The Direct Selling Association of South Africa (DSA) says it welcomes the aggressive stance taken by relevant authorities to stop the rapid growth of pyramid and Ponzi schemes.
DSA vice-chairman Mthunzi Mbali says: “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.
“As the DSA we welcome 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.
This is 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.
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.
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”.
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.
“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,” warns Mbali.
“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.”