We know the names and have been raised on some of the products. Either our mothers, aunts, grandmothers or sisters pursued the promise of “financial freedom” through these schemes because of the opportunities they presented…or seemed to. New data has emerged which shows that women, often used the most in the marketing collateral for these schemes, not only make up the bulk of those still in the lowest income earning bar of these pyramid schemes but they are also most vulnerable to the exploitation.
The recent The Direct Selling Association of South Africa (DSA) has welcomed the aggressive stance taken by relevant authorities to stop the rapid growth of Pyramid and Ponzi schemes.
DSA vice-chairman Mthunzi Mbali says: “In times of economic difficulties, people who are facing severe financial challenges will explore many avenues to generate some form of income and Ponzi scheme operators capitalise on this vulnerability. Currently, there are wide-spread media reports suggesting that leaders of suspected Ponzi scheme operations have had their funds frozen. This means the authorities are taking a more active role in scrutinising businesses suspected of defrauding the public. The DSA welcomes the no-nonsense approach in protecting the livelihoods of so many vulnerable people in our communities.”
Mbali says in South Africa, women have embraced direct selling business opportunities so enthusiastically and are consequently more vulnerable to Pyramid and Ponzi schemes because Pyramid and Ponzi schemes tend to structure their businesses to look-like direct selling businesses.
The direct selling industry, with an annual turnover of about R13 billion, has a community of over a million passionate entrepreneurs from diverse backgrounds. Seventy-five percent of these entrepreneurs are female and 87% are from black communities, operating on a full-time or part-time basis as direct sellers. Mbali says the direct selling industry in South Africa supports more than 6 million individuals who must be protected from Ponzi schemes, which are a form of fraud.
So, how does one tell the difference between a legit direct selling business and a Ponzi scheme?
Typically, Ponzi schemes pay “profits” to earlier “investors” with funds from more recent “investors”. The scheme leads victims to believe that profits are coming from product sales or other means when in fact other investors are the source of funds. Inevitably, when the bubble bursts investors lose their money. These schemes can be local or international. They are online or chat platform-based. These schemes can even imitate established community-saving clubs like Stokvels.
Several women, who are breadwinners in their families, rely wholly or partially on income derived from direct selling activities.
Mbali says: “Letting the Ponzi scheme industry operate with impunity is as good as taking food right out of their mouths”.
The DSA vice-chairman adds: “We are also particularly excited to see the media fraternity responding to our call earlier this year to support our industry in exposing Ponzi schemes. ”
“Real direct selling businesses do exist in South Africa and we encourage the public to visit our website at www.dsasa.co.za to explore legitimate direct selling business opportunities operating in a safe and regulated environment. All DSA-member companies in South Africa are required, as a condition of membership to the association, to adhere to a code of ethics that aims to protect consumers, the public and the industry in general,” Mbali concludes.
There you have it – check the credentials of the direct selling opportunity first before you bring yourself more woes than what you had intended. Furthermore, don’t underestimate the power of word-of-mouth – sometimes a cautionary message from a trusted friend or family member can prevent you from inheriting more unnecessary stress.