Mohloai Mpesi
LACK of financial education is a major factor behind the growing number of Basotho falling victim to scams, as pyramid schemes continue to emerge and re-emerge across the country.
Experts say many Basotho struggle to distinguish between legitimate investments and pyramid schemes, with many chasing quick profits while ignoring the obvious warning signs of Ponzi schemes.
The most recent example is the collapse of the now-infamous SGK scheme, which left thousands of Basotho counting their losses last week. Many took to social media to reveal how much they had lost.
Some reported losing as much as M200 000 or M80 000, while others lost M25 000 or less. Some had taken out bank loans to invest, while others emptied community savings schemes in the hope of earning large returns.
This happened despite repeated public warnings from the Central Bank of Lesotho (CBL) against SGK, Prestige Wealth Investments, Lengau People’s Society and other similar entities. The CBL has stressed that none of these organisations is licensed to operate.
“The Central Bank of Lesotho warns the public about the growing number of individuals and illegal investment platforms that promise unusually high returns or solicit deposits from potential investors.
“In a desperate attempt to persuade the public to deposit funds and to defraud them, some schemes and their promoters have falsely claimed to be licensed by the CBL. Members of the public are strongly advised to avoid such schemes and any financial institution operating without a valid CBL licence.
“The public is specifically warned not to invest in the SGK Investment Scheme (also known as SGK Platform or SGK Elite), Prestige Wealth Investments, Lengau People’s Society and Prime Aura Platform, under the false belief that these entities are licensed by the CBL,” the CBL’s 24 June 2026 statement reads.
SGK
SGK was an online investment scheme that operated in Lesotho and several other African countries, promising participants quick and unusually high returns. According to Lesotho’s Financial Intelligence Unit (FIU), it exhibited the characteristics of a pyramid scheme rather than a legitimate investment business.
The FIU last week exposed how the SGK pyramid scheme siphoned millions of maloti from unsuspecting Basotho through a network of bank accounts and cryptocurrency transactions. Investigators found that deposits from thousands of people were channelled into accounts linked to SGK before being transferred via BPAY Global, a Bahrain-based payment processor, and converted into cryptocurrency, mainly Tether (USDT), on the Binance platform. Between December 2025 and April 2026 alone, more than M2.1 million was converted into cryptocurrency, making it difficult to trace the ultimate beneficiaries, while victims were left counting heavy financial losses.
Root cause
National University of Lesotho (NUL) economics lecturer, Dr Ratjomose Machema, attributes the problem to limited public knowledge of financial management.
“The problem is information asymmetry. People do not have information about these investment packages and do not know how to address them.
“The issue is financial illiteracy, or a lack of personal finance management. The Central Bank has been trying to inform people about how to manage their finances. You cannot get rich quickly, and you should not spend all your money at once,” Dr Machema said.
He added that behaviour also plays a role, as some people knowingly invest in pyramid schemes despite widespread warnings.
“These issues are strongly linked to behaviour. People know, and it has been widely publicised, that it is a Ponzi scheme, but each one believes they will be lucky.
“People need patience. Work for a few more years, save, and you will be well off. These pyramid schemes will always come back in different packages,” Dr Machema said.
NUL economics lecturer, Leseko Makhetha, shares similar sentiments, saying financial illiteracy is a major driver.
“Most people do not understand investments, so they chase quick cash. The way these schemes are packaged makes them look like an investment. If someone tells you to invest M1 000 and receive M500 a month for a year, that is M6 000, or about 600 percent. The question is: where does that money come from?
“They package it as an appealing marketing or advertising scheme rather than a pyramid scheme, but the real question is: what is the product? If there is no financial or physical product, it is not an investment,” Mr Makhetha said.
He added that these schemes rely on a constant stream of new investors to survive.
“If you have to recruit someone for you to earn profits, then it is not an investment. If it is not registered with the Central Bank, it is not an investment. If there is no contract, it is not an investment.
“For the scheme to survive, someone has to keep investing money. Who pays the last person to join? Who regulates that money?
“It comes down to financial literacy and the systems that govern these schemes. Without clear regulation and registration with the CBL, there is no protection,” Mr Makhetha said.
He said the way such schemes are packaged makes them attractive, drawing in not only desperate people but also those with stable incomes.
“You would expect it to attract people who are desperate for money, but surprisingly, people with decent incomes actively participate too.
“If someone promises returns above 10 percent, think twice. You will hardly ever get a return above that. Even the Central Bank offers around 7.5 percent,” Mr Makhetha said.
Another NUL economics lecturer, Rorosang Lesaoana, said many Basotho do not understand the difference between a pyramid scheme and a genuine investment.
“There is a lot of confusion between the two. When the Central Bank tried to raise awareness about SGK, people were upset and believed the Central Bank was wrong. Someone might regard SGK as a genuine investment.
“We are a nation that struggles to accept what we don’t know. That is why, when the Central Bank warns people, they think it does not want them to benefit,” Mr Lesaoana said.
Investment gap
Dr Machema said there is an investment gap that financial institutions need to close, as many Basotho have money but lack access to credible investment platforms.
“This shows that people have money; some are trying to save. Microfinance institutions, banks and insurance companies should launch investment products that attract people. The demand is clearly there.
“Some of the more lucrative investments in the country include government bonds through the Central Bank, which mature over 10 to 15 years with good, compounded annual interest. Insurance companies also offer good returns, as does Unitrust at Stanlib,” Dr Machema said.
Unemployment
However, Mr Makhetha said the problem is not driven primarily by unemployment, since most people who join these schemes have a source of income.
“Unemployment would work the other way; an unemployed person usually has no money to invest. These are people who are working and saving. They divert cash from other resources into these schemes hoping for a return.
“Unemployment might play a small role, but I don’t believe it is the root cause. Most participants have smartphones and internet access, and transact through bank accounts, which means they are middle-income earners rather than the poorest in society.
“This is not a crisis of poverty; it is poor investment judgement. People are simply trying to get rich quickly.
“The Central Bank has been warning people since the days of MKM. This is more a behavioural and social issue,” Mr Makhetha said.
Mr Lesaoana disagreed, arguing that poverty and unemployment are in fact major drivers.
“People see this as a way to make a living, and it is mostly the youth who take part. Many were living in South Africa and were deported, so they turn to these schemes to survive.
“The poverty line plays a big role because people will do anything to escape poverty and hunger.
“The public should learn to recognise the signs of a pyramid scheme, such as recruitment of new members and promises of huge returns. There is also a need for greater financial literacy education.
“The government also needs to address unemployment and poverty because some people see these schemes as a form of employment,” Mr Lesaoana said.
Financial Intelligence Unit
FIU manager, Jothame Phakisi, told this publication that the unit only investigates suspicious transactions once they have been reported by financial institutions.
“Financial institutions report these issues to us when they suspect certain transactions. If they don’t report them, there is nothing we can do.
“Once we receive a report, we analyse the information. Where transactions are not reported, they can happen in many different ways.
“We work with financial regulators where there is a problem. Even after we issue warnings, the public sometimes continues regardless, saying we are interfering with their rights,” Mr Phakisi said.
He added that some investors continued despite fully understanding the risks.
“They lose their money fully aware that what they are doing is wrong.”
Mr Phakisi said it remains difficult to determine the full extent of losses suffered through SGK.
“We provide information based on our assessments, but it is difficult to say exactly how much has been lost because some people continue investing even after being warned.
“We try to warn the public early, before a scheme collapses completely. Some investors say they have already benefited, which makes it even harder to calculate total losses,” Mr Phakisi said.
Economic desperation and social trust
Private Sector Foundation of Lesotho (PSFL) Chief Executive Officer, Thabo Qhesi, said the root cause goes beyond financial illiteracy.
“It’s a mix of economic desperation, social trust structures and regulatory gaps working together,” Mr Qhesi said.
“Lesotho has high youth unemployment, a large informal economy, and heavy dependence on remittances from mineworkers and other labourers in South Africa, as well as public sector wages. When formal savings options offer low, slow returns, and people face real financial pressure, school fees, funerals and debt, a scheme promising 30 to 50 percent returns in weeks looks less like a gamble and more like a lifeline.”
Mr Qhesi said Basotho society relies heavily on trust built through family, church, village and workplace networks, which pyramid schemes deliberately exploit.
“These schemes are rarely pitched by strangers. They are introduced by a cousin, a colleague, a pastor, or a chief’s relative, someone whose social standing vouches for the opportunity.
“A warning that a scheme isn’t licensed by the Central Bank competes against the far more powerful personal example of an uncle who put his pension into the scheme and got paid.
“Pyramid schemes pay early investors specifically to create visible, local proof of payout. That lived evidence outweighs an abstract regulatory warning from an institution many rural Basotho rarely interact with,” Mr Qhesi said.
He added that weak enforcement, not just limited public awareness, allows these schemes to persist.
“The Central Bank can warn the public, but Lesotho has struggled to move quickly from warning to shutting schemes down, seizing assets or prosecuting promoters. This is partly due to capacity constraints, partly the cross-border complexity of money routed through South Africa, and partly because schemes simply rebrand and relaunch under new names.
“A large share of the population is under-banked or unbanked, with limited access to affordable credit and few formal investment products. Pyramid schemes fill that gap, often feeling like the only accessible investment option for someone outside the formal financial system,” Mr Qhesi said.
He said most people recognise when something appears too good to be true but struggle to understand why fixed, high returns are mathematically unsustainable because they require exponential recruitment to survive.
Asked why people continue joining despite repeated warnings, Mr Qhesi said the issue is not ignorance of the warnings themselves, but what those warnings are weighed against.
“It is visible local payouts, pressure from recruiters, a lack of better savings alternatives, and a calculated, if ultimately flawed, belief that they can get in early and get out before the scheme collapses.
“This is the same ‘greater fool’ logic seen in every Ponzi scheme worldwide. People often know it’s risky, but believe they personally will get out in time,” Mr Qhesi said.
