A grocery stokvel has been found to rather be operating as a pyramid scheme, reigning in more than R42 million in membership fees within two months.

Although many South Africans have opted to participate in stokvels as a means of surviving the financial effects of the pandemic, South Africans are advised to ensure that they are indeed participating in a valid and legal stokvel.

In the case of Up Money, the stokvel found guilty of operating as a pyramid scheme, you would become a member of the stokvel if you have paid the once-off membership fee as well as recruited an additional five more members.

However, the National Consumer Commission, Financial Intelligence Centre and Asset Forfeiture Unit approached the High Court for a preservation order against the purported “stokvel”. The National Consumer Tribunal has since found the stokvel guilty and fined them an amount of R1 million.

A pyramid scheme is defined under Section 43 of the Consumer Protection Act. It is essentially a scheme that is largely reliant on obtaining new members and cannot sustain without. Any arrangement where members receive a benefit after having recruited other persons, as opposed to having sold anything, is deemed as a pyramid scheme.

Although our country finds itself in trying times, South Africans are advised to do research into the groups or organisations that they join. Should you be wanting to join a stokvel, ensure that it does not fit the label of a pyramid scheme.