Another Ponzi scheme has come crashing down around the ears
of hundreds of “investors”. Unsurprisingly.
In its recent reincarnation poor Ugandans were lured into a
scheme where they bought computer tablets. This entitled them to a monthly pay
off, $100, and a Christmas bonus for their children. In this case the
unsuspecting investors -cum -victims were being given a share certificate.
Meaning you accept to take the part of the risk in this project. Which was
inadvertently reducing their burden of risk and liability for the issuing
company. I leave that area to smart lawyers to handle.
As is always the case
with these things, it’s not quite clear where the pay-out will come from. A
common characteristic of these schemes is that you might get initial payments
before you starting missing a few and the stories begin.
The promoters of these schemes or scams often use the money
from the latest entrants to pay the older “investors” until one of two things
happen. Either the rate of new entrants cannot support the payments to all the
older members or the promoter disappears into thin air with all the
collections. It never ends well.
These schemes, also known as pyramid schemes, rope in many
people very quickly, more so now with social media, and last no more than a few
months from start to collapse, depending on the level of sophistication.
They are attractive because they promise huge returns
quickly. The promoters feed on our human weakness for quick, painless success.
What pains me about these Ponzi schemes is that the authorities
know about them well before they go burst – the Capital Markets Authority
warned against this current scheme months ago. The police knew about their
shenanigans too. And yet no one moves to stop them. And often times the
promoters get away with a slap on the wrist – if at all, after separating poor
Ugandans from their hard-earned cash. If my memory serves me right, the central
Bank of Uganda has warned the public about similar schemes in the past, but the
public collective memory is very short.
Under such circumstances clearly, we are our own keepers.
And the only way to guard against falling prey to these charlatans is to gain
knowledge, improve our financial literacy.
I cannot relate to people who say “Money things give me
headache” or “I cannot manage those money things”. When I hear that I want to
shake sense into people who say that.
When you decide that for yourself you are giving up a key responsibility.
A responsibility which helps put food on your table and secures the roof over your
head and ensure your kids go to school.
This is how financial success happens.
You work long and hard at an endeavour that gives you an
income. You save some of that income. You learn how to invest your savings,
often by starting a business. It takes years to make any business a success. If
and when you do make your business a success, you become financially
successful.
And how do you recognise financial success? When your
business or investments, not your job, can take care of you and your family’s
needs many times over.
I have over simplified of course to drive home the point
.
But , if someone is
interesting you in a scheme that does not follow this route to financial
success, run a mile away. It’s cheaper. As all Ponzi victims will tell you.
Another way to detect a Ponzi scheme is to look at the
return on your money the promoters are promising, on an annual basis.
The safest investment -with almost zero associated risk- is
the government treasury bills or bonds, which give in recent years up to 15
percent a year.
So, if for instance they promise to give you 20 percent on
your money every month or more than triple your money in a year you should
smell a rat.
If the deal was so
good wouldn’t we all be in it? The banks, the insurance companies and even me?
Don’t be fooled. If a deal is too good to be true, it
normally is too good to be true.
(AUGUST 2018)
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