Pyramid scheme spotting quiz
A friend says: "Join for R1,500, then get three people to join under you and you make your money back." What is the main way you earn?
Not sure what to try yet?
In about 7 minutes, the free test matches ways to earn to your skills, time, data and budget.
Who it is for
It is for anyone who has been invited to join a business opportunity by a friend, family member or stranger online, and for people who want to protect others. It suits students, parents, church and community groups, and anyone who has seen a scheme promising easy money.
It takes about three minutes and every answer is explained.
How it works
Each question is based on the kinds of pitches people get on WhatsApp, Facebook and at family events. Pick an answer and you get a short explanation, including what the Consumer Protection Act says.
The core test is simple: does the money come mainly from selling real products to real customers, or from recruiting people who pay to join? Section 43 of the Act bans pyramid schemes, chain letter schemes and multiplication schemes (promising returns far above the repo rate), and it is an offence to promote them or knowingly join.
Worked example
"Pay R500, recruit two people, and move up the list until you get R4,000." That is a chain letter scheme: new members pay, the money flows up the levels, and you only get paid if enough people join after you.
Most people who join schemes like this lose their money, because the number of new recruits needed doubles at every level and quickly runs out.
Tips before you rely on it
- Ask what share of the company's sales goes to customers who are not distributors. If nobody knows, be careful.
- Add up the starter kit, monthly minimum order, events and training before you count any income.
- Ask to see an income disclosure: what the typical member earns after costs, not what the top earners say.
- Be wary of pressure to recruit family and friends, or to decide today.
Questions people ask
Is MLM legal in South Africa?
Direct selling of real products is legal. A scheme where pay comes mainly from recruitment is a pyramid scheme and illegal under section 43 of the Consumer Protection Act.
What is the difference between a stokvel and a pyramid scheme?
A stokvel rotates a fixed group's own savings. A pyramid or chain letter needs new people to keep joining and paying so earlier members can be paid.
How do I report a pyramid scheme?
Report it to the National Consumer Commission. If it involves investments or trading, also report it to the FSCA.
I already joined. What now?
Stop paying in and do not recruit others. Keep records of what you paid and to whom, and report it.
Are all direct selling companies pyramid schemes?
No. Direct selling of real products to real customers is legal. The problem is when income depends mainly on recruiting people who pay to join.
Sources (2)
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Earn Path is not a financial services provider and does not give financial advice. This tool gives estimates for your own planning.