The Gauteng Division of the High Court has granted a preservation order against Women Against Poverty and Hunger (WAPH), an alleged pyramid scheme, for R1 535 040.
WAPH has been promoting a so-called grocery scheme through social media, primarily targeting communities in Katlehong, Gauteng. The scheme requires members of the public to make a once-off payment of R300 in exchange for monthly grocery parcels over 12 months. Additionally, participants are incentivised to recruit new members with a promise of a R1 000 reward.
The groceries promised to participants include a 10kg bag of rice, a 10kg bag of flour, 2kg of sugar, 2 litres of cooking oil, a box of tomatoes, and a head of cabbage. In reality, these items would cost about R5 310 over the year.
After conducting market monitoring, the National Consumer Commission (NCC) launched an investigation into WAPH, uncovering that it was operating as both a multiplication scheme and a pyramid scheme, violating sections 43(2)(a) and 43(4) of the Consumer Protection Act (CPA).
“The NCC found that by offering, promising, or guaranteeing an effective interest of above 1 770%, WAPH is a multiplication scheme. A multiplication scheme is an arrangement that promises or guarantees participants an effective annual interest rate, as calculated in the prescribed manner, that is at least 20% above the repo rate,” the NCC stated.
According to the NCC, WAPH enticed thousands of members with the promise of receiving R5 310 worth of groceries over 12 months in return for a single R300 payment – an implied annual return of 1 670%. This deceptive promise constitutes a multiplication scheme.
Section 43(4) of the CPA defines a pyramid scheme as “an arrangement, agreement, practice or scheme where participants in the scheme receive compensation derived primarily from their respective recruitment of other persons as participants, rather than from the sale of any goods or services”.
“By encouraging participants to recruit more participants for a reward of R1 000 and promising unrealistic returns to participants, WAPH operated a pyramid scheme,” the NCC noted.
Following the investigation by the NCC, the Asset Forfeiture Unit of the National Prosecuting Authority submitted the application for the preservation order, which was granted on 18 September. The frozen amount of R1 535 040 is held across three bank accounts belonging to WAPH and one bank account belonging to its founder and promoter, Kelebogile Precious Phumo.
Despite the preservation order, the NCC cautions consumers to remain vigilant, because the scheme may still be active.
“The NCC’s investigation is still ongoing. Upon concluding this investigation, the NCC may take appropriate enforcement action, including a referral to the National Consumer Tribunal. The perpetrator(s) of the scheme may face an administrative penalty of up to R1 million,” the commission warned.
The NCC’s acting commissioner, Hardin Ratshisusu, expressed concern over the exploitation of vulnerable consumers, emphasising the need for public awareness.
“The CPA prohibits any person from directly or indirectly promoting, joining, entering, or participating in pyramids, multiplication, and related schemes. We urge consumers to be vigilant and avoid schemes that promise unrealistic investment returns. Consumers are reminded that promoting, joining, entering, or participating in these schemes is a contravention of the law, and as such, they may be prosecuted,” Ratshisusu stated.
