SA online crowdfunding’s surprising origin in 1800s Eastern Cape
18 September 2019 | Web Article Number: ME201916379
THE age of the internet and its multitude of social media platforms has made it easier for people to reach out across communities through crowdfunding.
Crowdfunding is the practice of raising money from a large number of people who each contribute a relatively small amount, typically via the internet. With pooling funds for everything from legal fees and medical bills, to even a band’s reunion tour, it is predicted that a total amount of $300 billion (USD) will have been raised worldwide via crowdfunding by 2025.
While crowdfunding as we now know it has only been around for a few years, traditional methods, such as stokvels and burial societies, have been around for over a century.
According to the National Stokvels Association of South Africa (NASASA), cattle auctions held in the Eastern Cape, in the 19th century, were called “stock fairs”. Locals started referring to these auctions as stokvels, and eventually combined their resources and started trading livestock.
Stokvels have since operated as a means of pooling money with the goal of benefitting its members over a period of time. The association reports that there are currently more than 800 000 stokvel groups in the country. In the age of the internet, however, online crowdfunding has allowed people to support one another instantly, across cities and communities, with the click of a button.
According to Leana de Beer, Chief Operating Officer at Feenix – an online student crowdfunding platform, there are three primary types of crowdfunding: rewards-based, equity and donation-based crowdfunding.
De Beer said that rewards-based crowdfunding requires individuals to contribute to a business in exchange for some kind of reward – usually a product or service offered by the company.
“It is often used by small businesses to build capital. Equity-based crowdfunding makes it possible for those who donate to become partners of a company by providing capital in exchange for equity shares, As equity owners, donors receive a monetary return on their investments.”
Donation-based crowdfunding is any crowdfunding campaign where there is no financial return to the funder. Renowned examples include virtual reality headset Oculus Rift which raised close to $2.5 million through crowdfunding, as well as the viral campaign for local petrol attendant, Nkosikho Mbele, who lent a woman R100 after she couldn’t find her bank card, raising over R400 000.
As a modern crowdfunding tool, Feenix is an online platform for students to bridge the gaps in their education funding needs. De Beer said Feenix students are required to register on the site, create a profile, upload fee statements, which is used to establish the figure they wish to reach and then work towards marketing themselves to their network. Compared to traditional methods, online crowdfunding platforms have improved access to reaching a greater number of potential funders a lot faster.
“Students are required to promote themselves and actively engage with funders, so they work hard to raise the required funds for their studies. What’s great is that their own communities (as well as others) can get involved with helping them reach their goals.” De Beer said.
Durban University of Technology (DUT) mechanical engineering student, Daelyn Naidoo (20), from Verulam in KwaZulu-Natal, approached quite a few organisations for funding in the past, but his applications were always declined. He has now benefitted from using the Feenix platform, through which he was able to raise the funds he needed in the second semester last year.
His mother, Vilosh Naidoo, is familiar with the concept of crowdfunding and has belonged to a stokvel at work for about 10 years.
“Other mothers in the group also have children who will be attending tertiary institutions,” she said. “Members usually put away about R1000 or whatever amount they can afford and decide which month they will be taking their pay out. I usually take mine in November. I’ve used it to pay towards student fees for both sons.”
Naidoo sees the crowdfunding concept that Feenix uses, as an evolved, tech-enabled version of the stokvel she is familiar with.
“The difference is that with Feenix people have to go online, and that’s perfect, since most people have access to the internet. Traditional stokvels still have their place. There are many advantages to belonging to one - you know the people involved and when you’re having difficulties you can always speak to the people who run the stokvel and they may assist you.” “But with modern crowdfunding, the reach is greater,” she said.
“Through facilitation by Feenix, students are able to gain access to a larger network of funders, so there are more resources compared to a traditional stokvel.”
To date, R27 million has been raised on the platform.