Marketing strategy rekindles fear of pyramid schemes

Growing use of cosmetics and food supplements is fuelling a boom for multi-level marketing companies amid growing fears about the operation of such firms in the wake of the collapse of several pyramid schemes.

While the firms maintain they are different from the pyramid schemes which collapsed recently swallowing billions of shillings of members’ savings, analysts have been sceptical about their operations.

Last month, Finance Minister Uhuru Kenyatta outlawed operations of pyramid schemes including non-genuine multi-level marketing operations.

Mr Kenyatta, in his budget speech, triggered debate on what exactly constitutes a genuine multi-level marketing firm as there is no specific law regulating their operations.

“In order to stop these evil schemes from defrauding Kenyans in future, I propose to amend the penal code to outlaw the operations of pyramid schemes including non-genuine multi-level marketing operations,” said Mr Kenyatta.

There is no organisation that regulates the marketing companies in Kenya.

A spot check by the Business Daily indicates that business at GNLD International, Tianshi, Angel Fashions, Oriflame and Forever Living — the most common multi-level marketing firms in Kenya — is booming.

All are companies from Asia and the Middle East which are increasingly spreading their wings in Africa with their array of products including jewelry, cosmetics, nutritional supplements and herbal products.

But analysts reckon that following the collapse of pyramid schemes with an estimated Sh34 billion in members’ money, Kenyans are sticking to internationally renowned multi-level marketing firms.

Four years ago, Ms Salome Masunga quit teaching to become a distributor of Forever Living products, a decision she says she can’t regret. Efforts by multi level marketing firms to establish an association are underway, in what players said would help boost the credibility of the companies.

Biggest problem
“The confusion over who is genuine or not is currently the biggest problem that we are facing as we are being confused with pyramid schemes,” said Mr Terje Width, the vice-president of Oriflame East Africa.

“There is a huge market in the country for cosmetics with 85 per cent of sales consultants being women,” said Mr Terje. Demand for nutritional supplements is growing in Kenya. Most consumers are spending more on nutritional supplements from the multi-level marketing companies than on real food products rich in minerals.

Antibiotics and conventional medicines are being substituted with nutritional supplements like vitamins, minerals, herbal supplements, and non-herbal supplements to prevent diseases and work to reduce any side effect caused by conventional drugs.