Owing to our country’s particularly hostile economic climate, desperate South Africans serve as the ideal target for con-artists running pyramid schemes, Ponzi schemes, multilevel marketing schemes and multiplication schemes.

Many consumers are spellbound by glib, cunning swindlers spouting empty promises of multiplying their painstakingly earned rands. Subsequently, victims readily hand over their cash, when invited to take advantage of an elite get-rich-quick ‘investment opportunity’.

To ensure you aren’t scammed out of the salary you’ve earned by the sweat of your brow, by smooth operators, watch out for the below schemes and their warning signs.


Ponzi Schemes

Dating back to 1920, termed after the deceptive inventor himself, Charles Ponzi, the cold, calculating operators of Ponzi schemes are apt at portraying themselves and their ‘business endeavours’ as credible and lucrative. They are highly proficient at persuading people to finance their apparently authentic ventures. As such, if a silver-tongued businessman avows unreasonably high returns within a brief time-span, you should steer clear of this too-good-to-be-true investment.

In Ponzi schemes, you won’t be invited to play an active part in the enterprise, but will simply act as a seed capital investor. Ponzi schemes depend on an unbroken stream of unassuming investors, as original members are paid out of their contributions. Thus, it’s easy to see how such schemes could quickly fall apart at the seams, when contributors unavoidably become scarce.


Pyramid Schemes

In pyramid schemes, you will be invited to be an active participant. How these schemes function is you are remunerated for recruiting new participants. These individuals will be required to invest upfront and carry on enlisting new investors. As follows, the scheme relies on the continuation of the recruitment process, with the topmost participants reaping the highest profits.

Warning Signs

  • Focuses solely on recruitment – ‘building your team’.
  • Compulsory upfront lump sum or participation fee.
  • Earnings based on recruitment, rather than selling goods.
  • Enter at lowest level – as you recruit, you move up.
  • Topmost members earn the highest ‘commissions’.
  • Scheme slowly disappears – operators restart it under an alias.


Multilevel Marketing Schemes

This con operates in a fashion comparable to a pyramid scheme, though entails the marketing of a tangible product., However, participants receive higher commission for recruiting fresh affiliates, than they do for sales. As signing up marketers is more rewarding moneywise, recruitment is the true incentive. Multilevel marketing schemes teeter on the brink of unlawfulness.


Multiplication Schemes

Under the Consumer Protection Act (CPA), multiplication schemes can be defined as when ‘someone offers, promises or guarantees you an effective annual interest rate that is at least 20% above the repo rate.’ Given that the current repo rate is 6%, multiplication scheme operators would lure you by falsely promising a 26% return.

The Financial Services Board (FSB) Warns Against:

  • DefenceX scheme
  • The Wealth Hub scheme
  • MMM scheme

If you need to double your money in hurry, turn to Quick Little Loans, rather than investing in a shady scheme that’ll inevitably lead to a loss of funds.