The Bank of Namibia has declared Karatbars International, an e-commerce company that apparently 'specialises' in the sale of small gold bars and gift items in gold bullion, a pyramid scheme.
Following investigations into the business practice, the bank found that it is not sustainable without the continuous recruitment of new participants who are eligible to pay a joining fee, which is in violation of section 55A of the Banking Institutions Act of 1998.
Kazembire Zemburuka Deputy Director of Corporate Communications at the central bank said that the business practice does not have tangible products for sale to prospective members or affiliates, except for the small gold embedded card.
"The fees paid for the small gold embedded card is used to render legitimacy to the business practice. However, the real attraction of new participants to Karatbars is not the purchase of the gold card, but the desire to earn money through the introduction of new members to the business practice," Zemburuka said.
Thus, the bank advised promoters and participants of Karatbars to stop conducting such business activities, further advising them to refrain from recruiting new members on the promise of earning a commission for recruiting new members to the business.
"Should Karatbars and its promoters wish to continue with the sale of gold embedded cards and gold related products, then such products should be sold directly to customers. The products should also be the primary source of income, that is, the commission should be earned based on the products sold, and not on the recruitment of new members as is currently the case," Zemburuka said.