Monday, June 15, 2009

Con schemes: Learn lesson and move on

Sunday Nation 14 June 2009, Page 23

Many people are working themselves into a frenzy over the millions of Kenyans who lost money in the ill-fated pyramid schemes, with allusions to dozens who have committed suicide as a result of the losses they suffered.

It is well and good to commiserate with fellow Kenyans and point the accusing finger at the masterminds of the schemes that resulted in such massive losses, but in the interests of truth and honesty, it must be pointed out that the larger portion of blame lies elsewhere.

Many have blamed the government for a weak regulatory framework that allowed rogue “businessmen” to fleece ignorant citizens of billions of shillings. The Central Bank of Kenya has come under withering attack for allowing the schemes to operate. Even the former Cooperatives minister has been dragged into the fray since some of the schemes were registered as cooperatives.

The truth

Despite the fact that it would be impolitic to speak ill of the millions of Kenyans who are nursing massive losses, it is imperative, however, for us to shine some light on the truth about pyramid schemes. At the height of excitement over the huge profits people were making in these schemes, the CBK published a warning in the media, indicating that these organisations were not authorised to take deposits.

This warning, and many others, were dismissed by most “investors” as a case of sour grapes. Some accused the government of standing in the way of citizens out to make an honest shilling. Even as some of the schemes were collapsing, new ones were springing up under different names.

It was even recently reported in the media that one of the collapsed schemes had resurfaced in a neighbouring country and quietly continued fleecing people there before its inevitable collapse. It is therefore the height of hypocrisy for those of us who took a huge risk and lost to turn around and ask the taxpayer to expend resources in investigations and compensation for those losses. As is oft repeated in business circles, a lot of the investment decisions we make have an element of risk.

The risk

What is never highlighted is that the risk is often a real one, and the majority of risk-takers often lose their investment on their way to success in business. It would be better for those who lost money in the pyramid schemes to dust themselves up, learn the lesson and move on.

Asking the government to get involved in investigations and compensation would imply that those who “invested” earlier in the schemes and made huge profits should also be tracked down and asked to return the money. Those asking the Central Bank to make regulations governing pyramid schemes are probably doing so in the heat of the moment, and obviously not much thought has gone into such demands.

Regulating pyramid schemes would be akin to regulating violent robbery – setting up rules and procedures concerning who may be robbed, how they may be robbed and when the robbery may take place. At this point in time the only thing government should do is to investigate if anyone was involved in wrong-doing and punish them appropriately under the existing legislation.

Dr Lukoye Atwoli is a consultant psychiatrist and lecturer at Moi University’s School of Medicine.

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