Hundreds of elderly people in Cape Town have lost their life-savings in a get-rich-quick pyramid scheme, which crashed with R15-million of investors' money.
The pyramid scheme was run by the now-defunct CDP Financial Services, which was part of the nationwide Sempri Financial Services. Only R25 000 has been recovered by the commercial crime unit in Pretoria.
The financial loss was felt mostly keenly by Cape investors, many of whom used their retrenchment and pension packages.
In one case, a Cape Town pensioner lost up to R900 000 of his savings when the pyramid scheme collapsed.
Police investigator Hugo Wolmerans of the commercial crime unit said the owner of the company, Pieter Nothling, gave himself up to the police and confessed when he realised there was hardly any money left in the bank.
Nothling has appeared briefly in court in Pretoria and his fraud trial has been remanded until April 19. He has been released on bail with a warning to appear in court.
Wolmerans said CDP Financial Services claimed to offer 10 percent to 12 percent monthly interest on investments and set up offices and agencies around the country.
Investors were told their money would be invested in small cash-loan businesses.
Police evidence will allege that the company was paying interest to investors from their own money, while the rest was being banked and used to finance travel and luxury vehicles.
Wolmerans said he had taken more than 300 affidavits from mostly elderly investors in Cape Town who had lost their life savings with CDP Financial Services.
Pensioner Selma Van Wyk of Parow invested about R30 000 in the scheme by borrowing money and selling her paintings. Before the collapse, she had recovered half her money but other family members and friends lost their life-savings, she said.
"Friends of ours were involved in this scheme and they told me about the good interest you get on your money. They lent me money, which I paid back with the 15 percent interest I received for around six months. It went so well, I even sold my paintings. Then suddenly we found there was nothing coming in," she said.
Ian Pilkington, who ran the Western Cape office, said he and his wife Marliese had been employed by the company and did not suspect anything was wrong. The couple has been co-operating fully with the police in the investigation and are under no suspicion, said Wolmerans.
Pilkington said most of the investors came to CDP Financial Services as news of the company spread "by word of mouth".
"We flew up to Gauteng every two months and the books and the audit on paper appeared one hundred percent up to scratch," he said.
Pilkington said he had no idea the monthly interest rate offered on investor's money was too high and it was not "until the bubble burst" that he realised there had been serious problems with the company.
The monthly interest rate offered by his office was 15 percent on investment, he said.
A number of pyramid schemes have been declared illegal over the past few years, and police are mystified about why these risky finance schemes have become very popular in South Africa.
Most revolving finance structures, including pyramid schemes, are currently under investigation by the Business Practices Committee and the authorities have warned the public to avoid being lured into pyramid schemes.
Pyramid schemes rely on recruiting new investors. Each new participant pays for the chance to advance to the top of the pyramid and profit from the payments of others who join later.
"I would like to warn the public that if a person offers you an interest rate per annum of more than 20 percent above the repo rate, you can be sure this is a harmful business practice," said Wolmerans.
Wolmerans said get-rich-quick investment schemes were being run all over the country. Millions of rands were being lost every year by investors who took part in risky pyramid schemes, he said.
The notorious Kubus milk culture scheme was a classic example of the pyramid scheme, as was the Vermaas case in Pretoria. However, a rash of similar schemes has started up in South Africa in the past two years.
"The pyramid scheme is spreading like an epidemic in South Africa and people must be aware that whenever they want to invest their life-savings, they must be sure that people who try to perform the actions of a bank must be registered with the Reserve Bank.
"The Reserve Bank would never refuse to assist people if they enquire about a financial scheme," Wolmerans said.