Stokvels: an untapped property resource

Silindile Leseyane

MAIN IMAGE: Silindile Leseyane – founder of Sakhisizwe Property Stokvel

Kerry Dimmer

A market often ignored by real estate practitioners is stokvels. There are some eight million of them currently, with more than 11 million adult participants, generating up to R59 Billion through their nationwide schemes. Many of them have a specific investment drive, such as funeral/burial schemes, groceries, education, etc. However, the larger stokvels are realising just how rewarding property investment can be.

Sakhisizwe Property Stokvel

One of those is Sakhisizwe Property Stokvel. Since its inception in June 2019, it has raised over R20 million from just 400 members, which has been invested in multiple properties. This success has led Its founder, Silindile Leseyane, to start a national drive towards education around stokvels, covering topics like financial needs and family inspirations, particularly those of low-income earners, and share valuable lessons learned from mistakes. Various property investment strategies are also presented, such as student accommodation, multi-lets and Airbnb.

This has highlighted property practitioners’ role, particularly in facilitating stokvel investments … but first, as Leseyane emphasises, there needs to be some understanding of how stokvels work because misconceptions prevail.

How do stokvels work?

“Stokvels are still largely misunderstood and, as a result, not a lot is done to tap into the real power that they have,” she says. “There are a lot of negative connotations associated with stokvels, but when you look at how cooperatives or Savings and Credit Cooperative Organisations (SACCOS) work in African countries, there is no doubt that there is huge potential to turn the billions that stokvels contribute into real and sustainable economic transformation, let alone improve the financial wellbeing of members.”

As recently as 2021, the United Nations (UN) estimated that over US$ 6 billion was collected through deposit-taking SACCOS in Kenya, which proves the true power of self-organised stokvels. “Whilst I am aware that there are a handful of stokvels in South Africa that are operating as Cooperative Financial Institutions (CFIs) and which have been granted the relevant licenses by the South African Reserve Bank, we can’t always wait for the government to motivate things, sometimes we need to take action ourselves,” Leseyane points out.

And that is exactly what a stokvel does – take action in financial transformation. Research shows that the average South African family participates in at least two different stokvels, which is often driven by need given banks’ restrictive lending and credit criteria. “They play a significant role in our communities in helping families save and cater to their short-term needs, for example,” explains Leseyane.  “The more sophisticated stokvel, like Sakhisiwe, is focused on wealth creation, as we do through the purchasing of properties, livestock, shares, and businesses.”

“When stokvel groups are focused and have a vision focused on wealth creation, they are able to alleviate poverty and can provide for retirement and generational wealth. Even now, and despite the 8 million that are in play, stokvels still have a huge untapped potential for the role they can play in allowing more South Africans to participate more meaningfully in our economy by pooling their resources towards a common objective, thereby achieving economies of scale as a group.”

Property practitioners can become trusted advisors to stokvels

This background is important if property practitioners consider becoming trusted advisors to a stokvel. “Property Practitioners need to know that not all stokvels are the same, nor are they created equal. For example, how the stokvel is incorporated will affect whether the stokvel is buying as a group, and therefore, the property needs to be registered in all members’ individual names or buying a property as a company or trust. The estate agent must be clear on who is representing the buyer and that all the necessary resolutions are in place.”

Generally, most stokvels purchase properties for cash or in instalments. In the latter case, says Leseyane, this does require property practitioners’ assistance to facilitate the acquisition and find them the best opportunities that will meet their needs. “For example, Sakhisiwe prefers to buy investment properties, meaning we are not interested in flipping properties. We invest in high-yield properties such as student accommodation, Airbnb, and multi-family homes. We do not invest in single-family homes as this has not proved as financially rewarding.”

Another aspect of stokvels is how sophisticated they have become. Sakhisiwe, for example, uses smart technology to track contributions and withdrawals and provides transparency to members. Behind the scenes, experienced teams source investment properties that are considered to provide high returns, and when an acquisition is approved, property management specialists are engaged to manage the process from thereon.

“Why this form of investment opens doors, it is the approach stokvels take towards personal upliftment in a tough economic environment with the associated inflation challenges that is imperative, says Leseyane.  “Even though stokvels remain popular in struggling communities, savings and investments do take a back seat. A property stokvel bridges this gap because members are able to avail of an additional income stream that eases some of the financial pressure.

“And, with a stokvel’s bargaining power as a group, it can also use bargaining power to negotiate discounts with suppliers and services that will be beneficial to their members.”

Leseyane says that agents that are seeking opportunities to work with investment property stokvels should really take the time to understand the needs of the stokvel “so you can present us with the right properties. Understand that in some instances, we may want to purchase for cash, and at other times, we may not have all the funds available to complete the purchase right away but over a period of time. This is how Sakhisiwe has been able to grow. If property practitioners are open to this formula, I can envisage good fortune for all.”

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