ICT

Cell C piggybacks on network marketing company

It's a thin line between pyramid schemes and network marketing

Cell C is netting about 500 subscribers a day through a new network marketing company, Money Talk.

In less than two months Money Talk says it has managed to get 15 000 people to join their scheme, which makes them Cell C subscribers.

Head of communications at Cell C, Shenanda Janse van Rensburg says that according to their records Money Talk has only signed up over 144 customers and sold 1284 starter packs.

She referred Moneyweb to Money Talk for any further information.

Money Talk was started by business partners Manzo Maphumulo, who also runs an IT company, and Linda Ndlovu who has a background in network marketing having worked for Amway, Clientele Life and Herbal Life.

The two said that they adopted the concept from an American company but would not name the company, saying that is a trade secret.

Maphumulo said that they chose Cell C because it had the lowest subscriber base and while they would have also liked to work with Virgin Mobile, they were turned down.

"Cell C was willing to work with us. We are basically just distributors of airtime and that's where our partnership ends," he said.

Janse van Rensburg confirmed this saying Money Talk signed up as a "SeCkhona channel distributor" and is responsible for selling and distributing Cell C products and services.

But how does the scheme work?

• For R2 950, clients get a camera cell phone with R500 Cell C airtime, R10 000 funeral cover and membership of a scheme that offers discounts of 50% on selected hotels
• Money Talk clients are also offered a "business opportunity" in which they can earn commission through referrals. Similar systems are employed by other multi-level marketing schemes such as Clientele Life, Amway and Holiday Club/Business Club.
• For every new client introduced, you earn R500. And for every three clients they introduce you earn R200. The money is paid to you 70% in cash and 30% in Cell C airtime.

Maphumulo claims the phone is worth over R4 000, but many clients might not be convinced of this. He says Money Talk has exclusive importing rights for the relatively unknown Malaysian brand, M Mobile. He hopes it will become a household name as clients recognise its quality.

These days a recognised brand camera phone sells for under R1000, so it is questionable how much value prospective clients will see in Money Talk's offer, if they ignore the "business opportunity" and buy it just for the products.

"There should be actual value added benefits for the consumer. For an example you can use Justine's and Avroy Shlain cosmetics. There is more value to the consumer than what is actually paid out in commissions," Andre Prakke a forensics accountant said.

"In this case there is really no benefit and there is actually a cost disadvantage to the consumer. Any consumer can purchase what they are advancing as benefits cheaper over the counter and save money," he said.

Prakke went on to say that he would say what Money Talk is selling is to the disadvantage of the consumer and can be determined a harmful business practice.

Prakke says that a business venture that meets all three of the following descriptions is an illegal pyramid scheme:

• You must make an investment (any money paid to enter the venture, it may also be called a membership fee or bookkeeping charge) to get the right to recruit others into the program
• When you recruit another person into the program, you receive what the law calls "consideration". That usually means money, but can be anything of value
• Your new recruits must make an investment to get the right recruit, and they receive "consideration" for getting others to join.

Multi-level marketing schemes often join an industry body called the Direct Selling Association (DSA). Ndlovu says that Money Talk has applied to be a member of the DSA, but that its operations will be scrutinised for a year before it is granted membership.

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