Friday 28 March 2014

Financial illiteracy

An epidemic is defined as “a widespread occurrence of an infectious disease” or of an “undesirable phenomenon”.

As a nation we face more than one of them. One of the most undesirable phenomena we have is financial illiteracy. While we can all read, write and do basic maths very few of us are financially literate. Very few of us.

At Consumer Watchdog we’re in a position to comment with some authority. We have a constant flow of people approaching us with money troubles. Some are with store credit and hire purchase, others with bank loans and a great number with financial scams. Almost all of the problems had at least some level of ignorance at their core. The victims aren’t stupid, they just didn’t know how finance works and as a result they end up in deep trouble, some of them losing vast amounts of money.

Store credit and hire purchase are a very good example. Most consumers genuinely don’t understand how buying on credit works. They don’t understand, for instance, what will happen if they fail to regularly make the payments required by the ghastly 2-year hire purchase scheme they signed. They certainly don’t know what happens if their goods are repossessed. They don’t understand that their debt won’t go away after the repossession, that in fact it will almost certainly increase. They often don’t know that the store will sell the goods as second hand for a fraction of their purchase price and will knock that amount off the balance they owe but meanwhile they’ll add on fees, penalties and interest to what’s left. They can end up owing several times more than the original purchase price and they won’t even have a sofa, bed or fridge to console them.

What happens when you buy a P3,000 sofa on a 2-year credit deal but
after a year you lose your job, stop making payments and it's repossessed .
They don’t understand this because nobody told them. The store certainly didn’t.

The same goes for car loans. We heard from a consumer who said:
“I got a car using a car loan. I got retrenched and I approached the bank about my financial position and they advised me to return the car. Five years later they told me that there was a shortfall when they sold the car and while I awaited an explanation they started talking money from my account. They take 500 month end and 800 mid month.”
He wanted to know what could be done. Unfortunately the answer is probably nothing. Even though the bank took way too long to contact him, he probably does still owe them money. The amount they got when they auctioned the car was probably less than the amount he owed them and the loan agreement he signed contained a clause saying they could take money from any account he had with them without asking permission. We might not like it but that’s how banks operate.

Do I need to mention scams like Eurextrade? Hundreds of educated, sophisticated people threw enormous amounts of money into that Ponzi scheme and they’ll never see it again. They might have been smart but they certainly weren’t financially literate. If they had been they would have known that the promised returns of nearly 3% per day were just a fantasy. They would have noticed that Eurextrade never even attempted to explain how such money was being generated. They would have known how Ponzi schemes operate.

The good news is that there are ways of becoming better educated about money. We do our little bit here in Mmegi and in the media but we’re not alone.

NBFIRA, the Non-Bank Financial Institution Regulatory Authority, are doing their best as well.

NBFIRA recently concluded a nationwide financial literacy campaign. They were in colleges, shopping centers, youth centers and on the radio and TV talking about their role but also doing their very best to inform the public about their rights and responsibilities in financial matters.

NBFIRA is a rare thing: a regulator that aggressively regulates. They’ve shown over the last few years that they’re not afraid to do their job and protect the public. You’ll have seen their notices in the press warning the public about insurance companies, brokers and micro-lenders who aren’t playing by the rules. They even had the courage to take on the Eurextrade scheme and various suspicious stock market trading companies with warning notices in the newspapers when they suspected people were being abused.

The industries they regulate also really respect them. I spoke to a senior manager from an insurance company recently and when I mentioned NBFIRA his expression changed immediately. No, he said, he did NOT want to get on the wrong side of NBFIRA.

They’ve also been enormously helpful on every occasion we’ve contacted them with a story of abuse by micro-lenders. Nowadays we don’t even deal with the loan sharks ourselves. We just say “Phone NBFIRA right now” and often within minutes the victim has been invited to see them. Within hours their problem is being resolved and a misbehaving loan shark is being held in chains in NBFIRA’s dungeon.

The bad news is that we have a long way to go before we can consider ourselves a financially literate nation. The good news is that we have a financial services regulator that takes its job seriously and that is doing its best to protect and educate us.

The bad news for NBFIRA is that they need to maintain the momentum they’ve already developed. They’ve achieved a lot but we want more. We want limits on how much interest they can charge for a start. Then they can start work on store credit and hire purchase. That should shake certain stores up a bit!

(They don’t really have a dungeon. But they should.)

The Voice - Consumer's Voice

Dear Consumer’s Voice #1

I kindly request you to assist me with the business of old coal irons. I met people who call themselves agents of a company which buys that item at price of P10,000 each. When I came with those irons, they told me that they are the ones who permitted enter that business premises not me. The business premises is in Phakalane and I’m not sure about the place, and those who called themselves agent refuses with their name. Please if is possible find out for me.

I’m slightly confused by this business. I’ve heard several stories about people claiming to offer vast amounts of money for these old irons. I saw a post recently on Facebook where the guy was offering P15,000 for each one.

Something is very odd here and I’m not sure what it is. Currently the scrap value for cast iron is about $300 per ton, nothing like what is offered by these people. Others told me it’s because they contain uranium, which is simply nonsense. What’s more if you search the web and look at sites like Ebay you can these irons on sale for just a few hundred Pula.

It’s not just something that’s happening in Botswana. I’ve also seen stories in the press from Zimbabwe saying the same thing but they can’t clear up the mystery either.

I suspect that this is either a rumour that is getting out of hand or it’s the beginning of some sort of scam. As yet I’m not sure but if you know please get in touch and let me know.

Dear Consumer’s Voice #2

I don't know if you assist with this kind of issue, but I need help. I applied for a few international jobs so now I got a response a company called Phoenix Consulting and it needs me to send my documentation, certificates and all.

Their email said “You are hereby notified that your qualifications and experience are found suitable for the requirements of our client, CORE OIL AND GAS (UK) LTD. For verification and screening, you are to submit your most recent resume and certificates to their e-mail address above. Please indicate your present salary and your preferred salary.”

Is it wise to send them my details? And is there any way to figure out if it is a real company or not?

This is without a doubt a scam. There are several clues.

Firstly they don’t give a landline number, they only give a UK mobile phone number which is of the type that can be redirected to anywhere in the world. They also give an address in a business area of London that I simply don’t believe. It’s also strange that they use a Yahoo email address, not one from their own domain.

Then there’s the wording of their email. It’s exactly the same as that used on other scams that have occurred before. You can find details of these on the internet.

Perhaps most importantly this is simply not how recruitment companies operate. If they selected you why don’t they seem to know your name?

Finally there’s the big clue. On the web site of the real “Core Oil and Gas” company is a warning:

This is the beginning of a 419 scam. Please don’t throw your money away.

Tuesday 25 March 2014

Karatbars and the Canadians

We reported previously on the Karatbars scam, in particular their preposterous claims that Consumer Watchdog had somehow endorsed them. In fact if they'd asked us I would have given them the finger, not the "thumbs up" their representatives claimed to have received.

Of course the whole thing is a pyramid scheme and a disastrously unwise way to buy gold.

We're not the only ones warning people about this. The Autorité des marchés financiers, the regulator of financial service providers in Quebec, Canada feel the same way.

In a warning they published last Thursday they warned the Québécois about Karatbars saying that:
"With the company's "Affiliates" program, investors can make Internet-based purchases through Karatbars plans and they are encouraged to recruit two other Affiliates. These Affiliates are in turn encouraged to recruit two other Affiliates each, and so on. Affiliates are lured by the possibility of earning large payouts, in particular through a percentage of amounts collected from the Karatbars plans and gold products purchased by referrals."
In other words it's a pyramid scheme.

You have been warned.

Thanks, yet again, to my friend Kasey Chang for the news.

A response from Woolworths

Following our observations on the price markups at Woolworths branches throughout Botswana (which can be up to 97%) we wrote to Woolworths Head Office in South Africa and asked for their comments.

Today we received a response from John Fraser, Divisional Executive: International, which went like this:
“We are aware of customer queries regarding the price of Woolworths products in Botswana.

Woolworths has recently taken over the management of the stores from the franchisee and we will be reviewing all store operations including the pricing model.

Due to the transport costs, there is a slight premium on products in Botswana. We are not aware of products that are marked up by 97% which we do find excessive. We will gladly share our future plans with you once we have reviewed the costs structure in Botswana.

Customers are assured that Woolworths is committed to offering customers quality at good value.”
Which, I suppose, is a start. At least they're responding and talking to us as a nation.

In case they want evidence of the 97% figure, here it is.

What South Africans pay.

What we pay.

Saturday 22 March 2014

The price of hummus at Woolworths in Botswana

I like hummus. I don't like being ripped off.

Woolworths here in Botswana are selling hummus. Clearly labelled is a special offer of "2 for R25.00".

In case you can't find your glasses, here it is closer up.

Excellent. We all love a bargain.

Except it isn't a bargain here in Botswana.

Firstly no price in Pula could be found, only the Rand special offer price. However, when we offered to pay in Rand, we were politely told No. That's a contravention of Section 13 (1) (e) of the Consumer Protection Regulations which says that a
"supplier who offers a commodity or service to a consumer fails to meet minimum standards and specifications if" [...] "the advertisement or representation of a commodity or service is made with the intent not to dispose of the commodity or service as advertised or represented"
If it's priced in Rand then they must sell it in Rand. Simple as that.

However we then get on to the bigger issue. The price they really sell it in Pula.


Let's do the maths. Knock off the 14% VAT South African rate, convert the price to Pula using Thursday's cash exchange rate and then add on our 12% VAT.

Depending on what exchange rate you choose, you get to a Pula price of anything between P18.80 and P20.98.

That's a markup of between 76% and 97%.

Nearly double the price, just for the privilege of buying in Botswana? Are they serious? I think a call to Woolworths in SA is called for, don't you?

Friday 21 March 2014

Superpricing in supermarkets

Last week I reported on a supermarket chain that was charging extraordinary markups on the goods it had imported from South Africa. They made the mistake of leaving the price in Rand on the goods and adding a new price sticker with the Pula price. An item on sale in South Africa for R150 was selling here for P176. Once you take account of the difference rates of VAT in South Africa and the current exchange rate that suggested the stores here in Botswana were marking up the price by almost 40%.

All for the privilege of buying in Botswana.

Frankly it’s a rip-off. Despite their claims that they incurred additional costs transporting their goods all the way here from South Africa the maths simply didn’t work out, particularly as their branches in Namibia weren’t marked up nearly as much.

But it gets worse. Our mystery shoppers were out last week looking at other stores, also ones that were the local outlets of large South African chains. It turns out that a markup of 40% isn’t the extreme, there are others that are much worse.

We found a store, part of a huge South African group with several outlets in Botswana, that was selling a range of cosmetics on specially made shelves that display the prices in Rand for their South African customers but they then manually label each item with the Pula price. We saw a lipstick for sale for R69.95 but labeled for sale here for P79.95. Do the same conversion, adjusting for our lower VAT rate and the current exchange rate and you find that the price should really be just under P53, not just under P80. The markup is 52%.

Another store, part of a South African cosmetics chain, does exactly the same thing, but worse. They were selling mascara that in South Africa is sold for R79.95 but which here in Botswana they’d priced at exactly P100. Get your calculator out and you can work it out for yourself. The price here should really have been just over P60, not P100. That’s a massive markup of 66%, the highest we’ve discovered so far.

We contacted the head offices of each of these stores in South Africa and asked them if they could justify these enormous markups. I confess that I expected them to talk about transport costs, like the first store did. But that didn’t happen.

One assured me that they would contact their
“Gaborone management to address the matter regarding the pricing of items.”
The other told me that they had
“alerted our regional and store managers to the incident and have asked them to check their stock carefully for the discrepancy you highlighted. We’ve also requested that store managers, as well as our suppliers, be more vigilant in checking all product and pricing before displaying in stores going forward.”
They concluded by assuring me that
“the incorrect pricing does not reflect our mark-up or pricing approach in any way.”
Guess what? The prices were changed within days.

So what was happening? Is it possible that the local store owners were just profiteering, just exploiting us? It’s possible. It seems that the head office people might not even have known that the local management were ripping us off.

So here’s a lesson for us all. It’s worth complaining. Companies that care about their reputation will take action if enough people complain, they really will.

The bigger problem with supermarkets isn’t price. It’s food safety.

Over the years we’ve heard a seemingly endless series of scare stories about the way food is treated in supermarkets. We’ve heard of food that’s passing its sell-by date being covered in marinades and spices to cover up the smell of impending putrefaction. We’ve heard of the same food that the management know won’t be able to be sold as raw being cooked and sold to customers for lunch. Once it’s covered in spices it’s much harder, perhaps even impossible, to tell that it’s decaying.

The health risks of this are staggering. If food no longer fit for human consumption isn’t cooked thoroughly it’s likely to make the customer extremely ill, perhaps even kill them.

Even when the supermarket doesn’t serve rotten food their expired products can still end up killing you. We heard a few years ago of a certain supermarket that disposed of its expired goods in large bins behind the store. Each night intruders would sneak into the waste disposal area and steal the expired meat products from the bins and the next morning would sell it to street food vendors operating at the station in Gaborone. Once covered with spices and sauce and cooked for ages nobody would know better, at least not until they spend the next few days either in their bathroom or their nearest hospital.

Even if the food is cooked well enough to kill any pathogens it’s still disgusting to be served food you probably wouldn’t feed to your dog.

Unlike certain restaurants I know, we consumers don’t get the chance to see the food preparation and cooking areas in supermarkets. We can’t see how well, or how badly, they’re treating the food they serve us.

We are therefore forced to trust supermarkets to abide by the laws and regulations put in place to protect us. We’re also forced to trust the authorities with the power to regulate them but let’s face it, they can’t be everywhere all the time.

The fact is that there’s only authority you can trust. Word of mouth. Let’s all start spreading the word when we see poor standards or get ill after eating food from a particular outlet. Let’s protect ourselves as well as our family, friends and neighbours from supermarkets who decide to abuse us.

The Voice - Consumer's Voice

Dear Consumer’s Voice #1
I got a car using a car loan. I got retrenched and I approached the bank about my financial position and they advised me to return the car. Five years later they told me that there was a shortfall when they sold the car and while I awaited an explanation they started taking money from my account. They take 500 month end and 800 mid month. I need a quick resolution.

Clearly this bank needs to organize themselves a bit better. Taking five years to chase you for money you might owe them isn’t good enough. We’ll talk to them about that on your behalf.

Meanwhile I suspect that there’s not much that be done about the money you probably owe them. When a car is repossessed it’s then sold at auction to attempt to recover the money the bank is owed. However it’s often the case that the amount they raise isn’t enough to completely pay off the outstanding balance you owe, often leaving an amount still to pay. That seems to be what they’re deducting.

Normally in these situations the bank will write you a letter explaining the process and describing the amounts still owed. They should also make it clear how much they got when they sold the car. I assume you don’t remember getting such a letter?

With your permission we’ll contact the bank and ask them to explain everything clearly to you.

Dear Consumer’s Voice #2

I’m suffering abuse by a loan shark. My story is, I was a student at university and I borrowed P1,000 from a certain cash loan during my sponsorship period but when my contracts finished I no longer had a source of money and my ATM card was with them. I had to hussle for job until I was employed as a Special Constable. Now the cash loan have engaged lawyers saying that I have neglected to pay them and they claim I have accumulated more interests and it’s now more than P2,000 and they have summonsed me. I’m waiting for a hearing at court now. What can I do?

Firstly micro-lenders are strictly forbidden from taking a customer’s ATM card or Omang. They’ll be in big trouble because of that. Secondly they’re dangerously close to breaking the “in duplum” rule which says that when you settle a debt the interest charged may not exceed the principal amount that you borrowed.

What can you do? You can call NBFIRA on 3102595 immediately and ask them to intervene.

Financial literacy and NBFIRA

You may have seen in the last couple of weeks that NBFIRA, the Non-Bank Financial Institutions Regulatory Authority, has been out in the community and throughout the media doing their best to improve our financial literacy.

I like NBFIRA a lot. They’re a regulator that isn’t afraid to regulate. If ever you have a problem with a micro-lender (loan shark is a better term in this case) you can call NBFIRA and they’ll do their best to help you out. They can’t cancel legitimate debts but they can ensure that lenders at least abide by the rules.

However, even though they’ve done a fantastic job of starting to clear up the micro-lending industry there’s still a long way to go. We need limits put on the interest rates micro-lenders can charge. We need their annual report to list all the micro-lenders that have been approved in the last year and those who were closed down. We need a list of approved micro-lenders available on their website 24/7. We need them to take on store credit and hire purchase agreements. We need a lot from them.

The good news is that I think they’ve got the determination, the skills and the powers to do all of this. Let’s help them get there.

Thursday 20 March 2014

"Million Minds Grow" - a challenge for you

Here's a challenge for you.

Visit this web site, "Million Minds Grow" and see how many warning signs you can find suggesting it's not all it claims to be?

I'll give you a few to start with.

They're a property investment company:

Our purpose is to provide Africans with the knowledge and opportunity to OWN their own MALLS and SHOPPING CENTERS, and create their own portfolio of income generating commercial properties for their generations.
This is an opportunity to invest in commercial properties with minimum amount from R500.
You receive 30% of dividends every month for the period of 10 years.
Admin fee of R500 is required to all who like to be owners of our commercial properties.
But they also offer lots of other things:

These are Benefits our members enjoy, TO JOIN Million Minds Grow, download Membership Application form here
50% Hotel Discounts
30% Travel Discounts
50% Discounts on Elite Coaching Program.
30% Discounts on registration on Commercial Property Courses
ITC Credit help, get out of Credit Bureau in less than 6 month, stop being blacklisted
Finish paying your bond in 5 to 7 years
Commercial Property Investment Opportunity, own shares in the Malls and Shopping Centers
Business Opportunity
And they're a range of other things, including legal advisors:
Attend free seminars about the following topics:
Personal money management
Advises on registration of new companies and tax laws regarding businesses
Stop RENTING and Start Owning properties, pay your BOND in 5 to 7 years
ITC Credit Help
Personal Development
Health and Medical Advices
Legal Advices
And then there are even more benefits, and some seem familiar:
Once Member Fills Levels 1, The Same Member Can Open Another Business Opportunity Transaction Account
You Can Earn Unlimited Amounts By Opening Up To Three Business Opportunity Transaction Accounts
A Member Can Become His/Her Own Sponsor From The Second And Third Account
Commissions Are Deposited On The 15Th Of Every Month.
Then it begins to get a lot clearer.

3 Step formula for success

JOIN Million Minds Grow by paying R350 once and enjoy benefits
 our services with maximum 5 people (the wheel of 5)
 for R250 pm
If you share with others our services, you earn from your first sale

So all you need to do to earn over R100,000 per month is recruit over FIFTEEN THOUSAND people. Are there really that many gullible people in your neighbourhood?

Saturday 15 March 2014

Are supermarkets "super"?

How safe are supermarkets?

Given that most of us buy our food from supermarkets, should we feel safe? Should we feel comfortable trusting our money, our health, even our lives to the people who run them? Or should we be worried?

The bad news is that we should be worried.

Following a number of questions and complaints from consumers we took a close look at supermarkets. The first issue raised was labeling. Customers have suspected for a long time that a particular store was not playing fair with the prices they charged for goods they’d imported from South Africa.
For instance one item they sold was priced at P176.80. However, next to the Pula price label was another label showing that in South Africa it sold for a mere R150. The arithmetic is surprising. Take off the 14% South African VAT, convert the price to Pula using today’s exchange rate and then add on our 12% VAT and you certainly don’t get to P176.80. Not even close. In fact you get to just P127.04. The store are effectively adding close to P50 on top, a markup of almost 40%, just for the privilege of buying their goods in Botswana.

Of course the store does its best to defend this markup. They say they add 7% on top for the added costs of transportation of perishable goods and 4% for non-perishable items. But that just doesn’t work out. The numbers aren’t right. They can’t explain the extra 40% they charge.

We’ve looked at other items they sell and the story is always the same. They are adding on anything from 25-40% without being able to explain it.

The obvious question to ask is whether other stores from South Africa are doing the same? We spoke to a one, a major retailer, who confirmed that yes, they also mark up their goods to reflect the increased transportation costs they incur. But they told us they add just 1% to the prices. Not 40%. We checked and it’s true.

So why is the first store adding so much? The reason is actually very simple. They like making lots of money from us and we let them do it.

There is a more worrying tendency among supermarkets. Carelessness about hygiene and food safety.

We’ve had numerous complaints from readers about the quality of food and the way it’s being stored in a variety of supermarkets. We’ve heard of moldy fruit and vegetables on sale, a number of products that have passed their use-by date and even some that are within their sell-by period but which turn out to be decomposing when opened. So again we went out to see for ourselves if this was the case and it was really very easy to find cases of rules and regulations being flouted.

We found supermarkets with expired goods still on display, supposedly “fresh” produce that clearly was rotten and a range of products that, contrary to the rules, had no Use-by or Sell-by dates. This wasn’t just in one supermarket, this was in a number of them throughout Gaborone. It was also in a range of “qualities” of store. Some were the more basic stores, others were the higher end of the range stores. It seems to be a universal failure.

One thing that was worrying was a comment one supermarket manager made about labeling of goods. He told us that he actively tries to sell local produce wherever possible and for that he deserves praise. We all know, don’t we, that buying local is best? So long as the produce is as good as the imported alternatives buying local is a comprehensively good thing to do. The transportation costs are lower, the goods are likely to be fresher and, above all, it supports the endeavours of our friends and neighbours. It’s the environmentally sensible, most economical and patriotic thing to do. We should all be buying local, so long as the quality is good enough.

Unfortunately this store manager told us that the biggest problem he faced was getting local fruit and vegetable producers to label their produce. For some peculiar reason they refuse to do this, despite it being a legal requirement to do with packaged goods. The store manager’s dilemma was whether he should buy local or obey the law on labeling. Either way he can’t win.

My position is simple. Much as I want us to support local industry, obeying the law comes first, particularly when it concerns our health and welfare.

We’re not going to stop the investigation of supermarkets. The issue is serious enough that we won’t give up. Stores are going to face a choice. Start obeying the laws on labeling and food safety or see your business decline.

The sad news is that supermarkets rely, to some extent, on our apathy. Just like very few of us change banks because of the hassle of filling in forms, supplying endless documents and offering blood samples very few of us will change our supermarket preferences. I’m as guilty of this as anyone else, rarely visit anything other than the two stores in the shopping centre I pass on my way home.

However until we start voting with our feet, our wallets and purses the banks and the supermarkets aren’t going to change.

Unless… There is another approach that might have an effect. Shame.

I’m afraid that if we don’t get suitable responses from the supermarkets that we find are breaking the law then they’re going to become famous, but not in the way they might hope. Famous for trying to poison us.

Is that the sort of fame they want?

The Voice - Consumer's Voice

Dear Consumer’s Voice #1

I bought a Toyota Rav 4 from a car importer last year in June but up to now the car has not been delivered. They have a representative in Gaborone who sent me a bill of lading and I got the information that the ship offloaded it in Namibia on the 12th September 2013. The supplier then sent me an email on the 17th saying the truck had left to pick the cars and that I will receive my car in a few days. Then there were delays related to clearance papers of other cars, but mine was ok with documents.

On the 31st October 2013, I went to meet the agent in Gaborone and ask him that since there has been too much delay I would like to go pick the car myself and that I would like to have a refund for my transport fee to Gaborone since I had paid for delivery at Gaborone, but he couldn't give me the details I needed for the car to be picked. I then gave up and waited for the truck to arrive thinking it wont take long.

In December they said the truck is coming but it never came. On the 6th January I also checked the supplier through email, but they said there was a mix up with other cars documents, which delayed the clearance. I went to see the police last week and they called my supplier and he repeated the same thing about mix up of documents. It has been too long for me and I just don’t know what to do. What can I do, more so that I took a loan to buy that car and I have been serving it since I ordered the car?

I’m very sorry for the trouble you’ve had with this car importer. The bad news is that many companies in the car import business are run by crooks. We’ve heard of several companies who do exactly the same thing as this company has done to you. They take your money and then give you nothing but a series of lies about where your car is. Many times there’s simply is no car at all.

I suggest that you go back to the police and update them on your situation. You need to lay a charge of cheating against this guy. Let them use their powers to punish this guy. He deserves it.

Dear Consumer’s Voice #2

On 26th February my wife ordered electronic goods from a company in China. She knew that these are replicas of the original ones, including two iPads for $70 each, two Acer laptops for $85 each, a Blackberry Q10 for $100 and a HTC phone for $50.

My wife then sent the money using Western Union to a man called David Li and received a tracking number for DHL so she could track you parcel on the DHL website. She tried to do that but it showed the number was invalid.

We then spoke to DHL and they tried to trace the package but they said there was no such parcel. My wife is just crying and totally depressed by the situation, it really is appalling to get such kind of dealings from someone from so far and does not deliver what he said he would.

I can understand your frustration as well as your wife’s feelings. I’m afraid that the plain truth is that you’ve been scammed. Obviously the fake DHL tracking number is a big clue but the biggest is that “David Li” wanted payment using Western Union. Real businesses don’t use Western Union for payment. Real, trustworthy businesses use bank accounts.

There is another issue. What were you thinking, trying to buy “replicas”? There is no such thing as a replica iPad, laptop or cellphone, they’re just fakes. Even if this wasn’t a scam you still would have been buying illegal products and it wouldn’t have been possible to help you if anything had gone wrong.

Please don’t buy fake goods, you’re just facilitating crime.

Sunday 9 March 2014

The maths of Karatbars

We've mentioned the Karatbars pyramid scheme before, in particular the claim by their local distributors that they have been "approved" or been given "a thumbs up" by Consumer Watchdog, which is A LIE.

Karatbars is a scheme based on selling tiny quantities of gold.

Gold seems attractive to most of us because of its historical significance. We all know about gold and its importance but Karatbars exploits our ignorance about gold prices.

They suggest on their web site that they'll buy gold at €48.91 per gram.

Which is curious.

My bank today says that the price of gold is about $1,349 per ounce. Note that this is typically a "troy ounce" which is roughly 31g.

Let's do the maths. The price at which Karatbars is offering gold of €48.91 per gram equates to €1,516 per troy ounce. Convert that to US$ at an exchange rate of about 1.4 and you get a US$ price of about $2,122 per ounce, compared to the real price of $1,349 per ounce.
As others have said, buying gold from Karatbars is a remarkably expensive way to buy gold particularly as the price of gold has dropped 15% in the last year.

But what do you expect from a pyramid scheme?

Friday 7 March 2014

Want to see the pyramids?

I’ve never been to Egypt so I’ve never seen the pyramids. But I have seen a number of pyramid schemes and you don’t need to travel far to see them too.

One of the first we encountered called itself “Success University”. Like many pyramid schemes, they claimed to have a product that they sold. In this case it was a range of mass-produced DVDs containing supposedly “motivational” materials. In fact these were nothing of any value, the real business they were selling was recruitment. Rather than selling the worthless DVDs your real task as a new recruit was simply to recruit other people beneath you and then to encourage them to recruit others beneath them. And so on as you build a pyramid beneath you with each level funneling money upwards.

Of course, as with all pyramid schemes, this doesn't happen easily. There simply aren't enough gullible and naive people around to recruit, certainly not enough to form multiple levels beneath you. We sent people undercover to several Success University presentations and the story was always the same: Join the scheme and you can be rich. They even went so far as to promise specific earnings, saying that you could earn $50,000 per year (currently about half a million Pula) from the scheme. Lies of course.

One of my biggest learning experiences with pyramid schemes came after we first started warning people about Success University. They don’t take kindly to criticism. I arrived at our office early one morning to find four men waiting at the door. They were, they said, from Success University Head Office in South Africa and they were going to speak to me. Fortunately they were polite, even when they said that what we had been saying about their scheme was untrue and they were going to sue us. What, I asked, had we said that was untrue? Could they justify their promises of riches? Were their products of any real value? Were they actually entitled to call themselves a “university”?


Nothing. I think the secret recordings we had made in their presentations helped persuade them that we had evidence on our side as well as some understanding of how pyramid schemes work. They were also somewhat subdued following rulings by the Bank of Namibia that they were an illegal pyramid scheme and that Namibians should steer clear of them if they valued their money. They went away from our office without the apology, the retractions and the retreat they’d expected from us.

Within weeks Success University disappeared from Botswana.

A few months later a new pyramid scheme appeared, this one lasted a lot longer and did a lot more damage. TVI Express was founded by an Indian man called Tarun Trikha and again the key part of this scheme was the recruitment of other people but they also claimed to have a product to sell. Their "product" was a range of holiday and travel discount vouchers. Apparently these got you massive discounts on flights, hotel stays and car hire. Despite what you might suspect, this was actually true. Yes, you could get these discounts but only if you chose from a VERY limited number of resorts, airlines and hire companies, none of which operated in Botswana. In fact I could only find one holiday resort in South Africa was associated with the scheme.

But there was another factor that they neglected to mention and which the victims recruited failed to notice. A discount voucher is not a product. It's just a price reduction against a product that you still have to buy for real money. Then add in the other fact that nobody ever has to buy discounts from hotels, airlines and car hire firms. Almost all of them offer discounts for free. A little internet searching will get you all sorts of discounts for nothing.

So TVI Express had no actual product and the riches it offered its victims were all based on recruiting other people beneath them. A pyramid scheme.

TVI Express lasted longer than most pyramid schemes but inevitably it finally collapsed when they ran out of people to recruit and when more and more potential victims knew about them already.

Then another came along. This was called WorldVentures and was yet another holiday discount scheme. However the curious thing that emerged was that WorldVentures had taken recently control of Success University. All the poor fools recruiting others into a business supposedly selling motivational DVDs had to switch to selling discount vouchers. Doesn’t that hint that the “products” are entirely irrelevant to the business they are trying to run? It’s a bit like your company changing one day from selling second-hand cars to selling funeral policies. It would be unthinkable in a real business.

But pyramid schemes aren’t real businesses. They’re scams. Yes, they’re persuasive, yes they promise riches and fabulous lifestyles and yes they have very smart-talking recruiters. But they’re still scams that will take your money and that will never give it back to you.

WorldVentures is one of the longer-lasting pyramid schemes but it won’t be around for much longer. I’ve known of them for over 4 years and they’re still quietly active here in Botswana but the net is closing in on them elsewhere. The Gaming Board in Norway has recently announced that following a lengthy investigation they are certain that WorldVentures is a pyramid scheme. Their main criteria for deciding this was simple. 95% of all the money paid out to recruits in Norway was for the recruitment of other people, not from actually selling things.

The fact that regulators around the world are closing in on a scheme is usually a sign that it will collapse soon, just like Success University did. The bad news is that you can rest assured that within weeks they’ll be back again using a different name and a different “product”. Pyramid schemes are as old and tenacious as the pyramids in Egypt.

The Voice - Consumer's Voice

Dear Consumer’s Voice #1

I took a loan in November 2012 which I was to pay for a year and I did just that. The last deduction was in December 2013. I called them on December 17th to enquire about the status of my account and I was told even though I paid the loan in full my account shows a balance of about P5,000 so I had to write a letter to them so that they close the account which I did. I followed them up beginning of January to find out whether it was closed and they told me they were moving offices they’ll do it on 14th January

A lady called me to tell me that they submitted the papers for deductions to salaries late so I should come and pay my monthly installment by hand. I told her I had paid my debt and had talked to someone who promised to close the account then she said she would follow it up and get back to me but she never did. I called them on 14th February to enquire again then I was told that they had already deducted my debt for the month so I should bring my payslip to the office after getting it. I did that on Friday 22nd and they promised by the next day I would have my refund in full. Until now I haven’t gotten anything and they took everything from my salary and I got nothing at all and I’ve got to newborns to take care of. What can I do?

It sounds to me that they’ve comprehensively failed to offer services “with reasonable care and skill” as required by Section 15 (1) (a) of the Consumer Protection Regulations. If what you say is correct then something has gone very wrong with their record-keeping and you deserve much better than this.

You urgently need to get in touch with the company again and demand a full statement outlining everything you’ve paid them and what they’ve credited to your account. You can then compare that with your records to see where things have gone wrong. If you send us their details we’ll get in touch with them as well to encourage them to help you.

Dear Consumer’s Voice #2

I bought a pressure cooker at a store in Tsabong in November 2013 at P999 cash price. I told them that I want to pay in three months which is normal treated as cash price. I paid a deposit of P200 then an installment of P300 in December and P150 in January 2014. Now I asked for my balance as I want to clear it. I was told I owe P1,050. I threated to report them and they changed and say I have to pay P648.

I still don't agree with this balance because in actual figures 200 + 300 + 150 = 650. Therefore the balance is P349.

Now they fail to explain why they add extra P300. There can’t be any extra charge because I personal collected my pressure cooker myself so there is no delivery cost.

You’re right, it is common practice for stores not to charge anything extra if you buy something over such a short period of time. However the problem is that even though this has been agreed face to face, consumers are often asked to sign a conventional hire purchase agreement that includes interest charges. They then find themselves expected to pay the store a lot more than they thought they had agreed to.

I assume you still have the agreement you signed in November last year? You need to check what that actually said. Meanwhile we’ll get in touch with the store and see if we can’t get them to see reason.

Saturday 1 March 2014

Adapt or die (or Embracing technological change)

Alvin Toffler, described by Wikipedia as a “writer and futurist, known for his works discussing the digital revolution, communication revolution and technological singularity” once said that “the illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn and relearn”.

He has a point.

In 2014, if you don’t understand new science and technology you’re really at a huge disadvantage. If you can’t understand the basic facts about things like diet, sexual health and vaccination you and your family are at enormous risk. If you don’t understand the basics of climate change, economic globalization and modern communication technology your career, your wealth and your quality of life are going to be limited.

If you don’t keep up with progress in science and technology you really are going to be at a huge disadvantage.

The same goes for companies offering service to consumers like you and me.

Whether they like it or not (and most of them don’t) more and more of their customers are using new mechanisms for telling each other about the services we receive. At the basic level they’re using text messages to tell each other about their experiences. The more advanced and better equipped are emailing each other. An impressive proportion are now using Whatsapp, Twitter and Facebook to share their experiences.

I admit that Facebook is the social media facility I’m most familiar with so I’ll just comment on that. Ask someone else about Twitter.

The effect of Facebook has been astonishing, even in a small community like ours in Botswana. There are several Botswana-based Facebook groups with thousands of members, including ours, that allow any member to post almost anything they want and every member of that group can be immediately alerted to the post. A company that has transgressed and offended a customer can be the subject of ridicule and humiliation, whether correctly or not, within moments across the globe.

The danger is not just from the comments, it can be just as much from the reaction companies display to negative comments.

In the past few months we’ve seen a manager of a security company respond to complaints about his company’s descending levels of service by insisting that complaints can only be dealt with by following the official company complaints procedure and that Facebook comments weren’t an acceptable way of raising concerns. The reaction to his comments from the entire community was simple. Sorry pal, that’s not your decision to make, we’ll complain however we see fit. Live with it.

A few weeks later a DJ in a hotel responded to complaint on Facebook about the service at the hotel’s trendy, pseudo-chic bar where he worked by claiming the people who attended the bar were “classy” whereas their competitor’s bar was largely patronized by “hookers”. You can imagine the firestorm this ignited. Even though he deleted his comments as soon as the reaction began that was too late. People had already taken screenshots of his comments and seconds later he was more famous than he cared to be. It took all the efforts of the hotel management and their PR company to put out that fire.

The hotel, even though the situation wasn’t their fault, learned the hard way that Facebook can be a very dangerous weapon.

Even on our Facebook group things can often get a little heated. We’ve had a variety of comments about service providers who consumers have described as “useless”, “incompetent” and “negligent”. Our policy is simple. Words like that can only be used when there is clear evidence that they are true. Until then we remove such comments and either encourage the original poster to use more measured language or to send us the comments privately. Or just perhaps calm down a bit.

We’ve even seen a couple of occasions when suppliers have seen these comments, become angry and threatened both us and the author with legal action, forgetting that over-reaction is ten times worse than taking no action at all, particularly when the posts have been removed.

The problem is that people forget that Facebook is the technological equivalent of standing on top of a tall building shouting through a loudhailer while being broadcast live (and being recorded) on TV, radio and then printed in the newspapers.

As they say on police programs, anything you say on Facebook may be recorded and later used against you.

Before you get the impression that I’m against social media, that’s not true. I think that facilities like Facebook are a critical part of the future of customer service. They just have to be understood and used wisely by both consumers and suppliers. Just like historical technological innovations like call centers offered new ways of satisfying customers, they have to be used correctly if they’re to be useful.

I’d go one stage further. I believe that the simple truth is that companies that embrace new ideas like the social are more likely to succeed, those that reject it are destined for failure.

Whether you like it or not it’s true. You might not like the new social media, you might be skeptical, even dismissive of things like Facebook, Twitter and Whatsapp but that’s a bit like my grandparents who were skeptical about television, my parents who were skeptical about satellite and cable TV and my contemporaries who are skeptical about the internet and iPads. You’re welcome to live in the past, in the technological Dark Ages if you wish, but the rest of the world will move on without you. Progress is heartless, it doesn’t care a bit about the people it leaves behind. Meanwhile those of us who accept it and who perhaps even welcome change will be richer and happier because of it.