THE lure of easy pickings has seen thousands of Bulawayo residents losing their money to pyramid schemes, which have been collapsing in recent weeks.
Report by Blondie Ndebele
Beauty Sibanda, a teacher at Mathe Primary School in Tsholotsho, said she invested a small amount with Perfect Shot Investments, signing a contract for a simple interest, meaning she would receive interest every month.
“I joined this scheme in December and I was getting something every month,” she explained. “I did not get my April payment, but I do not worry much because I did not put much money anyway.”
But while Sibanda said she was not worried about losing her money, thousands others are fuming and have resorted to courts or grabbing property, in the hope of salvaging their investments.
“I am very disappointed. I saw Geozing collapsing, but I never thought that this company would fall apart before I could get all my money,” an angry Perfect Shot investor who declined to be identified said.
“What is the use of being given only $200 when I had put over $1 000? We are not even certain whether these people would still be here on the 20th (of May).”
The angry investor called for police intervention, describing the actions of Perfect Shot as fraudulent.
After days of besieging Perfect Shot, a collapsed pyramid scheme, investors were asked to register when they invested their money and how much it was.
The company would then pay $200 to the investors, before paying back the full money they would have invested.
Perfect Shot has since put a notice at its entrance, saying it was winding down operations and would be sending people messages on when they could collect their investments.
The collapse of Perfect Shot follows hard on the heels of the failure of Geozing Pawn Brokers, whose director George Zingane was on Thursday convicted of contravening the Banking Act.
Another company reportedly running a pyramid scheme, Perandori, is said to have collapsed, but officials at the company say reports about its collapse were untrue.
Pyramid schemes, which were a common feature in the 1990s as people sought to get rich quickly, have resurfaced and as before, more people are losing their money.
But it is the collapse of Geozing that set the alarm bells ringing, indicating that the schemes were facing collapse.
Geozing was offering interest rates of up to 30% per month and in an economy where banks are offering between zero and 4% in interest per year, the pyramid scheme seemed like a lucrative investment.
A pyramid scheme is one where investors are promised lucrative short-term interest. However, it is usually the first depositors who benefit.
The pyramid scheme owners usually mislead unsophisticated people by promising guaranteed high rewards.
For their survival, the schemes must maintain a steady stream of deposits from new investors, who unknowingly take their place at the bottom row of the pyramid and whose returns are not guaranteed.
Pyramid schemes hardly have real assets or investments and sell no actual products, payments to those at the top depend on the recruitment of investors.
Due to legal loopholes, it is difficult to prove that such schemes are unlawful and that the intention was to deceive, which prosecutors have to prove in court.
In a recent interview, Bulawayo lawyer Matshobana Ncube confirmed that pyramid scheme owners might not be personally liable for the investors’ losses since they made an agreement with the company and not his person.
“I understand that the agreement was made between the company and the individuals,” he said. “To recover their money, the company should have assets that can be attached and sold, but if it does not then they are in trouble.”
Ncube said the only hope for investors was to prove that the companies running pyramid schemes had been formed with the intention of deceiving people.
“I fear, however, that with the number of investors who put their money in the schemes, many will not be able to recover the money,” he said.
He said investors should shoulder part of the blame, as there was no way one could make an investment that would reap 35% interest per month in Zimbabwe.
In the 1990s, many Bulawayo residents lost their homes and other property after they had invested in a scheme that promised handsome rewards.