‘STOKVELS’ AS AN ALTERNATIVE HOUSING FINANCE MECHANISM: A CASE STUDY OF ‘MASAKHE’ LADIES IN GUGULETHU Dikeledi Motupa A research report submitted to the Faculty of Engineering and the Built Environment, School of Architecture and Planning at the University of Witwatersrand, Johannesburg, in partial fulfilment of the requirements of the degree of Master of Built Environment in Housing. Johannesburg 2024 ii DECLARATION I, Dikeledi Motupa, declare that this dissertation is my own unaided work and all sources have been acknowledged by means of complete references. It is being submitted for the degree of Masters of Built Environment in Housing at the University of Witwatersrand, Johannesburg (Republic of South Africa), and it has not been submitted before for any other degree or examination at any other university. .……………………………… Dikeledi Motupa 12 September 2024 iii ABSTRACT Stokvels have been a longstanding financial mechanism in South Africa, historically providing savings and credit avenues, particularly for marginalised communities excluded from formal banking systems. Despite improved access to banking for black South Africans, the formal mortgage market remains largely inaccessible to the poor owing to constraints in the affordable housing market. With government housing initiatives constrained by overwhelming demand, many continue to lack housing assistance. This study explores stokvels as an alternative housing finance mechanism, focusing on the Masakhe Ladies stokvel group in Gugulethu through qualitative case study research approach. The study employs semi-structured interviews and evaluation research to explore how stokvels, as an alternative housing finance mechanism, offer a way for low-income households to gain access to adequate housing. A theoretical framework is constructed from literature on stokvels, adequate housing, self-help housing, enablement, inequality livelihoods and poverty, and enablement. Findings indicate that stokvels, through collaboration with government, private and governmental entities, can facilitate access to adequate housing. While acknowledging that this is a single case study the recommendation emphasises focusing efforts not on universal applicability but on adapting the collaborative model to meet the specific needs of diverse communities, ensuring tailored and effective outcomes. iv DEDICATION I dedicate this research report to my children Marumo, Mafedile, Mosa and Kganya. I also dedicate this report to the memory of the late founder of Masakhe Ladies, whose legacy endures through her impactful work. v ACKNOWLEDGEMENTS I want to express my sincere gratitude to Professor Ariyen Luxien for providing invaluable guidance and fostering my interest in Housing finance. Special appreciation goes to my supervisor, Amanda Williamson, for her unwavering belief in me, dedication, patience, and consistent guidance throughout this entire journey. I also extend my thanks to Professor Marie Huchzemeyer, our course coordinator, whose kindness and encouragement provided the strength and courage needed to persevere, especially during moments of weakness. I am grateful to the Centre for Affordable Housing Finance in Africa, the National Stokvel Academy, and the Finance Expert from SC wealth for their advice in their respective fields of expertise. A heartfelt thank you to the HDA, Cape Town and Ms. Pine, whose instrumental support connected me with Masakhe Ladies, PPC group and Corobrik, without them my work would not have progressed as well as it did. I appreciate the willingness of Masakhe Ladies, PPC group, and Corobrik for sharing their time and information, contributing significantly to this research. Finally, I want to acknowledge the support from my family, especially my husband for granting me the courage to embark on this endeavour. His patience has been indispensable throughout. I am also grateful for the understanding of my children, as this research project took a significant time away from them. vi TABLE OF CONTENTS DECLARATION .............................................................................................................................. ii ABSTRACT ..................................................................................................................................... iii DEDICATION ............................................................................................................................... iv ACKNOWLEDGEMENTS .............................................................................................................. v TABLE OF CONTENTS .................................................................................................................. vi LIST OF FIGURES ........................................................................................................................... ix LIST OF TABLES .............................................................................................................................. x LIST OF ACRONYMS .................................................................................................................... xi CHAPTER ONE: INTRODUCTION TO THE STUDY .................................................................. 1 1.1. Introduction .................................................................................................................. 1 1.2. Background .................................................................................................................. 2 1.3. Research site ................................................................................................................ 3 1.4. Problem statement and rationale ............................................................................. 4 1.5. Aim ................................................................................................................................. 5 1.6. Research question. ...................................................................................................... 6 1.6.1. Sub-research questions ........................................................................................ 6 1.7. Assumed Findings ......................................................................................................... 6 1.8. Research Methodology .............................................................................................. 6 1.8.1. Research Design and Approach. ...................................................................... 7 1.8.2. Sampling ................................................................................................................ 7 1.8.3. Data collection instruments ................................................................................ 9 1.8.4. Data analysis ....................................................................................................... 10 1.9. Ethical considerations ............................................................................................ 11 1.10. Limitations ............................................................................................................ 12 1.11. Provisional list of chapters ..................................................................................... 12 CHAPTER TWO: LITERATURE REVIEW ................................................................................ 15 2.1. Introduction ................................................................................................................ 15 2.2. Adequate housing ..................................................................................................... 15 2.3. Women in Housing ..................................................................................................... 16 2.4. Stokvels ........................................................................................................................ 18 2.4.1. Characteristics of a stokvel ............................................................................... 19 2.4.2. Stokvels and formal financial institutions ......................................................... 21 2.5. Self-help housing ........................................................................................................ 23 2.6. Enablement ................................................................................................................ 24 2.7. Inequality .................................................................................................................... 25 vii 2.8. Livelihood and Poverty ............................................................................................. 26 2.9. The conceptual framework ...................................................................................... 27 2.10. Conclusion .............................................................................................................. 28 CHAPTER THREE: HOUSING FINANCE ARRANGEMENTS IN SOUTH AFRICA ............... 30 3.1. Introduction ................................................................................................................ 30 3.2. Overview of South Africa’s Housing finance ......................................................... 30 3.3. Wholesale and construction finance demand and supply ................................ 31 3.4. End-user housing finance ......................................................................................... 32 3.4.1. Mortgage Finance ............................................................................................. 32 3.4.2. Microfinance ....................................................................................................... 34 3.4.3. Pension backed home loans ............................................................................ 35 3.5. Government Interventions ........................................................................................ 35 3.5.1. Housing programmes and subsidies ................................................................ 37 3.5.2. Challenges in government interventions ........................................................ 41 3.6. Non-conventional financing .................................................................................... 42 3.7. Conclusion .................................................................................................................. 43 CHAPTER FOUR: FINDINGS AND ANALYSIS ....................................................................... 45 4.1. Introduction ................................................................................................................ 45 4.2. Research Participants ............................................................................................... 45 4.3. Profiling the group...................................................................................................... 46 4.4. Reasons for joining the stokvel ................................................................................. 47 4.5. Securing access to adequate housing. ................................................................. 49 4.6. Supporting stakeholders ........................................................................................... 50 4.6.1. Local media ........................................................................................................ 50 4.6.2. Government and subsidiaries ........................................................................... 51 4.6.3. Private entities ..................................................................................................... 53 4.7. Formalisation and recognition of stokvels as a legal entity ................................. 57 4.8. Conclusion .................................................................................................................. 60 CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS ............................................ 61 5.1. Introduction ................................................................................................................ 61 5.2. Synthesis and key findings ........................................................................................ 61 5.3. Conclusion .................................................................................................................. 63 5.4. Recommendations .................................................................................................... 64 REFERENCES ........................................................................................................................... 69 ANNEXURE A1: ......................................................................................................................... 77 SEMI-STRUCTURED EXPERT INTERVIEW PROTOCOL ...................................................... 77 viii ANNEXURE A2: ......................................................................................................................... 79 SEMI-STRUCTURED SUPPORTING ORGANISATIONS INTERVIEW PROTOCOL ............. 79 ANNEXURE A3: ......................................................................................................................... 81 SEMI-STRUCTURED MASAKHE LADIES INTERVIEW PROTOCOL .................................... 81 ANNEXURE B: ........................................................................................................................... 84 INTERVIEWS WITH PARTICIPANTS ....................................................................................... 84 ANNEXURE C: ........................................................................................................................... 85 ETHICS CLEARANCE CERTIFICATE ...................................................................................... 85 ix LIST OF FIGURES Figure 4. 1: Categorisation of the group based on age. .............................................. 46 Figure 4. 2: Categorisation according to income ......................................................... 46 Figure 4. 3: The block making machine and the container donated by PPC group ..... 54 x LIST OF TABLES Table 1: Interviewed Research participant’s .................................................................. 9 Table 2: Benefits of stokvel accounts from the major banks in South Africa. .............. 22 Table 3: Interviewed Research participant’s ................................................................ 45 Table 4: Student functions in the clinic ........................................................................ 65 xi LIST OF ACRONYMS BNG - Breaking New Ground CoCT - City of Cape Town CSI - Community Social Investment DHS - Department of Human Settlements EPHP - Enhanced People’s Housing Process FFC - Financial Fiscal Commission FLISP – Finance Linked Individual Subsidy Programme FSC – Financial Sector Charter HDA – Housing Development Agency IRDP – Integrated Residential Development Programme ML – Masakhe Ladies NASASA – National Stokvel Association NGO – Non-governmental Organisation NHFC – National Housing Finance Corporation RHLF – Rural Housing Loan fund ROSCA – Rotating Savings and Credit Associations SAHIF – South Africa Housing Infrastructure Fund UISP – Upgrading of Informal Settlements Programme 1 CHAPTER ONE: INTRODUCTION TO THE STUDY 1.1. Introduction Numerous South Africans aspire to own homes, but the high cost of property acquisition poses a challenge. The primary conventional avenue for property purchase, a mortgage bond, is beyond the financial reach and accessibility of a significant portion of the South African population. Despite numerous policy interventions, the backlog in housing remains, leading to a significant number of urban households residing in informal settlements and utilising backyard rentals (CAHF, 2015). The urban population continues to grow, placing increased demand on urban housing and the government struggles to keep pace with the expanding urban population. On the other hand, the affordable housing market fails to meet the demand for low-cost housing, indicating a shortage of available stock for low-income households to engage in the market (Kajimo-Shakantu & Evans, 2006). Herein, the affordable housing market refers to residential properties that are priced within the financial means of households in the low-income band. This market encompasses housing options that do not exceed 30% of a household's gross income, ensuring that sufficient resources remain for other essential needs such as food, healthcare, and transportation Unconventional approaches to property acquisition are frequently required, and one of the methods employed by South Africans is engaging in community-based savings schemes like stokvels. This initiative, despite its informal nature, address the requirements of destitute households that lack alternatives when government and private sector initiatives fall short of meeting their needs. Stokvels uplift communities in various ways and offer access to finance, eliminating barriers for households (Lengolo, 2019). These stokvels have been advanced as financial tools, serving as vehicles for community members to address financial challenges and pursue the acquisition of assets and other endeavours (ibid.). Based on the case study of Masakhe Ladies in Gugulethu, this research report explores stokvels as a housing finance mechanism. 2 1.2. Background In Gugulethu, a township outside City of Cape Town city centre (CoCT), a group of 24 women formed a stokvel group Masakhe Ladies (ML), to finance their housing situations. The stokvel enabled the women to build and renovate their homes and to create livelihood through backyard rentals. The Masakhe Ladies (translated as “let’s build ladies”), resorted to a finance mechanism that is based on the concept of a community self-help initiative. Gugulethu, along with its informal settlement areas, stands out as a focal point for the CoCT, given its status as the most densely populated and with the highest unemployment area in the Cape Flats District (City of Cape Town, 2022). According to Statistics South Africa (Stats SA) (2022), Gugulethu faces an unemployment rate of 19.3%. Considering the low-income group estimated at 5.3% (Stats SA, 2022), the profound impact of this reality on the housing backlog becomes evident, given that these households face significant challenges in meeting basic necessities, securing adequate housing becomes increasingly difficult. CoCT has witnessed a significant increase in urbanisation since 1996, with the population increasing by 56% between 1996 and 2006 (CoCT, 2021). During this period, 60 to 65% of residents of Gugulethu resided in informal dwellings (ibid.), a trend partly attributed to the influx of foreign migrants from neighbouring countries such as Zimbabwe, Malawi, and Uganda (Kalule, 2016). These migrants, seeking better opportunities, have migrated to South Africa, particularly to Gugulethu, between 2000 and 2013 (ibid.). Overall, the influx of foreign migrants underscores the challenging conditions in their home countries, motivating their migration to South Africa but contributing to the dynamics of urbanisation and housing demands in Gugulethu. CoCT (2021) recognises that the escalating demand for housing, coupled with constraints in its provision, has given rise to informality to address the housing gap. This informality takes the form of backyard rentals and the prevalence of informal settlements, serving as tangible indications of the persistent housing needs (CoCT, 2021). The uncontrolled expansion of informal settlements is further fuelled by rapid urbanisation, high unemployment rates, and the continual misalignment between the demand and supply of low-income housing in the South African housing market (Mhlongo et al, 2022). 3 Despite these challenges, the CoCT attempted to address housing concerns, providing 9 218 housing opportunities for the Cape Flats District between the financial years 2013 and 2017. However, the staggering demand for housing during this period amounted to 28 960, illustrating that the City has managed to fulfil only 32% of the housing demand within that timeframe (CoCT, 2022). To navigate these housing challenges, the CoCT has implemented several programmes such as the Upgrading of Informal Settlements Programme (UISP), the fully subsidised low-cost housing programme (IRDP), the First Home Finance/Finance Linked Individual Subsidy Programme (FLISP), and the Enhanced People Housing Process (EPHP) (CoCT, 2022). Developed by the National Department of Human Settlements (NDHS), these programmes are designed to address the diverse needs of the urban poor (ibid.), reflecting a comprehensive approach to tackle housing issues in Gugulethu and similar areas. The founder of the Masakhe Ladies stokvel group found herself was excluded from various housing programmes, because she was a previous beneficiary of the then People's Housing Programme (PHP), now replaced by EPHP. The EPHP project at the time encountered setbacks and failed before ML’s chairperson’s house could be built. The upside is that she had received a designated site. The exclusion from housing programmes encouraged her to start the stokvel group. 1.3. Research site The research is based in Gugulethu, which is situated approximately 18km outside Cape Town's city center. It is a township established in the 1950s with a total population of 98,468 residents (Statistics South Africa, 2023). The enactment of the Group Areas Act (1950) had profound consequences on the formation of the township. It forced the displacement of African, Colored, and Indian communities from the inner city to outskirt locations (Legassick, n.d.). This policy initiated the forceful relocation of Africans to Nyanga and Langa, with Langa specifically designated for African bachelors and Nyanga for African families (ibid.). This mass removal, affecting over 60,000 black families, transformed various areas in the city center into 'whites only' zones (Sara, 2017). As Athlone, Wind mere, and Retreat experienced further evictions, Langa became overcrowded and naturally expanded into 4 what is now known as Gugulethu (Legassick, n.d.). The establishment of Gugulethu in 1958 aimed to alleviate the strain on Nyanga caused by overcrowding (ibid.). Rural migrants, primarily from rural homelands like the Transkei, were carefully managed in the 1950s (ibid.). Those who worked in the city were accommodated in Nyanga, the sole black urban residential area closer to the city center of Cape Town during that era (South African History Online-SAHO, n.d.). However, the government at the time prohibited households from owning their homes in Gugulethu, resulting in families making do with 'barrack-like' dwellings (ibid.). This restriction led to cramped living conditions, with many families resorting to single beds due to the limited space available (ibid.). This historical context underscores the formation of Gugulethu and highlights that despite government efforts, some of the housing challenges such as overcrowding inherited from the apartheid system persist, a sentiment echoed by various scholars (Gardner, 2017; Rust, 2015; Nyapokoto, 2010). Notably, Gugulethu holds the distinction of being the township with the largest area covered by informal settlements in the Cape Flats District (CoCT, 2022). This diverse composition highlights the complex nature of Gugulethu, reflecting both its historical roots and its contemporary challenges, especially in terms of informal settlements. 1.4. Problem statement and rationale According to a study by the Financial Fiscal Commission (FFC) (2013), 80% of mortgages are approved for households earning over R15,000 monthly, while only 20% are granted to those with a monthly income between R7,500 and R15,000. Consequently, households with a combined monthly income below R7,500 are ineligible for commercial bank mortgages (FFC, 2013). Kajimo-Shakantu and Evans (2006) attribute the lack of housing finance for the low-income households to a limited supply of affordable housing, irregular income, and over indebtedness among South African households. Moreover, banks generally display a reluctance to invest in housing for the poor or adapt their systems to accommodate households with informal incomes (Kajimo- Shakantu and Evans, 2006). On the other hand, the demand for government assistance for housing is synonymous with long waiting lists, slow turnaround times for service delivery due to the housing delivery backlog (Chakwizira, 2019). 5 Ebrahim (2009) noted that the consequence of imperfect markets, limited access to formal housing finance, and high fixed costs of mortgage bonds forces households to resort to informal finance mechanisms. Households are therefore permanently reliant on rentals, living in backyards or informal areas, they are caught in what Lemanski (2017) terms permanent temporaries. Driven by the aspiration to become homeowners, these households adopt incremental building strategies, relying on funds obtained through informal borrowing from relatives and friends (Fan, Wu, and Yang, 2017), as well as micro-finance (Mills, 2007). Stokvels are gaining popularity in South Africa and there is potential for stokvel groups to adopt this model to meet their financial needs (Lengolo, 2019). Existing research primarily delves into how stokvel groups can optimise savings for various investments (Kibuuka, 2006; Moliea, 2007; Lukhele, 1990; Mulaudzi, 2017) or focuses on understanding the broader practice of stokvels (Naong, 2009; Schulze, 1997; Finmark Trust, 2018; and Verhoef, 1999). There is not much literature that focuses on stokvels as a housing finance mechanism, it is therefore worth exploring the ways in which stokvels offer a way for low-income households to contribute towards the purchase or building of a home. 1.5. Aim The overall aim of the research is to contribute towards housing finance scholarship by investigating how stokvels are offering a way for low-income households to have access to adequate housing. The objectives of this research project are, ● To examine how stokvels have operated in South Africa, ● To explore how Masakhe Ladies use stokvels as a housing finance tool. ● To explore the role of governments, government institutions the private sector, and the community in fostering access to adequate housing for low-income households. 6 1.6. Research question. How has Masakhe Ladies utilised stokvels as an alternative housing finance mechanism to gain access to adequate housing? 1.6.1. Sub-research questions • How do alternative, non-conventional financial mechanisms, such as stokvels provide access to adequate housing for low-income households? • How do formal institutions (public sector, banking sector) relate to stokvels? • What have been the experiences of members of the Masakhe Ladies group in securing access to adequate housing? • How have other stakeholders/actors engaged with the Masakhe Ladies group? 1.7. Assumed Findings It was assumed from the onset that the Masakhe Ladies group is a diverse get-together of women residing in different housing typologies, from low-income households. It is also assumed that these women have utilised the funds generated from their stokvel contributions to incrementally build their homes over successive cycles. Furthermore, the study assumes that the group has actively engaged with formal institutions as the group has such a high media presence which potentially enhances their visibility and connections with various organisations. The study also assumed that the ladies did not receive any government assistance or mortgage finance before the formation of the stokvel group. 1.8. Research Methodology This section offers an outline of the research methodology used to investigate how Masakhe Ladies (ML) utilise stokvels as a housing finance mechanism and how this provides a way for low-income households to attain access to adequate housing. The study embraces a qualitative approach, specifically an exploratory single case study. Following an explanation of the research design and approach, the chapter delves into the sampling procedures. Subsequently, an overview of the data collection process and the analysis approach is provided. Lastly, the section addresses the limitations and ethical considerations guiding the study. 7 1.8.1. Research Design and Approach. The research advocates for a qualitative methodology aligned with the study's objectives and research inquiries. The researcher opted for a qualitative approach because it enables participants to express their perspectives on the studied issue and clarify how their system functions according to Cresswell (2014). Through open-ended questions, the researcher gained insights and understanding into how the ML stokvel group utilises their pooled funds and how their established connections with supporting organisations assisted in securing adequate housing. The chosen investigative approach is an exploratory single case study, centred on the MLs' stokvel group. According to Yin (2003), a case study is suitable for addressing the 'how' question, particularly when the case's context is pertinent to the research inquiry (Baxter & Jack, 2008). Within the ML stokvel group, three essential elements are central to the research inquiry: a) the group uses pooled funds from member contributions to address their housing needs, b) the group has received direct interventions from both government, governmental and private entities, and c) the group encompasses women from diverse housing situations and income brackets including low-income bracket. These integral components form the basis of the research inquiry, positioning the ML group as a relevant case for exploration. To mitigate reliance on a singular approach, evaluation research was conducted to assess the purpose and wherever possible the impact of policies, housing programmes, and strategies in meeting the needs of the targeted group. This involved scrutinising policy documents like the White Paper on Housing, Comprehensive Plan for the Development of Integrated Human Settlements known as Breaking New Ground (BNG) policy framework and housing finance programmes, as well as literature pertaining to the affordable housing market. Additionally, an examination of housing finance sources was undertaken to comprehend the various options available in the affordable housing market. 1.8.2. Sampling Given that this study is centred on a single case, the primary focus is on the ML group. Before selecting the ML case, several stokvel groups that utilised stokvels for home purchases and construction were approached. However, the ML group stood out due to 8 various elements demonstrated in the previous section which align well with the research inquiry. This group was identified from multiple social media platforms and a speech delivered by the Minister of the Human Settlements Department, Sisulu, in 2019. The ML case serves as a testing ground to ascertain whether stokvels can effectively facilitate access to adequate housing for poor, low-income households. Initially, the researcher engaged with a project manager from the Housing Development Agency (HDA), responsible for collaborating with ML to secure land for housing construction. The project manager facilitated my connection with the chairperson of ML. Although the chairperson agreed to an interview, the research could not proceed at that point due to the absence of ethics clearance. After obtaining clearance five months later, the project manager resigned from HDA, however, the interview continued despite her resignation. Contact was also made with National Task Team officials. These officials work under the EPHP programme, at the National Department of Human Settlements (NDHS), and therefore ML was established as a pilot project of the EPHP under the NDHS. The interview with ML chairperson, and an official of the task team took place online, however, some details on how the group operates were withheld. Additionally, information obtained from social media indicates that the ML group received assistance from various private institutions in achieving their goals, prompting further engagement with these institutions to determine the roles they played for the ML stokvel group. Furthermore, interviews were held with the representatives from the PPC group and Corobrik. A purposive sampling strategy was employed to select experts in the fields of housing finance and stokvels, aiming to gather diverse perspectives on the study's inquiry. To address the initial objective of understanding the functioning of stokvels in South Africa, interviews were conducted with the National Stokvel Academy and a Financial Management Expert who also advocates for the stokvel movement. The two experts were approached to ensure varied viewpoints. In pursuit of the third objective, which involves exploring the roles of government, non-governmental organisations (NGOs), the private sector in stokvels, interviews were conducted with the Center for Affordable Housing 9 Finance Africa (CAHF), the Financial Expert, the National Stokvel Academy, as well as representatives from the PPC group and Corobrik. Table 1: Interviewed Research participant’s Participants Institution Date interviewed Masakhe Ladies chairperson Masakhe Ladies 09 December 2023 2 Masakhe Ladies members Masakhe Ladies 09 December 2023 Former HDA Project manager Housing Development Agency (HDA) 03 November 2023 Corobrik representative Corobrik 14 December 2023 PPC group representative PPC group 24 January 2024 Stokvel Expert National Stokvel Academy 08 November 2023 Finance Expert SC Wealth 08 November 2023 Housing Finance Expert Centre for Affordable Housing Finance, Africa 08 November 2023 Source: (developed by researcher, 2024) 1.8.3. Data collection instruments To reinforce the credibility of a single case study, diverse data sources were employed, including semi-structured interviews and evaluation research. Interviews with the ML's chairperson and two members were conducted online, aimed to capture varied perspectives and supplement information on operations and challenges. Insights into the stokvel's interactions with private institutions and government were gathered through interviews with both members and private entities. Engagements with experts further enriched the study by exploring potential contributions and support roles of government and private institutions. Document analysis of major banks' products and relevant policies was also undertaken. 10 Unstructured Qualitative interviews process In line with qualitative research, empirical data were primarily gathered through extensive interviews with the participants. The interviews lasted from one to two hours and adopted a relatively semi-structured approach, guided by an interview outline. Encompassing various pertinent themes, the interviews allowed flexibility for both the respondents and the researcher to deviate from the schedule, so that additional questions can emerge as the conversation unfolded. Upon obtaining participants' consent, interviews were recorded using a voice recorder and subsequently transcribed. The interviews, structured around various themes, predominantly featured open-ended questions framed to stimulate conversational interpretation by the individuals. In instances where respondents, appeared to misunderstand questions, the questions were rephrased or a more direct question was posed, and this was frequent with ML. Notes were taken down during interviews and both electronic and hard copy formats were used to save and organise written documents, categorised by major research themes. The data collection process necessitated a thorough and explorative approach to cover all possible angles. Continuously organising, reflecting, interpreting, and revising of gathered data were essential. 1.8.4. Data analysis The rationale for approaching the chairperson and two members of the stokvel, and to interview three experts, and also the supporting organisations is to enhance the validity of the data acquired from participants. The use of triangulation, following Creswell's (2014) guidance, allows for a comprehensive validation of themes that surface from diverse sources of information. Triangulation stands out as a widely employed method in qualitative research, serving as a robust tool for data analysis and ensuring validity (Carter, Bryant-Lukosius, Blythe, & Neville, 2014). The obtained data was thoroughly interpreted to distinguish themes, systematically organise them, and translate them to establish meaning. Thematic analysis was employed to categorise, review, and code the collected data. The resultant list will record major ideas emerging from the analysis and the following process was followed: - 11 The interview structure was already categorised into themes but required further sorting of responses to disclose details from each interview because it is important to extract key themes during the transcription and analysis of interviews (Leedy and Ormrod, 2005). My task was therefore to sort relevant from irrelevant information, capturing important details into concise sentences or phrases. Grouping sentences based on specific meanings became necessary for effective alignment with the research objectives. Throughout the analysis, efforts were made to identify both different and similar viewpoints of respondents. Further classification of responses was undertaken to reveal distinctions from each interview. The goal was to develop an overall description of stokvels as an alternative financial mechanism, aligning with Leedy and Ormrod's (2005) emphasis on concluding and generalising findings. 1.9. Ethical considerations This research project centres on adults, specifically in ML group, which consists of women whom some are from economically disadvantaged backgrounds and can be considered a vulnerable group. It was crucial to convey to the women that the study is solely for academic purposes, and there are no incentives provided for their participation in the research. Due to the collaborative nature of the interviews involving multiple participants, complete anonymity and protection of identities was not achievable. Given the sensitivity of information related to the financial position and income sources of the group, as well as individual monthly incomes, participants found this intrusive. To address this, income data was categorised into brackets, e.g. (R0-R3500), to make the questioning more comfortable and less intrusive. The members chose to remain anonymous; and assurance was given to them that their contributions will be presented anonymously in the report. However, experts providing insights on the topic were willing to be identified and gave me their permission before proceeding with interviews. The representatives from the supporting organisations are not identified as requested and only the names of the organisations are referred to herein. It was crucial for the researcher to acknowledge the role as a professional within the Limpopo Department of Human Settlements, recognising the potential influence this might have on the research. Maintaining a neutral perspective, particularly considering 12 the distinct structural and geographical differences between the Department of Human Settlements in Limpopo and in the Western Cape. The researcher is involved in various stokvels in her personal capacity, and the manifold benefits associated with such participation are recognised. It's important to acknowledge that the researcher’s engagement in stokvels might influence her perspectives on the research objectives, potentially introducing bias in favour of stokvels as an effective tool for housing finance. To mitigate this, the researcher remained vigilant that her involvement did not unduly impact the research outcomes or the interpretation of views expressed by participants. The researcher aimed to avoid selectively presenting only positive results or withholding pertinent information to favourably portray the outcomes, and consistently referred back to the primary aim of the research. 1.10. Limitations The case study focuses on a specific stokvel group, and it's crucial to recognise that the findings cannot be generalised, as each case is unique. Insights derived from a single case study lack applicability to other contexts, and drawing general conclusions from a single case is not feasible (Yin, 2003). However, the study offers valuable lessons that can guide government, non-government agencies, and private sector institutions regarding alternative community-based housing finance mechanisms. The stokvel group is situated in Gugulethu, where 90% of the residents primarily speak Xhosa (Statistics South Africa, 2022). Given that Sepedi is the researchers first language, a language barrier arose during the interviews. To overcome this challenge, the researcher conducted the interviews in English, and the participants responded in English, using Xhosa when needed to convey their thoughts. To ensure effective communication, a task team official, fluent in both Xhosa and English, provided translations during and after the interviews. 1.11. Overview of chapters Chapter One: An Introduction to the Research Project. The introductory section of the research project sets the stage by presenting the background, identified problem, specifying the research's aims and objectives, and 13 detailing the main research question along with sub-questions. Additionally, this chapter incorporates a description of the field study area, providing context to the location of the ML stokvel group. The methodology section outlines the chosen research methods, ensuring the validity of findings aligned with the research objectives. It further explains the approach to conducting the research, addressing ethical considerations, and acknowledging the study's limitations. Chapter Two: Literature Review This chapter initiates the exploration of the theoretical framework, aiming to comprehend theories related to stokvels and access to adequate housing, integral to the study's objective. The conceptual framework concepts are elucidated in the literature review chapter, where arguments and perspectives from scholars are analysed across various thematic areas such as stokvels, self-help housing, enablement, gender dynamics, employment patterns, exclusion mechanisms, and socioeconomic inequalities. The conclusion of this chapter features a diagram that visually captures the theoretical framework guiding this study. Chapter Three: Housing Finance Arrangements in South Africa This chapter centres on a comprehensive exploration of the financial governance landscape in South Africa, specifically exploring their interactions with stokvels. A detailed assessment of housing finance provisioning is undertaken, with an examination of housing policies and finance structures prevalent in South Africa. The insights presented in this section are derived from an extensive desktop study encompassing literature reviews and policy documents. Chapter Four: The Findings and Analysis This chapter unveils the outcomes derived from the interview data collected during the research. Commencing with an overview of ML's profile, the chapter systematically dissects the data, categorising it into essential themes relevant to the research. A thorough analysis of the data is conducted, explaining the research findings in a comprehensive manner. Chapter Five: Conclusion and Recommendations. 14 In this concluding chapter, a comprehensive summary of the research project is presented, encapsulating the key findings, drawing insightful conclusions, and offering recommendations for potential future research endeavours in the realm of alternative housing finance mechanisms tailored for low-income households. 15 CHAPTER TWO: LITERATURE REVIEW 2.1. Introduction This chapter introduces the theoretical framework, which delves into theories surrounding stokvels and access to adequate housing, both central to the study's aim of examining how stokvels can facilitate access to adequate housing for low-income households. Initially, adequate housing is looked into and what it signifies for women. Stokvels will be defined, their origins outlined, looking into their characteristics and their relationship with formal financial institutions. Constructs such as self-help, enablement, livelihood and poverty, and socioeconomic inequalities will be examined in the context of access to adequate housing for low-income households. Subsequently, a conceptual framework will be presented, showcasing the interrelationships and connections among these various constructs. 2.2. Adequate housing In the Constitution, the Bill of Rights guarantees everyone the 'right to access adequate housing,' and the state is required to adopt reasonable measures to provide resources for the “gradual achievement of this right” (Republic of South Africa, 1996: 1255). However, the Constitution doesn't explicitly define the term "adequate housing". Courts and legal interpretations further refined and elaborated on the concept of adequate housing in the case of the Government of the Republic of South Africa and Others v. Grootboom and Others (2000). The South African Constitutional Court defined "adequate housing" as extending beyond shelter, encompassing legal security of tenure, access to basic services, affordability, favorable location, and structural integrity (Government of South Africa & others v. Grootboom & others, 2000). The court emphasised that the right to adequate housing is substantive, guaranteeing individuals not only a place to live but also legal protection, essential services, affordability, suitable location for opportunities, and structurally sound homes (ibid.). In the Grootboom case, the Constitutional Court acknowledged the UN-Habitat definition of adequate shelter but did not explicitly adopt it as a binding definition for South African law (ibid.). Instead, the court emphasised the need for a context-specific understanding of "adequate housing" within the South African constitutional framework (ibid.). 16 The United Nations Habitat Agenda established a definition for adequate shelter in 1997 which was accepted and endorsed by 171 countries worldwide (Tipple & Speak, 2009). South Africa, as a signatory to the United Nations Habitat Agenda, acknowledged and adopted the definition of adequate shelter proposed by UN-Habitat. This recognition was part of the country's commitment to global goals and standards for ensuring appropriate housing or shelter provision (Tipple & Speak, 2009). Determining if housing is adequate, as per UN-Habitat, should involve the affected people, considering the potential for gradual improvement. The criteria for adequate housing can vary between countries due to cultural, social, environmental, and economic factors. The definition also emphasises the importance of considering gender and age-specific factors, such as the exposure of children and women to harmful substances. The attributes of adequate housing hold significant importance for women and children in society (Kajimo-Shakantu and Evans, 2007). This essential factor is a focal point in this study and will be further deliberated in the upcoming section. 2.3. Women in Housing Adequate housing, as mentioned earlier, encompasses various elements such as habitability and structurally sound homes which lack thereof shows in health-related problems and promotes gender-based violence. Housing not only promotes dignity and self-worth but also promotes stability and a sense of pride. It's noteworthy that a significant proportion of black individuals in Africa reside in precarious conditions that compromise their privacy and dignity (Sobantu, 2008). Specifically, women are at increased vulnerability, given the intimate link between their housing rights and their well-being, notably their health and security (Gomez and Thiele, 2011). For this reason, women place more emphasis on enhancing their housing conditions and assume the responsibility of managing household finances than men, ensuring the future livelihoods of the household, whether there is income or not (Kajimo- Shakantu and Evans, 2007; Chenwi and McLean, 2009). It is crucial to highlight that a majority of households in Africa are headed by women (Kajimo-Shakantu and Evans, 2007). Therefore, in discussions of inadequate housing, it is primarily women who are confronted by these issues, and advancing gender equality in housing rights yields numerous advantages for women (Gomez and Thiele, 2011). On the other hand, women 17 bear the responsibility of caring for children, and providing suitable housing for women directly benefits their children (ibid.). According to a study by Sobantu (2008), women express that their perception of housing is shaped by the functions they anticipate it to fulfil, primarily as a secure place for both the woman and children. Notably, women often intertwine their identity with that of their children; discussions about themselves always encompass their children (Sobantu, 2008). Consequently, housing plays a pivotal role in not only augmenting security but also enhancing the overall quality of life for women and their entire families (Sibiya, 2002). Notably, within the framework of offering subsidies to low-income households, women are given priority, acknowledging their perceived vulnerability (DHS, 2009). Despite facing long waiting lists for government assistance and exclusion from mortgage finance due to engaging in self-employed or informal work, women consistently prioritise and tend to their household responsibilities (Kajimo-Shakantu and Evans, 2007). Notably, a substantial portion of their earnings is dedicated to meeting the diverse needs of their households and on the well-being of their children (ibid.). They do this to gain access to suitable housing for themselves and their families through various alternative community-based initiatives (Masondo, 2006). Kongolo's (2007) study reveals that in community-based savings groups, women consistently demonstrate higher loan repayment rates compared to men. Their reliability in contributing to such initiatives is underscored by Masondo's (2006) findings, emphasising the trustworthiness of women in terms of financial commitments. The dynamics of societal structure undergo a transformation when women begin to challenge their living conditions and inquire about potential improvements. They question what aspects are within their power to change (Newton, 2012). Women are therefore actively engaging in community-based initiatives aimed at improving their living conditions, demonstrating a notable presence in savings programmes, as revealed by Kongolo's (2007) study. The community-based initiatives referred to in this context take the form of stokvels, and an in-depth discussion on stokvels will follow in the subsequent section. 18 2.4. Stokvels This section aims to offer an understanding of the functioning of stokvels in South Africa, exploring their origins and the guiding principles derived from studies and institutions endorsing the establishment of informal savings and credit unions within impoverished communities. A stokvel is “…a type of credit union in which a group of people enter into an agreement to contribute a fixed amount of money to a common pool weekly, fortnightly, or monthly. Then, depending on the rules governing a particular stokvel, this money or a portion of it may be drawn by members either in rotation or in a time of need.” Lukhele (1990:1). The term stokvel has its roots in the practice of rotating cattle auctions during the 1900s, initially referred to as stock fairs by English settlers in the Eastern Cape, later adopted by locals as stokvels (Lukhele, 2018). During these auctions, farmers and labourers formed groups, pooling funds to collectively purchase cattle (ibid.). Globally, similar practices are known as rotating savings and credit associations (ROSCAS). Stokvels operate on the fundamental principle where a group of individuals convene regularly to contribute money, allocated to one member based on the group's constitution (Lukhele, 2018). Established on trust and existing relationships, stokvel members typically share a close connection with one another (Lengolo, 2019). With over 810,000 stokvel groups and an estimated annual contribution value of R49 billion, these associations, particularly in black communities, have empowered members to access insurance, savings, and credit for purposes such as education, housing, and various business ventures (ibid.). While similarities exist between stokvels and ROSCAs, Lukhele (1990) emphasises that a stokvel, per its definition, allows for funds to be both allocated to a member and saved for future needs. Additionally, Bouman (1995) argues that a stokvel encompass both ROSCAs and Accumulated Savings and Credit Associations (ASCrA), the latter involving regular savings with accumulated funds available for loans and eventual distribution among members. A ROSCA/ASCrA is recognised globally by various names. In South Korea, it's called a kye, susu in Jamaica, and isusu in Nigeria (Lukhele, 1990). India has chit funds and bishi, while Cameroon refers to it as a tontine (Bouman, 1995). In Bolivia it is called a pasanaku, and in the Philippines calls it paluwagan (Mokoena et al., 2021). In South 19 Africa, different racial and ethnic groups use diverse names for stokvels, such as umgalelo, mogodisana, tshomisano, muholo, makgotla/burial societies, investment clubs, and youth stokvels (Lukhele, 1990; Schoeman, 2018; Kibuuka, 2006). 2.4.1. Characteristics of a stokvel Clearly outlining the features of a stokvel is vital to differentiate it from similar practices. The significant characteristics include trust, forced commitment fostering social capital, goal orientation, and informality. Next, the research delves into each of these characteristics and conclude by outlining the advantages and disadvantages of stokvels. Trust Since gaining popularity in the 1930s, stokvels have sustained operation for decades with minimal formal control, relying on trust among members (Porteous and Hazelhurst, 2004). Trust is the cornerstone of every stokvel, and serves as mitigation for risks associated with informal associations (Moliea, 2007; Kibuuka, 2006; Mulaudzi, 2014). Stokvels predominantly comprise individuals who work together, reside in the same neighbourhood, or share a common religion (Adams and Canaveside Sahonero, 1989; Bouman, 1995; Merret and Russell, 1994; Naong, 2009; Smets, 2018). This has been emphasised by Cheeky Media (2018), saying that the essence of a stokvel revolves around "people who know each other, trust each other, and build together". Nevertheless, not all members are familiar with one another. Occasionally, an individual aspiring to become part of a stokvel is introduced by an existing member, and the existing members make a discretionary decision. In instances where the recommended member fails to meet obligations, both the recommended member and the existing member share the responsibility (Cheeky Media, 2018). Therefore, members opt to save or loan money with colleagues, friends, or neighbours without substantial collateral, relying on trustworthiness to create a secure environment for credit and savings through stokvels (Kibuuka, 2006). Coerced commitment. While joining and remaining in a stokvel is a voluntary choice, there exists an element of peer pressure linked to membership (Mulaudzi, 2014). The pressure exerted within the group motivates members to fulfil their monthly commitments (Smets, 2018). In a study conducted by Kibuuka (2006), a woman expressed a strong preference for facing 20 hunger over missing her stokvel credit payments and monthly contributions. Members assert that individual savings prove challenging, and it's the peer pressure that ensures commitment, instilling a sense of responsibility and helping them avoid embarrassment within the group (Kibuuka, 2006). This compelled commitment contributes to the sustained longevity of stokvels over many years (Boumann, 1995). A study by Moliea (2006) found the average lifespan of a stokvel to be ten years, with Mulaudzi (2014) identifying a group that had successfully operated for over 15 years. Goal orientated. The formation of every stokvel group has an objective attached to it upon its establishment, and hence there are many types of stokvels depending on the goals and needs of those members (Bouman, 1995). The most famous stokvel type that has been in existence since the 1930s in urban South Africa is the burial societies (Lukhele, 1990), established amongst friends, families, church congregants, neighbours, and work colleagues to assist each other when one has been affected by a funeral in the family (ibid.). Informal association A notable attribute of a stokvel is that a stokvel functions as an informal financial association without recognition from legal frameworks (Schoeman-Louw, 2018). Stokvel rules are flexible, allowing for variations such as the allowance of a member to charge interest rates of loans to non-members (ibid.). In Bolivia, a pasanaku (stokvels) serves as informal savings and credit services for the majority rather than formal credit institutions (Adams and Canaveside Sahonero, 1989). India sees around 50% of adults participating in a ROSCA/ASCrA due to its informal and low default rate appeal (Bouman, 1995). In South Africa, stokvel dominance is seen in black communities, especially among women with low education levels, providing security and support absent in formal banking (Naong, 2009). As an advantage of its informal nature, stokvels leverage the collective power of a group to achieve goals that might be challenging for individuals alone (Cheeky Media, 2018). Women are found to be more prevalent in stokvels (Finmark Trust, 2018; Naong, 2009). Studies indicate that they empower women, helping them meet basic needs, save, invest, and accumulate assets (Matuku & Kaseke, 2014). 21 Stokvels drive communities toward self-help initiatives to combat poverty, unemployment-related challenges, and inequality, fostering self-reliance and empowerment (Matuku & Kaseke, 2014). As a community-based savings model, stokvels promote the culture of Ubuntu, and operate on a non-profit basis, focusing primarily on mutual assistance rather than profit maximisation (Hazelhurst and Porteous, 2004). Furthermore, stokvels instil discipline, commitment, and sacrifice among members, fostering a culture of savings (Cheeky Media, 2018; Schoeman-Louw, 2018). On the downside, stokvels lack legal protection for both the group and its members, as they operate outside the formal business sector (Schoeman-Louw, 2018). The informal nature of stokvels makes individuals susceptible to being lured into pyramid schemes masquerading as stokvels (ibid). In the absence of specific agreements, there is no recourse for defaulting and inflation can diminish the value of accumulated savings (Merret and Russell, 1994). 2.4.2. Stokvels and formal financial institutions Nedbank's Perm introduced the first stokvel savings account in 1988, sparking interest from other major banks in South Africa, each offering tailored savings accounts for stokvel groups (Lengolo, 2019). The relationship has evolved, with stokvels, led by organisations like the National Stokvel Association of South Africa (NASASA), advocating for improved financial products and contesting for better terms (Mulaudzi, 2017). Presently, all major banks in South Africa offer tailored savings products for stokvel groups (Lukhele, 2018) since the financial sector has committed to expanding retail financial services (Moliea, 2007). While stokvels traditionally operate independently, the banking sector has become complementary to the process (Lengolo, 2019). However, there is a contention that the interest rates provided in these accounts are disproportionately low. Additional benefits associated with the account are outlined in the table below. These benefits should be considered within the context of a prime lending rate of 11.75%, a Consumer Price Index (CPI) of 4.6%, and a bank repo rate of 8.25% at the time of the research. (South African Reserve Bank, 2023). 22 Table 2: Benefits of stokvel accounts from the major banks in South Africa. Bank Benefits Nedbank stokvel account • Nedbank offers between 5 - 6.75% interest rate depending on the account balance, • R10 000 burial cover for each member for R15 per month, per member, • 10% discount in groceries from selected partner stores, • Can open additional investment accounts linked to the savings account, • Stokvel members get a free pay-as-you-use account, • Free cash deposits (Nedbank, 2023). Standard Bank’s Society Scheme savings account • Standard Bank offers a 3.2 – 4.30% interest rate depending on the account balance, • Cash prizes in regular draws for accounts with a minimum balance of R5 000 and above, each R5 000 extra gains the account an extra entry into the draw, • First five branch and ATM deposits are free, • Can transfer balance into other investment accounts, • No account fee charged for balances over R5 000 (Standard Bank, 2023). First National Bank (FNB) stokvel account • FNB offering 7.05 - 8.08 % in interest depending on account balance, • No monthly fee for account balance exceeding R5 000, • Free notification for account transactions (FNB, 2023) Absa Bank • Absa offers a 4.80 – 6.30% interest rate depending on the account balance, • Zero transaction fees, • Account members get tips on investment options and savings information, • Free R2 000 accidental cover for 10 nominated members of the stokvel, • R500 grocery voucher when a stokvel spends R30 000 at a selected partner retail outlet (Absa, 2023) Source: (developed by researcher, 2023) The Grameen Bank of Bangladesh pioneered the concept of social collateral (Sibiya, 2002). Originating as a pilot project in Jobra village, Bangladesh, in 1976, the Grameen Bank evolved into a formal institution in 1983, aiming to combat poverty and empower the marginalised through micro-credit. What distinguishes this institution is the absence of collateral requirements, a characteristic that sets it apart from mainstream banks, as 23 its operations are not driven by profit maximisation (Grameen Bank, 2022). Grameen Bank also innovatively delivers services directly to clients' doorsteps, enhancing accessibility. (Sibiya, 2002). Notably, it prioritises women's empowerment, engaging them in economic endeavours, and has established a formidable presence in remote areas, demonstrating its commitment to grassroots impact (Sibiya, 2002). Grameen Bank's successful microcredit model, recognised with the 2006 Nobel Peace Prize, extends beyond poverty alleviation. In addition to empowering borrower members economically, it supports their children's education, and provides interest-free loans to beggars for financial independence, with over 21,000 beggars transitioning to self- sufficiency (Grameen Bank, 2022). The case of Grameen Bank underscores the adaptability of banks to tailor products suitable for stokvels or savings groups, leveraging the same operational framework, fostering a functional market given banks' capital capacity to optimise systems. In the subsequent segment of this chapter, an exploration into constructs of self-help, enablement, inequality, livelihood, and poverty, is undertaken through a review of relevant literature. 2.5. Self-help housing Self-help housing refers to an approach where individuals or communities actively participate in the construction, improvement, or renovation of their homes (Turner, 1976). Self-help housing comes in three forms a) self-help, b) mutual self-help, and c) assisted self-help where one gets help from external agencies for advice, support, and training to build (Masondo, 2006). In the 1900s, especially following World War I, it was a common practice for households to seek assistance from family, neighbors, and extended family members in the construction of a house (Nientied and van der Linden, 1988). This emphasised the importance of communal effort and solidarity during a historical period marked by reconstruction and housing needs (ibid.). Self-help is important as it empowers individuals and communities to take an active role in improving their living conditions, fostering a sense of ownership and community engagement, because they know their own housing needs (Turner, 1976). The government, the private sector, and NGOs can play crucial supportive roles in self- help housing initiatives. The government can develop and implement policies that 24 encourage and facilitate self-help housing projects, providing a regulatory framework that supports community initiatives (Nientied and van der Linden, 1988). It can do so by allocating funds or providing subsidies to self-help housing projects, making financial resources accessible to low-income communities (ibid.). Self-help housing presents a cost-effective alternative for the state, as highlighted by Masondo (2006), especially when compared to government-provided housing, as noted by Turner (1979). The government can therefore strategically leverage self-help housing initiatives as a preferred alternative to providing free housing. This shift can be facilitated through enablement, a concept that will be further explored in the upcoming section of the discussion. By promoting and supporting self-help, the government can encourage a more sustainable and cost-effective approach to housing, aligning with the principles of empowerment and community-driven development. In the context of this study, the community can create a mechanism for self-funding through stokvels, which are specifically utilised for self-help housing initiatives, including mutual self-help or assisted self-help housing, with the primary objective of the stokvel being to provide housing. 2.6. Enablement The concept of enablement, which has its roots in the Habitat II conference, gained prominence in the 1980s through UN documents and was further developed by the World Bank in the 1990s (Jenkins, Smith, Wang, 2007; Choguill, 2007). Defined by Choguill (2007), enablement involves creating an economic, financial, legal, and institutional environment crucial for supporting the housing sector. This necessitates the active involvement of various stakeholders. Pugh (1994) underscores that while enablement provides the necessary framework, it is through community engagement, entrepreneurship, and household initiatives that urban housing sectors are developed. As international institutions like the World Bank have been involved in development projects in developing nations for an extended period, the housing objectives, including enablement, reflect insights gained from past experiences (Pugh, 1994). With constraints on government funds, the housing discourse revolves around the government's role – whether it should directly provide houses or act as a welfare state. The government is in a more favorable position when it functions as a welfare state and facilitate the involvement of the private sector. 25 In practice, enablement is demonstrated as collaborative partnerships involving government policymakers, companies, government agencies, non-governmental organisations (NGOs), households, and community-based organisations, aligning with the principles outlined in the World Bank's policy documents (Pugh, 1994). Informally described as a strategy aimed at "removing bottlenecks from the quest for housing solutions" (Choguill, 2007:146), enablement emphasises the need to address obstacles hindering the exploration of effective housing solutions through coordinated efforts and cooperation among diverse stakeholders. As emphasised, the government plays a crucial role, however as noted by Pugh (1995) public expenditure is essential for anti-poverty strategies and development efforts but the government has limitations, and therefore it should focus on specific functions and contributions. Therefore, fostering partnerships becomes integral to the solution. Inequality, livelihood, and poverty stand out as pivotal elements significantly influencing the majority of these urban households. The following section looks into the intricate interplay of these factors. 2.7. Inequality Inequality refers to the disparities or uneven distribution of resources, opportunities, wealth, and privileges among individuals or groups within a society (Beteille, 1978). It encompasses various dimensions such as economic, social, and political differences, highlighting differences in income, education, employment opportunities, and healthcare (Beteille, 1978). Inequality can manifest at both individual and systemic levels, contributing to a difference in living standards and quality of life (Katiyaya, 2020). Addressing and understanding inequality involves analysing and addressing the root causes and systemic factors that cause inequality (ibid.). Conflict theory, originating from the work of Karl Marx, suggests that societal conflicts arise from the unequal distribution of resources and power (Beteille, 1978). It highlights the role of social institutions in perpetuating this inequality, with the dominant class controlling economic and political structures to exploit subordinate classes (ibid). Inequalities in wealth, education, and resource access are not coincidental but intentional efforts to maintain the status quo (Terreblanche, 2002). Understanding power dynamics and social struggles is essential in addressing social inequality. 26 Countries with greater income inequality tend to perpetuate economic advantages and disadvantages across generations, limiting social mobility (Katiyaya, 2020). Economic factors like wealth, income, and education determine one's social position, influencing social mobility (Seekings and Natrass, 2006). 2.8. Livelihood and Poverty This section focuses on the concept of livelihood from the perspective of policymakers and the lived experiences of the poor. Professionals tend to have a narrow perspective when defining livelihood, often concentrating solely on employment (Chambers, 1995). Livelihood encompass various means of making a living, including livelihood capabilities and tangible and intangible assets (Amis, 1995). Even though employment can be a component of livelihood, the livelihoods of the poor are typically built on diverse activities and sources, providing sustenance, income, and security (Chambers, 1995). Poverty is defined by economists as a lack of income or low consumption (Pieterse, 2008). However, while definitions are often imposed by those with research and policy- making power (ibid), Chambers (1995) argues that the true essence of poverty can only be articulated by the poor themselves. This is evident in findings from the 'Jodha’s Paradox,' where farmers and villagers, despite facing a decline in per capita real income, considered themselves better off. The participatory analyses further revealed the disparity in priorities between the poor and the wealthy, emphasising the subjective nature of poverty assessment (Amis, 1995). Chambers' argument aligns with Turner's (1972) assertion that social concepts are differently defined by the poor and wealthy. On the other hand, Wratten (1995) and Amis (1995) attribute poverty to urbanisation and capitalism, contending that capitalists play a significant role in perpetuating urban poverty. They argue that policy formulation tends to prioritise capitalist interests, contributing to the exacerbation of poverty. This perspective aligns with broader discussions on how economic systems can shape and perpetuate socio-economic differences in urban areas. The concentration of wealth and power in the hands of capitalists may result in policies that prioritise profit over the well-being of marginalised urban populations, further deepening the roots of poverty. Beall and Fox (2009) are of the view that urbanisation does not result in poverty, however, poverty resulted from rapid urbanisation exceeding the job opportunities in the 27 labour market. In the 1950s and 60s it was thought that the urban poor would be absorbed into the formal labour market, however as urbanisation had increased in 1970’s, it was evident that this will not happen as the informal economies and informal settlements increased (Beall and Fox, 2009). It becomes evident that poverty is not solely a consequence of an overall scarcity of goods and services within a society. Rather, as Barnett (1988) suggests, it stems from the unfair distribution of these resources, ultimately resulting in inequality as shown above. This perspective underscores the importance of considering not only the basic material needs but also the social and cultural dimensions of poverty. In developed societies, the inability to participate in commonplace activities can be a stark manifestation of relative poverty, highlighting the significance of addressing disparities in the distribution of both material and social resources. Combining the perspectives of Amis and Wratten (1995) regarding urban poverty with Terreblanche's (2002) emphasis on the role of social institutions, a comprehensive understanding emerges. It suggests that the interests of the urban poor are not necessarily advanced by capitalists, and urbanisation itself may contribute significantly to urban poverty. Therefore, a detailed approach to addressing urban poverty would involve addressing economic inequalities and reforming the social institutions that contribute to the perpetuation of inequalities. It requires a comprehensive understanding of how urbanisation and capitalist pursuits intersect with social structures, and policy interventions should aim at creating a more equitable urban environment that empowers and uplifts the urban poor. 2.9. The conceptual framework The provided diagram illustrates the theoretical framework of the study, depicting the connections between key theoretical concepts. The framework demonstrates that key constructs such as inequality, poverty, and livelihood strategies create a void where basic needs are unmet, prompting communities to reshape societal structures to fill this gap with meaningful solutions. Consequently, stokvels emerge in societies characterised by inequality, poverty, and unconventional livelihood strategies, serving as a foundation for self-help housing initiatives that facilitate access to adequate housing. 28 Figure 1.1: Conceptual framework Source: (developed by Motupa, 2023) 2.10. Conclusion The significance of adequate housing attributes, especially for women and children, underscores the complexities and challenges in ensuring equitable living conditions in South Africa. Adequate housing is fundamental for dignity, stability, and pride, but many individuals face unsafe conditions affecting privacy and well-being. Women bear the brunt of inadequate housing, therefore there is a need for gender equality in housing rights. Prioritising women in low-income household subsidies recognises their perceived vulnerability, exclusion and long waiting lists, leads discouraged and excluded individuals to devise their housing solutions. They engage in community-based initiatives such as stokvels to challenge their living conditions. Stokvels, rooted in community trust and informal associations, play a crucial role in empowering marginalised groups, particularly women. These voluntary collective savings groups enable access to financial resources for diverse needs like education, 29 housing, and business ventures. While fostering self-reliance, discipline, and a sense of community, stokvels face challenges, such as lacking legal protection and vulnerability to fraudulent schemes. Despite risks, their informal and flexible nature, stokvels contributes positively to community development. Stokvels have the potential to play a major role in self-help housing, because self-help housing, encompasses mutual self- help and assisted self-help, and emphasises community involvement and empowerment in home construction. Government, private sectors, and NGOs can enhance these initiatives by providing regulatory support, funds, and subsidies. This is embracing the concept of enablement, rooted in international development discourse. The government's role shifts from sole provider to enabler, focusing on specific functions. Finally, the literature has shown that interconnected dynamics of inequality, livelihood, and poverty reveal complex challenges. The conflict theory underscores the intentional nature of differences perpetuated by social institutions. Livelihood, often narrowly perceived by officials, encompasses diverse activities for the poor, challenging conventional employment-centric views. As indicated by the conceptual framework, it can be concluded that inequality, poverty, and livelihood strategies create a void where basic needs are unmet, prompting communities to reshape societal structures to fill this gap with meaningful solutions. Consequently, stokvels emerge serving as a foundation for self-help housing initiatives that facilitate access to adequate housing. 30 CHAPTER THREE: HOUSING FINANCE ARRANGEMENTS IN SOUTH AFRICA 3.1. Introduction This chapter provides an overview of housing finance literature in South Africa, focusing on how financial mechanisms and policies are associated with providing housing in the affordable housing market. The objective is to assess whether existing policies acknowledge the presence of alternative housing finance mechanisms and explore how South Africa's housing policy integrates these alternatives into housing programmes. Additionally, the chapter seeks to investigate whether government and private sector interventions effectively incorporate and enhance alternative housing finance mechanisms, such as stokvels, to facilitate access to adequate housing for medium to low-income households. 3.2. Overview of South Africa’s Housing finance South Africa’s housing model is described as government aided with a private sector approach, however it is dominated by an approach of the state as the main housing provider for lower income households to address the 2.5 million housing backlog (Department of Human Settlements, DHS, 2015). The private sector on the other hand is intended to supply middle-to higher income households on a demand meets supply basis (Gardner, 2017). Due to irregularities in the market the lower segment of the middle-income households is inadequately accommodated in the housing market (Centre for Affordable Housing Finance Africa- CAHF, 2015). A well-operating housing sector, as outlined by the Financial and Fiscal Commission (FFC) in 2013, is characterised by a framework that encompasses rules and regulations implemented by the government through policies and legislation. This regulatory structure is vital for the effective functioning of the housing sector (Wood, 2019). Crucially, the involvement of private sector entities, alongside financial and facilitative interventions, plays a pivotal role in shaping the landscape of housing (South African Housing Infrastructure Fund, SAHIF, 2020). 31 The financial dimension of this sector is underscored by three key housing finance instruments, state finance, private sector investments and household savings as outlined by the FFC (2013). These instruments serve as critical components in facilitating and sustaining the dynamics of housing (FFC, 2013). In the following section focus is given to financing sources from the viewpoint of investors involved in housing development projects. This overview will highlight the investments into the affordable housing market as it is relevant to this study. 3.3. Wholesale and construction finance demand and supply Public sector entities and various financial institutions such as banks, guarantors, developers, and rental housing institutions, secure investments for housing finance through government investments, private equity, pension funds, and both foreign and local institutional investors (South African Housing and Infrastructure Fund, SAHIF, 2020). These entities play pivotal roles in providing financing and debt for housing developments to developers, as well as extending financial support to end-users for construction, repair, or expansion of residences (Rust, 2011). Foreign institutional investors, despite limited involvement due to government dominance, saw a substantial investment from the European Investment Bank (IEB), supporting affordable and social housing projects (Wood, 2019). In 2013, EIB provided a US$178 million loan to several financial intermediaries, including the Development Bank of Southern Africa, NHFC (National Housing Finance Corporation), Nedbank, and Standard Bank (ibid). Pension funds, led by the Government Employees Pension Fund (GEPF), allocate funds to housing projects, but there's room for increased utilisation of their substantial capital (SAHIF, 2020). GEPF supported 646 housing projects, allocating R10.5 billion to SA home loans (Woods, 2019). Private equity, demonstrated by the South African Workforce Housing Fund, actively invests in affordable housing, with collaboration between public and private entities, such as the NHFC, addressing housing challenges (ibid.). Overall, a comprehensive approach involving various stakeholders is essential for fostering growth in the housing sector. Rust (2015), Gardner (2017), SAHIF (2020) and FFC (2013) concur that developers face difficulties when operating in the affordable housing sector, particularly in constructing entry-level houses below R400,000. This predicament is predominantly 32 attributed to delays in the regulatory and administrative steps of the housing delivery process, impacting funding availability and overall cost (SAHIF, 2020). A study by CAHF (2015) revealed that the various stages from inception to mortgage bond application took nearly double the time stipulated in regulations. Township application processes, from application, survey, general plan approval, services agreement conclusion, and council consideration, extended to 157 months, exceeding the guideline duration by 69 months (FFC, 2013; CAHF, 2015). These delays affect the entire housing delivery process in extending the timeline to over five years for a new housing development from initiation to sale (SAHIF, 2020). This prolonged duration not only diminishes delivery rates but also escalates housing prices due to a limited housing supply relative to potential buyers (ibid.). It significantly influences the cost and scale of delivery (CAHF, 2015). Heightened costs contribute to increased unit selling prices, compromising affordability and limiting funds available for additional units, thereby impeding delivery scale and exerting upward pressure on prices (ibid.). To address the challenges in South Africa's housing market, there’s a need for long- term perspective. Supply-side challenges, call for a focused effort to tackle delays in regulatory approvals and township application processes (FFC, 2013). There is also a need for a focus on bulk services and internal reticulation as there are heightened concerns over costs, availability, and efficiency during implementation (ibid.). 3.4. End-user housing finance End-user finance primarily comprises of mortgage loans, pension backed loans and microfinance. Initially, this section will firstly explore mortgage loans, then delve into microfinance and subsequently look into pension backed loans. 3.4.1. Mortgage Finance The mortgage market in South Africa is regulated by the Banks Act (No. 94 of 1990) (Drummond, 2022). Despite possessing well-established credit markets, accessibility to mortgage finance remains constrained, primarily favouring individuals with higher incomes (ibid.). The determination of mortgage eligibility centres on factors such as household income and existing credit commitments (CAHF, 2015). Financial institutions 33 typically extend interest rates, either above or below the prime rate, depending on the borrower's credit history and other relevant considerations (ibid.). In the affordable housing sector, it is customary for banks to apply a margin of around 2% above the prime rate, serving as a benchmark for evaluating loan affordability (ibid.). In South Africa, mortgages are commonly structured over twenty years, with the monthly instalment typically capped at approximately 25% of the household income. According to the FFC (2013) 80% of mortgages went to households earning over R15,000 monthly, whereas 20% of mortgages were for households with R7,500 to R15,000 monthly income; those below R7,500 received no mortgage finance. This highlights a low engagement with lower- middle-income households by commercial banks, and that there is no finance for housing for low-income households. Drummond (2022) found that 88% of mortgages exceeded R700,000. Given that a minimum gross monthly income required to qualify to purchase a R700, 000 worth of property is a little over R25,000.00. This highlights limited allocations to the affordable housing market. According to CAHF (2015) the availability of mortgage finance is constrained for the lower-middle class due to the lack of supply of housing stock undermining the demand for finance. In 2002, the drafting of the Community Re-investment (Housing) Bill was initiated, aiming to compel banks to extend loans to areas previously redlined areas (Lemanski, 2017). Had the Community Re-investment (Housing) Bill been implemented, financial institutions would have had to achieve particular targets concerning both income levels and geographical locations (CAHF, 2015). Banks expressed dissatisfaction with the proposed bill, arguing that the government was compelling them to accept risky loans (ibid.). Nonetheless, the banks swiftly presented an alternative proposal centred on mortgage lending, known as the Financial Sector Charter (ibid.). The Financial Sector Charter (FSC), initiated in 2005 by major banks, committing to lend R42 billion to low-income households (FFC, 2013). While it targeted households earning R1,500-R7,500, concerns arose. Challenges included the housing market's inability to meet the low-end income bracket, forcing lending at higher levels, and a shortage of affordable housing stock (CAHF, 2015). Despite claims of success, doubts persist about the FSC's impact on low-income households (ibid.). 34 3.4.2. Microfinance Microfinance, viewed as a solution beyond the reach of mortgage finance, garners support not only from the private sector but also from government bodies such as the NHFC. A key approach involves providing wholesale finance to specific housing Microfinance Institutions (MFIs) (Wood, 2019). MFI’s that specialise in housing finance in South Africa are Lendcor, Real People and Kuyasa Fund, with the latter recently making a transition from non-profit organisation to a for-profit entity (ibid.). As per the NCR (2012), low-income groups account for a significant proportion of total unsecured lending, as found by the FFC (2013), constituting 60 per cent of the value of unsecured credit in 2007, declining to 40 per cent in 2012 (ibid.). However, the extent to which low-income households, especially those not eligible for fully subsidised houses, use unsecured lending to contribute to their housing needs is unclear (ibid.). The prevailing view is that households falling in the gap between those eligible for a subsidy and those who qualify for a mortgage (the gap market) are inadequately catered for, and the microfinance market provides them with an option for housing finance on an incremental basis (Rust, 2011). Incremental housing, a long-standing practice in South Africa, has traditionally been funded by pension-backed loans, microfinance, and other sources (CAHF, 2015). Due to the perceived risk of small loans, microfinance lenders often impose high-interest rates (ibid). The typical interest rate for MFI’s are 21% ranging up to 30% (Wood, 2019). Informal lenders in South Africa commonly engage in microfinance (Drummond, 2022). The micro-lending industry witnessed a rise in unregulated lending before the National Credit Regulator was introduced (ibid.). This expansion gave rise to unscrupulous money lenders, often known as 'loan sharks.' Addressing public concerns over the exploitation of low-income earners and the rising over-indebtedness of borrowers due to exorbitant interest rates, the government stepped in for regulation through the National Credit Regulator (NCR) (Di Lollo & Drummond, 2019). The NCR aims to regulate for a fair and non-discriminatory consumer credit marketplace. Its mission includes overseeing responsible credit granting and usage while ensuring effective redress mechanisms (ibid.). All loans from formal institutions necessitate some form of security. For instance, mortgage finance involves registering a bond using the house as the asset. However, 35 individuals without assets, commonly the poor, are compelled to resort to microfinance, touted as an unsecured lending form. Yet, most microfinance providers still require a payslip as proof of salary, indicating that security is essential even in microfinance. A salary functions as a precarious security measure, even though job loss can leave individuals in a worse position if they have taken out a loan, particularly when compared to those who didn't qualify for any form of finance initially (CAHF, 2015). 3.4.3. Pension-backed home loans Pension-backed home loans (PBHL) in South Africa are a financing arrangement where individuals can use a portion of their pension fund as security when applying for a home loan (Wood, 2019). This innovative approach allows employees to leverage their retirement fund credits as security for mortgages for housing construction, renovations/upgrading, and home purchases, in accordance with the Pension Funds Act of 2007 (Di Lollo & Drummond, 2019). Pension fund members can secure favourable loan terms, including potentially lower interest rates or more accessible credit (Wood, 2019). The pension fund serves as a form of guarantee for the loan, providing added security for the lender. It is essential for individuals considering PBHL to carefully assess the terms and implications, as it involves tapping into retirement savings for property- related financing (ibid.). In summary, South Africa's mortgage market contends with ongoing challenges in providing accessible options, particularly for lower-income households. The persisting affordability issues, especially in affordable housing, highlight the need for effective solutions. While approaches like microfinance and pension-backed home loans are an alternative solution to those alienated from mortgage finance, careful consideration is essential. The upcoming sections focuses on government interventions designed in response to the context presented. 3.5. Government Interventions The examination of government investment in housing finance becomes imperative considering the comprehensive overview presented above, illustrating the involvement of the private sector in the housing finance sector. Legislative, policy and regulatory framework 36 Housing falls under the jurisdiction of national and provincial departments of human settlements, with legislative frameworks for its implementation derived from section 26 of the South African Constitution (1996) (Tshanga, 2014). According to the constitution “Everyone has the right to have access to adequate housing. The state must take reasonable legislative and other measures, within its available resources, to achieve the progressive realisation of this right." (Republic of South Africa, 1996:1255). The government is constitutionally bound to guarantee every citizen's right to suitable housing and to gradually fulfil this right. Its roles vary based on the specific situations of different households, serving as a facilitator for those capable of independently affording housing and adopting a more involved role for households experiencing financial limitations (Department of Human Settlements- DHS, 2015). The government assists, such as complete or partial subsidies, to households facing challenges in fulfilling their housing requirements (Gardner, 2017). This is per the provisions of the Housing Act (No. 107 of 1997), which outlines the national policy framework for human settlements, assigns distinct responsibilities to various levels of government, and introduces the National Housing Code (2009), detailing the approach to public funding (Tshanga, 2014). Additionally, the provision of human settlements is regulated by the Rental Housing Act (1999) and the Social Housing Act (2008) (Gardner, 2017). The Social Housing Act outlines the rights of landlords and tenants, and it governs the Social Housing Regulatory Authority's establishment and functions, particularly in regulating and investing public funds in social housing (DHS, 2015). It is important to note that these Acts, along with their resultant programmes, are beyond the scope of this research paper and will not be analysed below. The Housing Development Agency Act (2008) outlines the goals, organisational structure, and authority of the Housing Development Agency (HDA) concerning its responsibilities in identifying and facilitating land for human settlements development, as well as establishing priority development areas (DHS, 2015). Supporting the initial housing policy, 1994 Housing White paper, are three key strategies, including 1) national housing subsidy initiatives targeting households with a monthly income of R3,500 or less, 2) ensuring stability in the housing environment, and 3) generating additional housing finance through the establishment of the NHFC and the RHLF (Department of Housing, DOH, 1994). These strategies were implemented to tackle housing challenges as per the Botshabelo Accord (Gardner, 2017). Within this 37 accord, financial institutions committed to discontinuing redlining practices, and in turn, the government made concessions to facilitate a conducive lending environment (CAHF, 2015). However, persistent discriminatory lending practices prompted the government to retract its guarantees, resulting in a deadlock (ibid.). In response, the government sought to establish partnerships and instil confidence in the housing sector, formalising two agreements with the Association of Mortgage Lenders, now known as the Banking Association of South Africa (ibid.). The initial accord, the Record of Understanding, was later succeeded by the New Deal (ibid.). In its reformed approach to housing delivery, the government introduced the Comprehensive Plan for Development (2004), also referred to as Breaking New Ground (BNG), as a policy framework in 2004, marking a shift in housing strategy (Joseph & Karuri-Sebina, 2014). Following the implementation of the Breaking New Ground (BNG) initiative, the government shifted its focus from mere housing provision to the establishment of sustainable human settlements (ibid.). This shift prioritised 1) sustainable human settlements, 2) integration and spatial restructuring, 3) viewing housing as an asset, 4) informal settlement upgrading, and 5) expanding the social housing program (DHS, 2015). These strategies were reinforced by the adoption of Outcome 8 in Annexure 8 of the Medium-Term Strategic Framework and the National Spatial Framework for Human Settlements (Gardner, 2017). These frameworks outline a delivery structure for 4-5-year periods, specifying essential targets for achieving sustainable human settlements across the provinces of South Africa (FFC, 2013). The government's adoption of Outcome 8 further highlights its commitment to improving the quality of life for households and creating sustainable human settlements (DHS, 2015). Outcome 8 concentrates on upgrading up to 400,000 units within informal settlements, improving access to essential services, delivering 600,000 units for households in the gap market, and mobilising strategically located public land for low- income and affordable housing with increased densities (FFC, 2013). 3.5.1. Housing programmes and subsidies To realise the aforementioned objectives, funding for Human Settlements programmes