15 April 2019

Namibia: Longrich Denies Operating As a Pyramid Scheme

The Chinese company Longrich has denied accusations that it operates as a pyramid scheme after the Bank of Namibia declared its operations illegal.

Longrich, in a statement issued on Saturday, said they intend to establish a branch office and warehouse in Namibia this year.

In a statement last week, the Bank of Namibia said Longrich was an illegal financial scheme and that those promoting the company in the country should cease operations with immediate effect.

The statement issued on 12 April 2019, said the central bank had launched investigations into the scheme following constant public inquiries on the legitimacy of the business activities of Longrich and results indicate that it is illegal.

Though the company aims to sell a variety of household cleaning personal care products and pet care products, Kazembire Zemburuka, the BoN deputy director: corporate communications, said in the statement the company's core activity involves recruitment of members for a fee.

"Participants are encouraged to introduce new members to the scheme to supposedly buy products and earn monetary rewards and progress in status. As a result, the initiating member slows in recruiting, and starts to benefit from the contribution of the new members subsequently joining them," he said.

Zemburuka said this is typical of illegal schemes.

"Typically, illegal financial schemes put in place an elaborate recruitment drive where a person is offered a chance to join a group, programme, team or scheme in which he/she needs to recruit new members to make money and not necessarily through the sales of products to consumers," he said.

It is not mandatory for Longrich members to sell the products, but the marketing strategy focuses on new member recruitment primarily as the source of income.

"Because the business model relies on money paid in by new recruits, the business model is unsustainable and will result in participants, especially those at the bottom of the scheme, losing their money" the statement read.

Longrich promotion videos show that members are asked to pay a minimum of N$1 000 when joining.

Members are thereafter encouraged to recruit more people and are paid a signing fee for signing up new associates who also help them get monetary points.

The more people are signed up under a certain member, the more points the member gets.

Because of this, Zemburuka said the business activities of Longrich, therefore, contravene Section 55A of the Banking Institutions Act, which states that:

"A person or banking institution may not conduct, permit or become involved in the conducting of, or the acceptance or obtaining of money, directly or indirectly from members of the public, as a regular feature of a business practice, with the prospect of any of such members receiving payments or other money-related benefits directly or indirectly."

Zemburuka said should Longrich and its promoters wish to continue with the sale of Longrich products, such products should be sold directly to customers.

Adding that products for sale should also be the primary source of income, which means, the commission should be paid based on the products sold and the business practice should be sustainable without asking new members to join by paying a fee.

In a statement released on Saturday, the company denied breaking the law and that its model allows all members to place orders directly with them at uniform prices.

Ever since its entry into the international market in 2010 and the establishment of its first overseas' branch, the company said, it has opened offices in Asia, Africa, Europe and America.

"So far, Longrich trademarks have been registered in more than 100 countries and regions," the statement said.

According to the company, South Africa and Nigeria play a pivotal role in the African market. Currently, the company said, they are building a free zone smart factory in Lagos where it has invested US$20 million.

"Composed of advanced production facilities, modern office buildings and comfortable living quarters, the factory will come on stream in October 2019 and looks set to become a best-in-class smart factory in Nigeria and Africa," the company claimed.

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