R 12 Billion per annum market, millions of potential clients, everyone wants a peice of it, but no one is prepared to do the dirty work...

As a promise I intend keeping, from my previous article "From Stokvels to Stock Markets" I promised to share so some of the insight I have been exposing my self to regarding these market. And even in Today's article you won't stop falling over your granny's chair as I share some of the lighting and most fascinating facts about this market.

Like the title of my article indicates "No one wants to do the dirty work". And with this phrase I don't intend to point a finger or act as if I'm better than anyone. But sincerely speaking, as I dig deeper into the dark truths and speaking to the relevant people. I realise that it has been some decades now, and everyone has been standing at the site, but no one willing to start digging and even those few who had the little courage to do so never got anywhere because the digging was done in doubt on whether there is really treasure there, and secondly without doing proper architectural work before the mining starts. In that sense, the dark pit was bound to fall on them eventually, and because of the fear and non commitment no one has succeeded so far...

If you are a bit confused about what Am I going on about, read my previous article and you will be in-tune.

Here are some more facts found about this market that I have recently found:

- According to Old Mutual, what is called grey money, which is money circulating outside the formal market has grown to be a R 33 billion industry in about a decade.

- It is said one in three black people belongs to a Stokvel in one way or another

- The main reason why Stokvels were started back in about a century ago was because of lack of access to banking services by poor people in the rural areas, and even after some emigration took place when people left their home lands to work in the cities, the culture of group saving remained intact because they found out that the banks were not as accommodative.

- Amongst the big four banks (ABSA, Standard bank, Nedbank and FNB) no bank can claim a significant stake in the 12 billion industry. This is because these banks have been trying to develop relevant products for the market, but have been missing some few small and what would seem insignificant characters of the market. The most evident being the social capital, and obviously the interest rates that seem ridiculous to a Stokvel member who is used to either 0% or an insignificant percentage on her/ his borrowings from the group compared to around 10 to 25% and above on banking products.

- The Stokvel culture is not about to cease existence even as black people move into the middle class, and certainly because the social economic barriers are still very much evident, as governmental economic empowerment initiatives are only able to reach the few elites and not to the lay man on the street who is likely to be a member of a Stokvel.

- There are high profile Stokvels that contribute R 200 and 20 000 per month. This was observed by a Pretoria University professor who did a research on why do Stokvels still exist in urban areas with most sophisticated individuals who perhaps even receive preferential treatment from bankers.

I think I have said a mouthful for now, but in my next article I will share some more facts about the Stokvel market, what keeps them together and the activities involved...

There's more where that came from, keep in touch...

Andile Fulane

Founder: Empowered Vision

"Economical freedom through Financial education and Entrepreneurship"

Mobile: 084 770 92 70

email: empoweredvizion@gmail.com

From Stokvels to Stock Markets

I have been on a journey trying to find ways of touching millions of South African lives by empowering them in Financial skills and encouraging enrepreneurship. This dream is closely coming to reality by day as I dig deeper and trying to understand the South African market.This is a first of the many articles I will share with you as I mine for gold in neglected lands...

What you didnt know about the "poor savings schemes" in the townships!

• Size of market relative to whole population estimate; According to the UCT Uniliver study on the stokvel market, about 2.5 million people belonged to a stokvel excluding burial societies, which then represented 9% of the whole population. And one in every two black people belonged to a stokvel.
• Size of market in value: The same report indicated that an estimate of R 12 billion is invested in Stokvels p.a. Further studies by the Old Mutual Group revealed that grey money (which is money held outside the formal financial institutions) had grown to 33 billion over the past decade and the majority of it was held by Stokvels.
• Social and network economical vehicle evident in all LSM groups (LSM 1 – 10); with mid segments LSM 5,6 and 7 (17%, 16 and 14% respectively) with highest claimed membership. And the two extreme segments 1 and 10 with least claimed membership, 7% and 3% respectively. This is according to a report prepared by Fin Mark Trust – Stokvels in SA (2002)
• The need is evident and quantifiable; The report (Fin Mark Trust – Stokvels in SA; 2002) also states that around 41% of the Stokvel members are un-banked.
  Further to that; according to the Stokvel Company which has 9500 Stokvels consisting of 430 000 individual members, more than 70% of Stokvels review their savings account/ investment portfolio only once a year.With the assumption that the level of formal education has an impact on one's financial literacy levels, only 6% of the Stokvel market members have either a diploma or degree. With 38% having reached a high school level, but only 19% matriculated.
• They are already organised; which makes it easy to access, influence and keep the motivation alive amongst them.
• They are consistent and have a long life span in their nature; and because of that they serve as an excellent vehicle to nurture growth and monitor progress and to evaluate the outcome of recommended programmes continuously so as to amend them accordingly. This approach can also provide an opportunity to have access to a group of people whom you can study behavioural trends and make informed conclusions.
• Wild fire spread of influence; Stokvel members are part of house holds and communities, and whichever skill that has value in their lives will certainly have a room in their homes and conversations with friends. Stokvel members usually don't sign any contracts as a commitment to the group, but trust has remained a loyalty knot that binds all the members to honour their bargain of the agreement and therefore this reflects how much influence will it have, because it will become not only something that they believe in, but it will become part of the culture as much as Stokvels have become part of the township culture.
• The hunger to learn, save and participate in the financial markets is already there; A typical example will be the reception that the NEF Asonge share scheme received when it was launched specifically to empower black communities and to encourage savings amongst them. The shares offered were over subscribed by 13%. It is recorded that around 10 000 groups and 150 000 individuals were consulted through the mobile one on one sessions done to promote the initiative.
  

I hope from now you wont take the tea lady lightly, or the man in blue overall suits that you constantly see in early hours when you are rushing for your executive meeting... There is power in the collectives, people are more than eager to learn and they are not as ignorant as we assumed..!

Until the next article...

Yours in Economical Freedom through Financail Education and Entrepreneurship,

Andile Fulane

CEO Empowered Vision
email: empoweredvizion@gmail.com
Cell: 084 770 9270

When is it the right time to start saving for my retirement?

Today's topic is rather "hot" to pu it "mildly"...! Some of us leanerned the hard way, but this is a perfect platform to learn rather effectively, because that would certainly save you your future.

I was speaking to a friend who is in the field of personal financial advisory, a very smart young woman who has contributed a lot in these industry. You can check her work on www.abacusformoney.com, and these is where the topic became alive and I felt I should share it with my fellow bloggers, because this is a rather realistic and serious issue which our young people should start taking seriously.

I feel it is a neglected topic and carries a lot of weight, because most of these age group is inconsiderate when it comes to retiring well, their believe is that "I'm still young and there is still a lot of time to catch up..." but statistically speaking, if one can carry on with the same tone for more than 5 years with only a compulsory pension contribution, an opportunity cost of 5 years would have been incurred and five years is a lot looking at the penalty that one gets if you were to retire 5 years earlier than the normal retirement age.

When is it the right time to start saving for retirement is "THEE" question? Is there anything like too early, because there is certainly something called too late...!

More and more people should be conscious about their retirement savings, for I know the deduction from a payslip is just an "UN-avoidable expense" to put it mildly. That's what I used to believe, not realising that this forced saving can actually save me from the humiliation of living from hand to mouth and depending on governmental grant, and therefore costing millions from my fellow citizens (Tax) to support my retired years. At that time there wouldn't be time to save or invest. It would be consumption time!

An average person's accumulation phase starts at early 20's and the earnings potential graph has an upward slope until around mid 40's, that gives you a give or take of around 22 years of good earnings potential. The age vs earnings potential curve is an upward sloping one, which means earnings do rise up with age but at a decreasing rate. This is because as a person leaves college, accumulates experience and more relevant education, his earning potential also rises. But as a person ages, his commitment to personal growth (Education/ work skills) deteriorates with more family responsibilities and other commitments, the energy levels and the hunger to succeed also contributes to this.

So, a 5 year non-contribution, compounded, and the fact that at an early age on average a person has a very high risk appetite, which would mean his/her portfolio could be made of High Risk/ High Return Portfolios made of Equities and some derivative instruments.

More studies into this I believe could prove a very high potential loss of retirement capital! I'm going to research more on it, and would like to hear your take as well.

Urgency of financial education

I'm very excited once again to be sharing my views and opinions on this blog especially on this topic that has got the world talking, and shouting for attention...

The global community is setting up platforms on each and every corner of the world, and it is trying to catch normal citize's attention on this topic "Be financial literate", it is not only for your own good, but for the benefit of fellow human beings as well. Why you may ask, because every action you make has an effect on my personal financial life. That is how small the world has become! With the recent Global economic meltdown, and the effect it has had on each every household in this world, one cannot emphasise this point any further. Decisions that were made by a certain mortgagee and a mortgagor, by a certain Investment Manager, a certain Credit Analyst in these big corporate banks has seen a lay man on the street living without food, because the global financial system has just collapsed.

All of us have a particular role whether on a micro or macro scale.

One of the most evident efforts made by the global community is by Operation Hope, the biggest social investment bank in the world, headed by the visionary John Hope Bryant who also serves on President Barrack Obama's advisory panel on financial literacy.

The objective of this summit was to bring world leaders together, share wisdom on the same table to address one of the key elements of this global finacial crisis. A strong message was to be sent to the global community about the effects of financial illiteracy and the importance to inculcate it in our day to day living, in our state policies, in our family values and in our communities. Among the world's respected and powerful speakers was United State's Federal Reserve Chairman Ben Bernanke. http://summit09.operationhope.isupport.tv/messages/view/5206 who also emphasised the need for financial literacy for sustainable global economic growth.

In his words, John Bryant commented:

“Fear is a prosperity killer, and right now consumers here and around the world are feeling it (fear). Underneath this fear and lack of confidence, are massive levels of financial illiteracy.” John Hope Bryant

Another abstract from the summit reads:

The Global Summit will make a strong business case for financial literacy itself, and seek to reshape the debate around financial literacy away from its definition by some as a simple, narrowly focused math class, towards a more robust, practical, and aspirationally relevant strategy to ground consumer confidence in a core competency; an understanding of what we at Operation HOPE (HOPE) call the “language of money,” or Financial Literacy 3.0. Money is at its core an emotional issue for most, if not all, people around the world. It represents stability (or lack thereof), opportunity (or lack thereof), access (or lack thereof).

Understanding “the language of money” is far from a math class; it is contextual, psychological, cross sections with issues of self-esteem and self-worth, and is impacted by one’s culture and environment. From the individual, to the community, extending up to the G20, our relationship with money is a key driver to how we perceive and respond to the world around us. When you don't know, you tend to fear. Fear is a prosperity killer and underlying the current epidemic of fear are massive levels of financial illiteracy.

The outcome of the summit was indeed life chaning. It was evidence that the global community is taking a giant stand!

There is actually a lot to share on this topic, and I would also like to hear other people's perspectives on this subject, it surely touches each and every one of us, no matter what the backgound and level of education is.

You are what you beleive

This is my first official post, and kind of represents my personal experience with money, whether it be current or previous. So, I'm not writing this from a "journalist or writer's" point of view with little abstracts collected from other people just to be more prolific and more pleasing to the ear. But I'm writing this as a fellow blogger, just expressing my views.

From my profile, I indicated briefly my personal background. I did indicate that I'm not from a middle class family, to say the least. I think categorising us as poor could have been a fitting word to the conditions which I grew in. To cut a long story short, there were days where we had to begg from neighbours for food. Money was so scarce that it was only limited to adults, and as a child you depended on what you were given as and when your parents had surplus cash.

I could go on with my life story, which is very touching to others, but because it is so a part of me which has even passed, it is simple for me to talk about it as if I was talking about someone else, without being any emotional or sensitive to the things that happened. My point here is that I have experienced life at its worst "financially" that is, and are now experiecing life full of hope and possibilities of financial freedom. And from these perceptions and realities which are a world apart, there are principles or if I may say behaviour patterns, similarities and beleives about money which will find in another group and not in the other.

They say what you do daily determines who you are, and if you are to change who you are, you will have to introspect yourself and figure what is it that you do everyday that you need to change to become a better person. Now much of what is done by these groups of people, lets call them the "have's and have not's" is inherent from the environment which they grew in, and therefore means that much of their behaviour patterns is not exactly done conciously. Most of them who are well off or worse off finacially, are not even aware that their beleive systems about money is a major factor into their state of financial success or failure.

You, got me right! Much of our social ills cannot only be limited to the culprits doing them but universal practices, beleives, behaviours, and paradigms are partially responsible for the misbehaviours. A perfect, relevant and recent example is the Western World's beleive in credit. The World Bank solves financial problems of world economies by borrowing money to them on exhobitant interest rates, getting them even more indepted and economically enslaving even more generations to come. And the Global crunch which eminated from loose credit regulations in the United States where credit was afforded freely and easily to anyone without any affordability checks, and this behaviour continued for decades until the financial system collapsed. This was just the universe responding back to such behaviour rooted to greediness, and self righteousness.

Now micro sizing this view, personal behaviours are much more influenced by examples mentioned above. A person born in a community cultured by giving, sharing and saving will more likely grow up to be a giving, sharing and saving adult, if ofcourse there is anything to give and save. We all know that there are millions of families living on hand to mouth in Africa, India and other countries, living under the breadline.

In closure, our beleives about money determine whether we are going to be successful or not in our quest to financial freedom. So, let us be concious about what our external environment is feeding us. And let us equip ourselves by reading and attending personal improvement workshops and when it gets really tough, let us not run to the bank for a loan but let us draw from within and consider things like downgrading our lifestyles, selling some of our luxurious goods and keep only the basics.

"If you buy what you don't need, you will end up selling what you need"

Siyabonga!