Many stokvels have the broad objective of creating (through collective actions) value or wealth, while burial societies aim to provide a dignified funeral for their members. It’s generally assumed that stokvel members want to create wealth not only for themselves, but also for their families, specifically their children. It’s also assumed that burial society members wish to provide decent burials not only for themselves, but also for loved ones. Based on this it is important for both groups to prioritise succession planning.
Essential considerations
Here are four important things stokvels and burial societies need to consider in relation to succession planning:
1. Growth
There must be a plan to grow the membership through the recruitment of younger members. This will allow older members to mentor younger members on the objectives and culture of the group.
Younger members can also add value through adapting ever advancing technology to the benefit of the group. For example, they may be able to introduce newer technologies that make for safer financial transacting.
2. What the future may look like
Stokvels and burial societies should reflect on what the future would possibly look like and how they would wish their group to exist in said future scenario.
An example would be a burial society acknowledging that the value R10,000 provides for a funeral today, may not be the same for a funeral in 10 years time. Things would be more expensive, meaning that their cover value and premiums would have to be adjusted accordingly.
3. Key positions
The constitution of the stokvel or burial society should be clear on the importance of succession and the key positions and responsibilities that will allow for the group’s continuity beyond the current membership. Potential leaders in the key positions should be identified and groomed for said responsibilities.
4. Leadership
Current leaders should not see succession planning as a threat to their positions and roles, but rather as an opportunity to teach the next generation of leaders for the continued benefit and existence of the group. One attribute of good leadership is a positive legacy that includes being recognised as one who ensured the continued survival of the stokvel or burial society.
Good leaders see beyond current circumstances and guide groups towards decisions that will be beneficial later. A good leader would anticipate a future challenge and guide the group to a solution. For example, creating a succession plan that will produce new leaders who will ensure the continued growth and legacy of the group.
Succession planning made simple
Tyvision Media — producer of the financial literacy TV series Ke Zaka: Stockvel Insights on Business Day TV — sources relevant, credible and reliable information to help stokvels and burial groups make the best possible financial decisions with their available resources.
It can also assist groups with professional administration including scheduling meetings, setting agendas, taking minutes, record-keeping and the development of succession plans.
Tyvision Media understand that each stokvel or burial society is unique and so tailors the support that it provides to each group accordingly. For assistance in the professional administration of your group, email alucias@tyvisionmedia.co.za or WhatsApp 081-596-1065 or 072-938-7256.
Good leadership is a must for stokvels and burial societies to survive. Many have the best intentions and objectives, but often find themselves let down by poor leadership.
Good leadership helps the group establish goals and guides them through the process of achieving set objectives. It is important for the leadership to have the support of members. This support is often gained when members are consulted and included in decision-making.
The leadership is normally made up of a chair, a secretary, a treasurer and an executive committee, depending on the nature of the group.
The challenges stokvels and burial societies face often lead to them not achieving their goals. Some of the more common leadership problems relate to choices, criteria and reviews. Some members elect the leadership based on friendships and other factors that are not necessarily linked to the required management skills.
Stokvels also often do not interrogate the criteria for their specific leadership requirements. Members need to assess things such as skills sets, availability, experience and competence in a particular area. For example, when electing a stokvel secretary, members should evaluate their nominated candidate’s organisational, availability and administration skills.
Furthermore, objective reviews to assess the performance of leadership often do not happen because they are perceived as “attacks”. Often, founders of the stokvel appoint themselves as “permanent” leaders. This scenario is harmful because it does not allow for succession planning.
What to consider in relation to stokvel leadership:
Influence: The ability to influence through articulation, facts, demonstration and guidance. It is important for leaders to be able to guide members towards a common goal and stay on the agreed course.
Inspiration: Leaders should inspire confidence. Clear communication of a shared vision and purpose are traits of good leaders who inspire members to achieve their goals. Leaders should not entrench divisions by inspiring just a section of the group and alienating others.
Accountability: Being open and transparent, and owning decisions and their outcomes, good or bad. It is not good leadership to accept praise for good outcomes and shift the blame for bad ones.
Visionary: Good leaders see beyond current circumstances and guide groups towards decisions that will be beneficial later. A good leader anticipates a future challenge and guides the group towards a solution.
Inclusive: Consulting and taking members into one’s confidence when arriving at a decision. A good leader ensures members understand and support decisions, and does not always refer to his or her authority as a basis for decision-making.
Stokvels and burial societies must ensure that, in choosing their leadership, they thoroughly engage with all the matters that must be considered before arriving at a decision. Electing leaders on the basis of friendship is not how groups should be administered.
Having a chair remain in the position for an extended period because he or she founded the stokvel or burial society is not always good practice. Groups should always ask the following questions: Do we support and have confidence in our leadership? Does our current leadership help us achieve our group goals?
Tyvision Media administers stokvels and burial societies, and can help groups with scheduling meetings, drawing up agendas, taking minutes, and keeping records. They also provide relevant, credible and reliable information that assists groups to make the best possible decisions with their resources.
Contact Tyvision Media for professional administration for your stokvel or burial society via e-mail at alucias@tyvisionmedia.co.za, or by phone/WhatsApp at 081-596-1065 or 067-742-0534.
As it can be risky for burial societies to rely on a group savings account to fund members’ funeral payouts, it’s worth considering taking out insurance, says Tyvision Media
More than 4-million South Africans belong to burial societies, making them an important part of our country’s culture.
A burial society can be defined as a “single-purpose stokvel”. Like a traditional stokvel, such societies are made up of members who regularly contribute money towards a communal “pot”. However, these funds are collected with a sole goal in mind: providing a dignified funeral for the society’s members and their loved ones (“dependents”).
These societies are usually governed through a constitution. This sets out the rules of their operation, including the monthly contributions, expectations from members and the financial benefit that will be paid out to members for funerals.
Burial societies often look to their collective savings to pay the stipulated financial benefit to members. However, the use of group savings accounts for this purpose can be risky. After all, savings accounts are exactly that, accounts designed for savings, not for “insurance” payouts — that’s where underwriting comes in.
An underwriter is a registered financial service provider (FSP) that calculates and takes on the financial risk of a client in exchange for a monthly payment called a premium.
The importance of underwriting
Consider this scenario: Burial society A has 20 members, who each have nine people “covered” under their “policy”; this means the society is covering 200 lives in total.
Each member has to contribute R100 per month and, in return, they get to claim a financial benefit of R15,000 per funeral. (Often these amounts are not based on any actuarial calculations that take into account factors such as the ages of the members and their “dependents”). This gives the society a monthly collection of R2,000 in total.
So far, the burial society has collected R150,000 in a group savings account. It seems like they’re in a good health financially, right?
Then the worst happens: over the next two months there are 11 deaths and so 11 “claims” for funeral payouts. With just over R150,000 in the bank, the society is only able to “settle” 10 of these “claims” in full. Their group savings account is now also depleted. The next month, there’s sadly another death and another “claim” that can’t be settled.
It’s likely the “claimants” who did not receive their funeral payouts would not have kind words for the members who previously received their full financial benefits. Ultimately, this could lead to serious conflict and possibly even the collapse of the entire burial society.
However, had burial society A’s financial risk been underwritten by an appropriately registered FSP, this story would have had a very different ending.
In that case, provided all the members of the burial society had adhered to the rules of the underwriter’s policy and their premiums were up to date, the underwriter would be obliged to settle ALL valid claims, including those that came after the funds in the societies’ group savings account had been exhausted.
Finding a credible underwriter
Finding the “cheapest” premium is not the only thing that burial societies should consider when selecting an underwriter. In some cases, unregistered and unauthorised organisations and individuals offer funeral policies at such low premiums that it’s unlikely they’d be able to pay claims at the time when the money is needed most.
For this reason, burial societies should always ask policy providers these questions:
- Are you registered and authorised with the Financial Sector Conduct Authority (FSCA)?
- Does the policy have an underwriter?
Burial societies also need to fully understand the financial choices they are making and their implications, which is why it’s advisable to consult an expert before making any monetary decisions.
Lack of access to financial information and poor administration issues are a challenge for many burial societies. Tyvision Media — producer of the financial literacy TV series Ke Zaka: Stockvel Insights on Business Day TV — can assist groups with administration and provide the relevant, credible and reliable information they need to make the best possible decisions to reach their financial goals.
Do you or your burial society have financial questions you need answered?
Tyvision Media can help: simply fill in this online questionnaire or submit your questions, along with your contact details, the name of your burial society and the town in which it’s based, via email (admin@tyvisionmedia.co.za), WhatsApp or voice note (081 596 1065/067 742 0534).
Tyvision Media is hosting an informative financial literacy event for stokvels and burial societies at the Imbizo Lounge at the University of Johannesburg’s Soweto Campus from 9am to 1pm on July 27. For more information about this event, call or WhatsApp 081 596 1065 or 067 742 0534.