Part I: The Triumph of Pyramid Schemes

by Leselihub Staff

Today Lipalesa is waiting but she is used to waiting. However, unlike previous times, Lipalesa is smiling. She is smiling because she has requested help for M50, 000, an amount of money only imagined. Lipalesa cheerfully explains that today she will realize what she calls “The American Dream”. 

What is the American Dream? The American Dream is a prevalent concept founded on the ideals of liberty, opportunity and equality. The age-old notion assumes availability of equal opportunity to any American, allowing aspirations and goals to be achieved irrespective of socio-economic background. In modern times, the enduring concept has undergone a paradigm shift to transcend beyond the Land of Liberty. Today’s narrative of equal opportunity submits the Basotho Dream, the Nigerian Dream and the Zambian Dream.

The African era highlighted by the cycle of poverty is gradually fading and images of famine in sub-Saharan Africa have vanished. Today, South Africans speak of economic emancipation, Nigerians speak of prospering Nollywood and Basotho speak of chelete(money). Technology is transforming economic and financial dynamics in ways formerly inconceivable. The emergence of online pyramid schemes, affectionately known as “mutual aid social networks” has permanently revolutionized financial schemes. 

Founded on the principle of robbing Thabo to pay Thabang, a pyramid scheme is defined as a fraudulent investment scheme in which early participants are paid out of money received from later recruits. It is hierarchical and premised on new recruits providing the funding or “returns” to earlier investors. The absence of products, unsustainably high returns, and referral bonuses are familiar characteristics of pyramid schemes. 

Presently, online pyramid schemes exist in abundance; at the helm, an infamous Russian investor and swindler who was convicted of fraud in Russia. His ingenious financial system, replicated by a plethora of emerging financial swindlers, is on a mission to combat the world’s unjust financial system and it is succeeding. In the prevailing economic system, the rich are becoming richer and the poor are becoming poorer. The internet is a new vehicle facilitating the rapid spread of pyramid schemes. 

Enthusiasts of pyramid schemes often allude to unjust financial institutions such as banks and the lack of pecuniary opportunities in the economy for their involvement in pyramid schemes. Lipalesa explains that the pursuit of prospering in the corporate world proved an uphill battle. Although she possessed a sound business idea, sources of start-up capital were limited. Her visits to various banks and relevant business and financial institutions were met with cynicism, intimidation and outright disrespect. “I was told of security, collateral, and things I just did not comprehend. I felt like my hands were tied; no one was willing to listen to my business idea. I gave up on that dream and sought employment; after a thousand applications and not a single interview, I gave up.” 

Her story is not unfamiliar. Regrettably, it is indicative of Lesotho’s harsh economic situation, which has strengthened a familiar reassuring statement: “Ho tla loka (everything will be okay).” In response, the common Mosotho questions “Neng (when)?” Lipalesa protests: “my parents’ generation waited a lifetime for opportunities. They are still waiting. My dreams of succeeding are the same as my parents’ dreams, because nothing has changed.” Lost hope in Lesotho’s economic system and the mental trauma of waiting, have created a sense of urgency for financial freedom. It is evident that pyramid schemes afford the common man an opportunity to dream, prosper and live. This is not to assert the notion that pyramid schemes are solely beneficial to the underdogs, but they offer the forgotten a chance to buy cars, build homes and further their education. Is the spread of wealth not an affair to be celebrated?

Notwithstanding the merits of participating in a pyramid scheme, hierarchical programs are often characterized by high levels of risk. However, Italian Renaissance historian, politician, diplomat, philosopher, and writer, Niccolò Machiavelli rightly submitted that “Never was anything great achieved without danger.” The laws of life embrace justice, righteousness, respect, patience, and the like but life itself is not straightforward; it is uncertain, prejudiced and oftentimes unsympathetic. Although short-lived and imperfect, pyramid schemes contribute to redressing life’s injustices. How long should underserved Basotho observe from the sidelines as their counterparts continue to amass wealth? How many applications should they submit prior to buckling under? How many sustainable businesses can they establish amidst Lesotho’s hostile economic circumstances? 

Today, individuals like Lipalesa can dream. Pyramid schemes have cast a shadow of suspicion on the competence of legitimate financial institutions to spread wealth. Pyramid schemes are imperfect but the lamentable truth is that while rich men have dreams, poor men die to make them come true. To concur with Eldridge Cleaver, “If you are not a part of the solution, you are a part of the problem.” The underprivileged have waited on the sidelines for lifetimes and the present educate-and-shutdown approach falls short in tackling Lesotho’s economic disparities. African governments ought to combat the prominence of pyramid schemes through opportunity-promotion strategies. The highest wisdom of any individual, institution or government is to act. Regrettably one cannot shy away from the fact that in Lesotho, there is an ominous mismatch between obligations and the trickling down of money. 

A prominent financial analyst observed that in pyramid schemes, the cheated and the deceiver engage in a delicate ballet leading to their mutual downfall. The analyst firmly protested against the injustice and deception of pyramid schemes. However, Lesotho’s financial system appears more unjust, cruel and unforgiving than a pyramid scheme. As Lipalesa concludes “I don’t mind losing money to make money but in real life it is difficult to even imagine someday succeeding. It is almost like you cannot gain from the normal system unless you are already rich.” 

It is evident that Basotho have lost hope in legitimate institutions and methods. They would rather settle for the intricate psychological ploys offered by pyramid schemes than those offered by politicians. Unfortunately, when the system has failed the majority and fortune does not favor the hardworking, patience plays second fiddle. It is not that Basotho lack understanding of what pyramid schemes are but the truth is, most Basotho are simply tired of waiting and are choosing the road less traveled. Do all pyramid schemes eventually collapse? Rightly so. For the time being, let us bask in the monetary advancement of our brothers and sisters because if we are not our brother's keeper, at least let us not be his executioner.

  • April 22, 2016, 6:37 p.m.

Leselihub Staff

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