THE FINANCIAL troubles which people have borne around the world due to the outbreak of Covid-19 has been unprecedented.
Along the line in South Africa, somewhere after the salary cuts and just before the Unemployment Insurance Fund announced that it would make its last relief payment in June, a hint of desperation may have sunk in, fuelling the “WhatsApp gifting group”, or pyramid scheme.
The latest trend in “gifting groups” has been making the rounds on social media and which requires the victims to front a certain amount of cash in order to buy into the club.
Here’s how it works:
* To enter the group, you will need to be invited by a friend, family member or even some random stranger.
* The group consists of 11 members.
* Member number one is the person receiving the joining fee of R1 000, while the four previous members mentor the new entrants on how the process works.
* The new six members brought into the group will then pay their joining fee of R1 000 to member one.
* Once the group has filled all 11 positions, member one will receive R1 000 from members 6 to 11.
* The group will then split into two groups and member one exits the group with his bag of R6 000.
The term “stokvel”, which was originally coined in the early 19th century by English settlers, means a savings or investment society to which members regularly contribute an agreed amount and from which they receive a lump sum payment.
A conventional stokvel exists between a group of friends who generally have close contact with one another in order to ensure that nobody heads for the hills.
However, the latest WhatsApp “stokvel” exists solely online, with no paper trail or supporting documentation to state its validity, making it an expensive game of hot potato.
While participants may be excited over the newfound financial opportunity, it is important to reflect on history before buying in.
In mid-2017 to early 2018, a similar scheme surfaced under the alias “My life change 247” (MLC247).
The concept, which was deemed illegal in Namibia because it was in breach of the Banking Institution Act, used a similar modus operandi.
“Based on the bank’s assessment, the business model of MLC247 is not sustainable and may result in the loss of public funds. The bank would like to appeal to members of the public to refrain from participating in the promotion of activities of MLC247,” said the Bank of Namibia’s deputy director for corporate communications, Kazembire Zemburuka.
