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The 19.5% Cambist lie

Users have been duped.

CAPE TOWN – An analysis by Moneyweb has revealed that Cambist’s famous 19.5% return promise does not even stand up to its own illustrations. Users will not see 19.5% annual gains, even if Cambist delivers the stated returns on the contracts for sale on its platform.

Cambist’s marketing may have created the expectation that users would see a 19.5% annual gain on the full capital amount they put into the platform. This is far from the case.

Moneyweb scrutinised a number of Cambist contracts and discovered that the gain on the original capital for any of them was not more than 11%. Most provided gains in the range between 9.5% and 10.5%. These figures have been independently verified.

To understand this, it is necessary to explain the way Cambist works. Users buy active contracts on the platform at a set amount. In return, they are promised monthly return “instalments” over a set number of months, and a “total profit”, which is what they ultimately get back over and above their initial capital outlay. These figures are fixed from the start.

The below table shows how this works for five Cambist contracts. The top two are provided as examples by Cambist itself on its website, and the bottom three are contracts that were all up for sale on the Cambist platform on 3 December.

Cambist contract examples

Price

Instalment

Term (months)

Total repayment

Estimated profit*

R 5,247.56

R 621.65

9.12

R 5,664.74

R 417.18

R 4,789.11

R 338.59

16.13

R 5,462.09

R 672.98

R 3,580.04

R 417.75

9.18

R 3,834.95

R 257.65

R 6,830.00

R 423.24

18.62

R 7,880.73

R 1,051.73

R 2,003.05

R 321.13

6.54

R 2,100.19

R 99.95

*Note: The profit does not actually match the total repayments minus the price in some cases, but these are the figures as supplied on the Cambist website and we have kept them as they are stated.

 

Since users are given an illustration of the final gain before they even buy the contract, it is a simple matter to work out what gain that actually represents in annual terms. It is simply a case of calculating the annualised profit and expressing that as a percentage of the price. That is done using the following formula:  ([Profit / Term * 12] / Price) * 100.

If one applies that to the contracts in the above table, this is what is revealed:

 

Cambist contracts annualised gains

Price

Term

Profit

Gain

R 5,247.56

9.12

R 417.18

10.46%

R 4,789.11

16.13

R 672.98

10.45%

R 3,580.04

9.18

R 257.65

9.41%

R 6,830.00

18.62

R 1,051.73

9.92%

R 2,003.05

6.54

R 99.95

9.16%

 
However, the fact is that Cambist does not actually offer the 19.5% on the total capital amount. Although many users might have expected this to be the case, its website does clearly state that it only pays the 19.5% on a user’s “active capital”.

To understand what that means, we need to return to the way Cambist structures its repayments. Every month’s instalment includes a portion that is profit, but the rest is part of the user’s initial capital being returned. So the capital amount on which Cambist is promising the 19.5% actually decreases every month.

As an example, if a user buys a contract for R2 000, Cambist’s  first monthly instalment includes one month’s profit and the rest will be a capital repayment. If for argument’s sake that capital repayment is R200, then the profit for month two is calculated on R2 000 minus R200, in other words R1 800.

That is partly why the annualised profit on the total capital amount is always far below 19.5%. The products are structured in such a way that the capital decreases far quicker than profits are paid, so that in the end users earn their gains on almost nothing.

It also means that the only way for users to actually secure the highest interest rate is to keep buying new contracts with every repayment they receive. Their full capital only earns the promised rate if it is always kept in the system.

Which of course means that it is impossible to actually realise that return. Because as soon as a user takes any money out, the capital amount falls and so the ultimate gain drops too.

That, however, is not the biggest problem. Because an analysis of Cambist’s contracts by Moneyweb and verified by an independent accountant has failed to find a single one that actually pays at a rate of 19.5%, even using the platform’s “active capital” principle.

This gain is more complicated to calculate, but this spreadsheet illustrates the month-to-month instalments on the same five contracts above. In each case the the profit portion is separated from the capital amount so that the new monthly “active capital” can be calculated.

In all cases, profit calculated at 19.5% does not satisfy the final equation. In every instance, the profit would be higher than that actually stated in the initial contract offer, which means that the capital amount would not be paid back by the end of the term.

In order to make the equation work, the percentage gain on every one of them has to be reduced.  The highest return Moneyweb could find was 18.9316%, which was in an example provided by Cambist itself, and the lowest was just 15.593%, found on a contract that was being sold on the platform last week.

In the last three cases, it is actually impossible to balance the table exactly. No rate of return would actually result in the profit indicated.

Simply put, Cambist’s users have been duped. On the front page of the Cambist online platform, users are told that they will “earn a minimum of 19.5% return” on their active funds. The platform’s terms and conditions also state that “Cambist guarantees the interest rate of return as displayed on the Cambist Online Platform at the time of purchase”. All contracts on the platform display a “gain” of 19.5%.

Moneyweb’s analysis shows that this is quite simply false. The 19.5% gain does not exist.

Lise Oerlemans the manager of Cambist was given the opportunity to respond to this article and the calculated returns, however she had not done so by the deadline offered to her.

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