Things to avoid

The list of things consumers should avoid is a long one. Let’s begin with hire purchase.

Hire purchase is one of the worst ways to buy anything. The only thing I can think of that’s worse is borrowing money from a money-lender in order to buy things. But hire purchase comes a close second.

The biggest problem is not actually that buying something on HP typically doubles the price you pay. It’s not even that when you buy something on HP you don’t actually get to own it until you’ve made the very last payment. Until that point the sofa, fridge or laptop you thought you owned still actually belongs to the store and the moment they feel like it (if you’re a moment behind with your payments) they can come over to your house and take their products away again. The problem isn’t even that you’ll still owe them all the money.

The real problem is that if you sign a hire purchase agreement you are almost certainly unprotected by the law. The Hire Purchase Act, which was originally passed in 1961, says that the protections offered by the Act only apply to agreements where the total credit price is under P4,000. I recently looked at the advertisements from stores in the weekend newspapers and out of 67 items offered for sale on HP, only 4 of them were for items less than that limit. So the Act almost certainly doesn’t apply to you if you’re unwise enough to sign a hire purchase agreement.

So you should avoid hire purchase agreements.

You should also avoid foreign exchange or currency trading. In fact Forex trading has the potential to ruin your finances. A reader contacted us recently asking about one particular web site that offers to multiply (“leverage” is the technical term) your investment by up to 200 times, effectively giving you millions of Pula to trade with. What they neglect to tell their customers is that it works both ways. Yes, if you can correctly predict the fluctuations in the exchange rates between currencies you might make some money. They conveniently forget to tell you that it also means you can lose your entire “investment” in moments if the exchange rates go the other way. Within minutes of searching online I found stories of people who had lost over half a million Pula in moments trading Forex.

Another reader also asked us about a web site calling itself “23Traders”. He said that “they phone me everyday to invest on them, there is a guy who normally phones me telling me to deposit up to 10 000 US dollars so that I can make good profit”. Anyone who is that keen has an agenda they’re not telling you about. It’s curious that this company, who claim to be registered in Anguilla (an island in the Caribbean with a population half that of Ramotswa) and who claim to have a subsidiary in London are calling this reader from a number in Manchester.

The simple truth about Forex trading is that it’s a business full of suspicious characters. It’s a business that should be left entirely to the experts and that means experts such as banks and professional investment companies, not mere mortals like you and me.

You should avoid Forex trading unless you own a bank.

You should also most certainly avoid anything shaped like a pyramid. At the moment there are at least three that I know of that are actively recruiting people in Botswana. WorldVentures has been doing the rounds for a few years, promising fantastic holidays in exotic places but they aren’t entirely honest about this. None of this is actually for free. You have to pay to join the pyramid and then all you get are discounted holidays. You still have to buy the holidays, just at a slightly cheaper price.

What pyramid schemes like WorldVentures really sell is the promise of income from recruiting multiple layers of people beneath you, each of whom pays to join and then starts a flow of money up the pyramid, some of which stays with you as it passes by. Of course this rarely happens because it’s almost impossible to recruit the number of people you need to achieve the targets the scheme sets you and the figures produced by WorldVentures prove this. More than three quarters of all recruits never make a single thebe. Of those who do make some money, more than 80% make less than P100 each month and that’s income, not profit.

Consider this. 84% of all the money flowing through WorldVentures is taken by the top 0.8%.

Then there’s EmGoldex, who claim to be selling small quantities of gold. However that is itself suspicious. Since 2012 the price of gold has been steadily dropping and shows no signs of increasing. This is NOT the time to be buying gold.

In fact what they really want is for you to recruit people beneath you and for them to recruit others beneath them.

Authorities around the world have already issued warnings about EmGoldex. In their home country, the Philippines, the powers-that-be the warned people to avoid the scheme and the claims that they could make profits of 500-1,000%. In Colombia EmGoldex was told to immediately cease operations. In October last year the Secretary of State in Massachusetts, USA filed fraud charges against the people operating EmGoldex.

Another reader contacted us saying that a scheme called Four Corners Alliance is “doing the rounds about making loads of money”. Yes, you guessed it, they’re another pyramid scheme offering riches by selling worthless books on financial literacy.

Do I really need to say you should avoid any pyramid-shaped business?