Angella Johnson
THOUSANDS of people in Mpumalanga and the Western Cape have lost millions of rands following the collapse this week of a Cape Town pyramid investment scheme which targeted born-again Christians.
Liquidators are to be appointed to deal with the Two H Group: they estimate that more than R100-million is involved. A police docket has been opened for a missing director.
It had seemed such a sweet deal when Valerie (who does not want her surname revealed) first heard about the latest pyramid-saving scheme. So good that she was initially suspicious. But when others in her church in Nelspruit started to brag about the interest they were earning, the 66-year-old widow decided to invest her R50 000 life-savings.
Then, just more thana week ago, she received a phone-call from a fellow investor to say the deal had gone sour. The pyramid had crumbled, along with her dream of buying a small retirement flat.
“It’s like a bad dream. This thing was based on trust because most of us involved are Christians and we went into it via recommendations from friends. Now it seems that it might have been just a confidence trick and we are all going to lose everything we put in.”
Valerie only joined the get-rich quick scheme in August after overcoming her initial reluctance. It was so popular that she had to ask “nicely, nicely” to get on the bottom tier.
The Cape company claimed it could virtually double people’s money within a few months by investing in meat and poultry. The deal was: buy the produce from the United States and re-sell it throughout Africa for a healthy profit.
Investors were offered 5% interest weekly which they could either withdraw or leave to mature. For more than a year the scheme ticked over nicely. Money poured into the province, encouraging massive consumer spending on such luxuries as expensive sports cars, foreign holidays and even an aeroplane or two.
“Everything appeared to have been checked out by accountants and business people – even bank managers got involved,” said Valerie.
At first she invested only a few thousand rands, but as the weekly statements showed how much money was being earned, she raised the stake. As did other investors – including the cream of Nelspruit’s wealthy and professional classes.
The Two H scheme did appear more secure and sophisticated than the usual pyramid proposals which, with their promise of hefty returns for just a few rands, have been popular in South Africa over the years. The problem is that they fail soon after reaching saturation point. So it is only those who get in early who scoop up the cash bonuses projected.
A number of these groups are being scrutinised by the Department of Trade and Industry for pursuing harmful business practices.
Sun Multi Serve was one such scheme. It promised returns of 3 000% for an initial investment of just R550, but R34-million vanished from the R96-million invested before it was shut down by the Reserve Bank last December.
Pyramid businesses originated in the US and the idea has travelled the world, moving on as public confidence dries up in the face of its flaws – and criminal prosecutions. South African watchdog groups have warned the public to avoid getting hooked.
Too late for Stephen, a 29-year-old accountant in Mpumalanga, who has lost R200 000 – much of it borrowed. He is crying fraud.
It looks like he will now have to sell his luxury car and house. “I was getting a premium of around R6 000 tax free every week. It was fantastic!”
Such was his confidence in the project that Stephen introduced about 20 new investors, many of whom re-mortgaged their homes to raise the money. “I’m ashamed that I got friends and colleagues who trusted me involved in what now appears to have been fraud,” he said.
The pyramid crashed after Hansie Potgieter, one of the directors, disappeared leaving behind a suicide note and millions of rands unaccounted for. Some of the money was allegedly used to buy property in the Cape which liquidators are hoping to sell.
Louis Swart, a Nelspruit businessman and evangelist, was introduced to the scheme by the other director, Hennie van der Walt, and claimed to have profited handsomely as one of the first investors. He in turn acted as an agent introducing other Christians.
“Hennie is as shocked about this as the rest of us. No one was forced to get involved, they took a chance and many made big money. A few will have to bite the dust, but they should have known that making money can be a risky business,” Swart said.
Valerie is equally philosophical: “I suppose people will say we were victims of our own greed, but I’m not going to waste my energy being upset. I only wanted to make enough money to move from a rented flat into my own home, what was the harm in that?”