STOKVELS August 2020

By RORISANG MOLEFAKGOTLA, Published in BANKING & FINANCE IN AFRICA FEATURE

In the past, townships have not been considered as business sectors and are often overlooked when calculating the overall wealth in the country. However, this sector has slowly been developing and providing work to the unemployed. Township businesses are mostly informal and unregulated, but this does not detract from the fact that most are actually thriving. The growth that these informal businesses could experience through development could be phenomenal. There are many initiatives in place to aid this development, however, the informal sector is large and, therefore, these initiatives cannot aid all businesses at an accelerated speed.

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An interesting aspect of township commerce that is often not considered is the Stokvel. Stokvels can be traced as far back as the nineteenth century. In modern times, a stokvel can simply be described as a rotating savings agreement. It is made up of a number of people who all contribute a stipulated amount of money to a central pot, of which each member gets a turn to collect the savings of the entire group as a lump sum. There are various versions of stokvels wherein the group share the saved amount at the end of the year or buy groceries with the saved amount at some point in the year, as agreed upon by the group.

As wide spread as stokvels are, they do not have legal personalities. However, they do resemble a number of possible legal figures from the common law. There are stokvels that register as companies, partnerships and, in the past, as closed corporations, but the most common forms are informal, unregistered stokvel agreements. This means that no legal action can be pursued against the stokvel itself, but only against a member or members thereof.

Stokvels are estimated to generate billions annually. There are bound to be disputes among group members and misappropriation of funds or corruption involved in stokvels. The question is then whether there are any legal remedies when this does occur. As a stokvel is often informal in its setup, formal documentation is not drawn up to regulate the group or the members. It is important that some sort of constitution be drawn up to explore all possible avenues such as defaulting members and conflict resolution amongst members. The constitution of the stokvel must, of course, be in line with members' constitutional rights as set out in the Bill of Rights.

When opening a bank account on behalf of a stokvel, the bank requires a written constitution from the group. This is often in the form of an affidavit which assists stokvels in their dealings. However, there are those that do not save the money through the bank but entrust it to a single member known as the group treasurer.

Without a constitution, members of a stokvel who have been defrauded have the recourse of opening a formal police case of fraud. After investigation is complete, and sufficient evidence has been obtained, it can be referred to the National Prosecuting Authority for the guilty member to be prosecuted. The guilty party can be ordered to repay the stolen money in terms of s300 of the Criminal Procedure Act.

Section 300 of the Criminal Procedure Act states: (1) Where a person is convicted by a superior court, a regional court or a magistrate's court of an offence which has caused damage to or loss of property (including money) belonging to some other person, the court in question may, upon the application of the injured person or of the prosecutor acting on the instructions of the injured person, forthwith award the injured person compensation for such damage or loss.

This order can be executed in the same manner as a civil judgment, in that their property can be sold through the sheriff to recover the monies they defrauded.

The parties defrauded can also go the civil route, claiming the damages via the issuing of a summons and the subsequent process.

A key clause to include in a stokvel agreement is a rotation schedule, that is, when each member must contribute and the payout of the contribution, be it weekly, monthly or on an annual basis. The amount payable must be included, and a clause that prescribes the process to recover monies misappropriated and the roles of each member belonging to the stokvel must appear.

Due to the informal nature of most stokvel agreements, with the exception of those that are incorporated, they may handle any conflict informally as well. There are very few reported cases dealing with stokvels, and the one best known was handed down more than two decades ago.

In Malgas v Mndi (ECJ 074/2005) [2005] ZAECHC 34, Ms Malgas borrowed R6 000 from her friend, Ms Mndi. The money was derived from her friends' stokvel, the Masikhule Club, and came with an interest rate of 30%. Because Ms Malgas took some time to repay the loan, she ended up repaying R34 692,60. She felt she had paid too much and relied on unjustified enrichment and won back R4 435,40 through the magistrates' court.

Many stokvels operate outside of the law and rely on informal conflict resolution mechanisms to solve any disputes that may arise. They often approach street committees to assist in dispute resolution and, as a last resort, they attach and sell the defaulting or fraudulent members property to recover money. Despite these harsh measures, stokvels rarely have such conflict as they select their members carefully. Many stokvels are situated in poor areas and one must keep in mind that often they are not knowledgeable about court procedures and nor do they have the funds to access legal help. It cannot be denied that the stokvel is an integral part of South Africa's informal banking culture and it assists many South Africans by instilling a form of savings culture.

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Molefakgotla is a Litigation Attorney with Maponya (Mahikeng Branch).