With the high rise in unemployment, South Africans have decided to fight hunger through entrepreneurship and joining trending business ideas in the promise of high income. Sometimes they fall into a trap of an MLM scheme without even knowing. Before you even think you are bigger than the system, this scheme will land right on your doorstep without you even realizing it. It can start with a family member, a neighbour, or a friend who promises a life-changing opportunity where you will end up in a Zoom call or a room full of enthusiastic members calling each other “leaders.”
It seems like there are already thousands of South Africans in urban areas who have fallen for this “massive fast income opportunity.” Even though the ideas sound lucrative, many people wonder how real this is or if it’s just another MLM scheme. Here are the warning signs and what to avoid.
No. 1 Warning Sign
In every business, the product line or the service becomes the main topic. If you sell soaps, then that is the main focus; if you are giving out carpet cleaning services, then carpet owners will come for cleaning services, and that is how every business works. Yet when it comes to MLM, the people are never upfront about what their business is about unless they link words like “uplines,” “downlines,” “business centres,” “levels,” “recruitment,” “duplication,” or “network.” That should be your first red flag when talking to a person offering you a business “opportunity”
They also make sure to mention things like
- Recruiting certain number of people
- Incentives/money you will receive before you even start selling to people
- Unrealistic amount of money you will get for just recruiting people
The first red flag about MLM is receiving money for recruiting people, yet you have not sold anything.
South African MLM Companies That Are Trending
You will find legal operating companies in South Africa that are not total scams, yet they operate with the MLM model, in which their earning structure makes it highly impossible for a regular human being to benefit from.
1. The most popular MLM model in South Africa is Forever Living
Forever Living sells aloe vera products, yet you make more money by recruiting other people to buy start-up packages than actually selling the products.
2. Globally Popular: Herbalife
Herbalife is popularly known for selling weight-loss shakes, pills, and merchandise. Everyone is an Herbalife distributor so much so that the people who buy packages for reselling end up being the ones using them.
3. The Oldest Worldwide MLM Scheme: Amway
Amway sells household products, cleaning products, and vitamin pills, but the distributors make money through recruiting rather than selling. When the distributors are asked how much they make a month, there is never a clear answer; instead, they will turn it into a recruitment pitch.
Signs Of MLM Recruitment
A real-life scenario would be being invited to a meeting where everyone is being hyped up, with the presenter showing a slide show of success stories of people selling the same products, living luxurious lives, driving fancy cars, and living in big houses. They will have unrealistic targets like making R60 000 just from working from home, yet they can’t give straight answers to questions like:
- How much products is sold monthly to reach that target
- How much profit each product makes
- Expected profit after expenses
When asked these questions, the answer is diverted to recruiting people for you to make money. “Just bring 2 people to cash in on your first profits.” MLM focuses on showing dreams instead of numbers like other businesses.
Reasons Why MLMs Continue being Popular in South Africa
Any unemployed youth, stay-at-home parents, and low-income workers would find this attractive because they sell financial independence dreams.
Anybody struggling financially would immediately be interested when slogans like “Be your own boss,” “Fire your employer,” and “Build generational wealth” popped up because financial opportunities in South Africa are already limited, and this sounds like a perfect solution.
As much as the businesses sound lucrative, it is proven that 90% of MLM participants lose money instead, because they end up having stock that nobody buys, yet it’s not a need for them. These structures only benefit the owner of the companies, not the ones at the bottom trying hard to sell the products to make a living.
MLM Is Not Illegal But It Is Also Not Practical
According to South African law, multi-level marketing is legal if there is a real product to sell, you can actually earn from sales, and the recruitment is not the main source of income.
MLM being legal does not mean it’s practical; participants always find it hard to make sales, let alone sustainable profit. Usually participants make money at first through recruitment, but it dries out fast, especially in small villages where everyone is also part of the scheme. Since the structure demands constant recruitment, participants end up fighting to stay active by buying the products for themselves, which means you are now losing money instead of making money.
What To Do To Protect Yourself
When someone invites you to these business meetings or seminars, ask the following:
1. If there is a possibility of making money without recruiting anyone.
- Do not join if the answer is no.
2. Average number of customers they sell to every month
- Leave right away if they keep diverting the question to something else.
3. The actual profit margin on each product
- Reselling MLM products at a good profit is impossible because they are already expensive to buy.
4. If you make more money from recruiting than selling products, then it’s MLM.
5. If they can’t let you leave without pressure when you ask, then it’s a problem.
- Legitimate businesses won’t avoid obvious questions like these, and they won’t even have a problem showing you numbers. If they keep on repeating success and big targets instead of answering real questions, then it’s MLM.
Real Business Opportunities That You Can Explore
Instead of focusing on the overnight success that MLM sells us, you can actually choose from more realistic low-capital business ideas that produce real profits. Some of the low-capital businesses with real clients, real profits, and scaling possibilities are:
- Car wash, rug cleaning
- Residential cleaning
- Catering services from home
- Buying, reselling, and delivery services
- Plate printing
- Tutoring services
- Agro-farming
Conclusion
MLMs cannot be completely labelled as scams, but they are designed in a way that benefits the people at the top of the food chain in the company, whereas the bottom ones are scraping for change. The only people making real money are the company leaders and management, while the ones who were promised success sweat day and night just to make a sale or even recruit others.
Every rand counts in South Africa; do your research before jumping on the dream. If the company relies more on recruiting others than selling the actual product, then run with your few rand and think of a more sustainable business that can give you tangible profits.
