Chris Walker is not SA’s only financial magician

A look at some local investment opportunities that offer “impossible” returns.

JOHANNESBURG – Chris Walker is not South Africa’s only financial magician. There are others promising returns that are too good to be true.

Walker is the man behind Defencex, or Net Income Solutions, a scheme that offered returns of 2% a day, paid every day except for Mondays or the day after a public holiday. With 12 public holidays and 52 Mondays a year, that’s a return of 602% a year, uncompounded – much higher than the 7% you can earn on a government bond.

As amazing as this return sounds, it is not unique to Defencex. In fact, Walker’s scheme is remarkably similar to many other so-called high yield investment programmes (HYIPs) that can be found all round the world. These are Ponzi schemes that offer unsustainable returns. They work for a while, but eventually collapse, leaving the majority of ‘investors’ out of pocket.

There are also some home-grown schemes that offer similar returns.

Before listing these schemes, it is important to note that returns offered by Defencex and other HYIPs are simply not realistic. Last year the country’s best-performing unit trust returned ‘only’ 40.7%, and it made no promises upfront.

Any investment that promises a return even a few percentage points above government bonds should be treated with suspicion. It is actually illegal to promise a return 20 percentage points higher than the repo rate, which is currently 5%. Thus any scheme promising a return of 25% or above is automatically illegal.

Below we list four local schemes that seem too good to be true. If you know of any others, please add them in the comments section below or e-mail Julius@moneyweb.co.za.

None of these schemes are registered with the Financial Services Board. If you invest with them, be prepared to lose your money. If you are lucky enough to make money, and the scheme is later found to be illegal, you might be asked to repay your investment and profits.

Zantech Trading

Zantech Trading is a Durban-based business with satellite offices in Sandton, Newcastle and Port Shepstone. Its website invites investors to “become a shareholder at Zantech Trading, and earn 25% in dividends monthly for a period of 12 months.” That’s a return of 300% a year.

According to CIPC records, Zantech is a private company that was registered last year. It has one director, 30-year-old Sifiso Sibiya.

Moneyweb called Zantech’s Durban offices. The staff members there had heard of Sibiya but were not aware that he was a director. The office manager told Moneyweb that money received from investors is sent to “portfolio managers” who trade in commodities such as sugar, maize etc.

Motsoto’s Trading and Investment

This scheme operates out of Springs. Judging by reports that have reached Moneyweb, it has raked in millions from the local population. The scheme allegedly offers 30% monthly for three months, whereafter it returns investor’s capital. This works out to 360% a year.

Of the four schemes, Motsoto’s Trading is closest to an FSB licence. It was allocated financial services provider (FSP) number 44044 but failed to submit an application form. Its number has since been cancelled. However, a search for Motsoto’s Trading on the FSB’s website gives little indication that its FSP number has been cancelled. The status merely notes that a number has been allocated.

Contacted by Moneyweb, a Motsoto trading representative confirmed the 30%-a-month offer. She says the returns are generated by trading shares on the JSE.

Motsoto Trading and Investment is a private company that was registered last year. It has one director, 36-year-old Lucky Motsoto. Motsoto was not available when contacted by Moneyweb.

Financial Democracy

Another enterprising scheme, Financial Democracy Skills Development and Training is a private company with ‘branches’ in Groblersdal, Jane Furse, Middelburg, Monsterlus and Witbank. Members invest R7 500 and receive a return of R2 200 every month for six months. The money is deposited in an account at Absa. The number is 406496674.

Financial Democracy was registered in 2006. It has two directors: 45-year-old Jabulane Johannes Skosana and 40-year-old Johanna Skosana.

Contacted by Moneyweb, a member of the Groblersdal branch confirmed the returns on offer. She denied Financial Democracy is a Ponzi or pyramid scheme and claimed that returns were generated through a medicinal drink.

Weekly Cash Flow

Based in Polokwane, Weekly Cash Flow invites members to buy R5 000 worth of “stock” and receive R2 200 a month for 12 months. Members are strongly encouraged to recruit others to the scheme. The website states: “If you reach Level-3 that is 64 people in 5 weeks you qualify for a company car.” The homepage congratulates a member on becoming a BMW driver.

Weekly Cash Flow is a close corporation with two active members: Lucky Mayane and Sebotsa Ratau. Mayane did not return a request for comment.

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