Shebeen Owners Investment Scams

Protect yourself and your hard-earned money

We are all familiar with the old English proverb, “A fool and his money are soon parted.” We also know that the road to riches is paved with hard work, dedication and diligence with our savings – so why do so many of us still fall for the all-too-familiar getrich-quick scheme? Each year, thousands of people lose millions of rands in investment scams. The advancement in digital communications and the internet make these kinds of scams more common and harder to identify, making it easy to be the next victim. But knowing how to recognise these investment scams is the first step in protecting yourself and your money.

How to recognise an investment scam

• Investing in any product that offers an attractively high return with a minimum level of risk to capital is a major indicator that you should run for the hills and avoid it. • Upfront payment needed: no reputable or legitimate investment company will force you to make a payment upfront, without first giving you the necessary time required to peruse the investment opportunity. • An unsolicited request for your private information: these requests can either come via phone or in an email. Check the company details and phone them directly to verify these details. Remember that a glossy brochure or website is not evidence that an offer is a good investment or even a real deal.

Ponzi schemes on the rise in South Africa

Ponzi schemes have been increasing in South Africa due to the ailing economy and financial pressures placed on consumers, making them vulnerable and easy to prey on. According to the Bank Supervision Department Annual Report for 2016, the South African Reserve Bank (SARB) investigated 27 money scams in 2016 and resolved 63 investigations from previous years. To know how to avoid being scammed through a Ponzi scheme, you have to understand how it works.

What exactly is a Ponzi scheme?

Named after the person who first made these schemes infamous, Charles Ponzi, these schemes are operated by tricksters and seemingly legitimate businesses that will invite you to invest in a scheme or business. The operator promises you unrealistically large returns on your investment in a short period of time. These schemes depend on enticing a steady flow of investors, whose money goes to pay off promises made to earlier investors. Any such scheme will inevitably collapse, as it is impossible to find new investors to keep the scheme going.

Ponzi scheme red flags to look out for:

• Be wary of schemes that offer returns that are unrealistically higher than those offered by authorised financial services providers, such as reputable banks. • Be wary of schemes that are not registered as authorised financial service providers. Ask for their financial services provider (FSP) number and verify the number with the

Financial Services Board. • Be wary of companies that aren’t willing to explain exactly where your money is invested and share proof of your investment in the form of an investment policy document. When choosing a moneymaking opportunity, always do your homework thoroughly. Take your time and remember that you didn’t save your money overnight – it took time. Free advice is available from registered financial advisors. Speak to your bank manager or financial advisor about the best investment products for your needs. If you want to realise reasonable financial returns from your investments, you must be patient. Always remember the golden rule of investing: if it sounds too good to be true, it probably is.

BUSINESS FINANCE RENT TO OWN - THE PROS AND CONS AND MANAGEMENT

Have you ever been in a situation where your fridge stopped working or your TV took its last breath and you didn’t have the cash to repair or replace the item? What if that fridge belonged in your spaza shop and kept all your perishable items fresh, or that TV was the lifeblood of your tavern and your patrons relied on it to watch their favourite sports teams? We have all been in that stressful situation at least once, but modern-day appliances and big-ticket items are not meant to last forever. In situations like this, these items are more need-to-haves than nice-to-haves, and we certainly cannot afford to allow our businesses to operate without them. The “rent to own” option of purchasing items has gained strength in South Africa over recent years, and allows us the option to purchase these much-needed items in spite of being short of cash and having not budgeted for repairs and replacements. Let’s take a closer look at the pros and cons of rent to own. You be the judge if this really is the right option for you.

What is rent to own?

Rent to own is a month-to-month contract that allows you to rent a wide range of household appliances, furniture, electronics and even big-ticket items for your tavern or spaza shop, with the option to take ownership of the goods after the predetermined rental period.

When should you consider rent to own?

The rent to own option will work in your favour if you know that your income will increase in the near future. It will also benefit you if you want your tavern or spaza shop to have certain big-ticket items, but you cannot afford to purchase them all at once.

The advantages of rent to own

better for your financial situation at the time. Also, you can test the item over a few months and see if it is really suited to your needs, before making a final purchase. If, at any time, the item stops working or is faulty, you can return it to the rental company, which saves you time and money. If you fulfil your rental agreement by making all your monthly payments, you will end up owning the item when your contract ends.

Taverns transformed into Castle Kingdoms

The disadvantages of rent to own

You can easily end up paying two to three times the cost of what the very same item would cost you had you bought it upfront in the traditional way. Also, rent to own companies make their money from charging interest on items, and you should be wary of the interest rate per item before you make your final decision. If you are late on one of your monthly payments, you might be charged a late payment fee to continue with your original rental agreement.

Before you sign on the dotted line, make sure of the following:

• Protect yourself and your business by making sure that you only deal with reputable companies when looking for the best rent to own option to suit your pocket and your individual needs. A reputable company will offer you: » financial flexibility: the option to cancel your agreement and return the items at any time » peace of mind: look for added benefits of maintenance and risk cover being included in your contract for the duration of the rental period. • Make sure that the terms and conditions of the contract are understood by both parties – even the smallest details need to be in writing. Most importantly, be completely sure that you are able to afford the monthly instalment for the duration of the time stipulated in your contract.