Cablegate: Fall of Deci Pyramid Scheme Breeds Anger, Uncertainty

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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0348/01 1491049
ZNR UUUUU ZZH
R 291049Z MAY 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 8544
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHJB/AMEMBASSY BUJUMBURA 2892
RUEHKM/AMEMBASSY KAMPALA 3423
RUEHLGB/AMEMBASSY KIGALI 1348
RUEHNR/AMEMBASSY NAIROBI 1284
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 04 DAR ES SALAAM 000348

SIPDIS

DEPARTMENT FOR AF/E JLIDDLE; INR/RAA FOR FEHRENREICH, AF/EPS

E.O. 12958: N/A
TAGS: ECON EFIN PGOV TZ
SUBJECT: FALL OF DECI PYRAMID SCHEME BREEDS ANGER, UNCERTAINTY
1. Summary and Comment. In April, the GOT shut down an alleged
pyramid scheme, the Development Entrepreneurship Community
Initiative (Deci), which had attracted approximately 700,000

Tanzanian investors and USD 10 million since 2006. The government
closed Deci offices nationwide and froze its assets after a series
of news reports alleged that the enterprise had been operating
illegally. The scheme promised members 200 percent returns on
investment in as little as 8 weeks, but never revealed its
profit-making formula. Citing affiliation with the Pentecostal
Churches of Tanzania, Deci claimed its strategy was "not of the
human mind, but was established using the wisdom of God." Until the
recent government intervention, Deci members were happily pocketing
returns and the number of members was growing steadily.
Subsequently, as investigations indicated that Deci's holdings were
insufficient to repay investors, many Tanzanians lined up at Deci
offices anxiously awaiting final word on repayment. Investors
expressed anger at GOT intervention in what, from their perspective,
was a legitimate and profitable enterprise.

2. The Deci scandal will almost certainly result in devastating
financial losses for many already impoverished Tanzanians. It will
also mean a loss of confidence in the Government of Tanzania by
investors who blame the GOT either for interfering in a successful
poverty alleviation program or for not protecting them from a
predatory and illegal enterprise. Further, the Deci debacle
highlights the risk in any financial dealings in Tanzania. Lack of
education along with limitless trust in religious and other leaders
led 700,000 Tanzanians to invest their savings in a scheme with no
obvious profit-generating mechanism. Despite a very similar scheme
in neighboring Kenya just one year prior, the GOT either failed to
notice Deci altogether or was unwilling to intervene sooner. A
recent news article asserted that the Bank of Tanzania is currently
investigating a number of potential pyramid schemes, suggesting
increased attention to the matter. It remains to be seen, however,
whether these investigations will lead to punitive or preventive
actions. The Deci case also shows that Tanzania's free press and
investigative reports can move the reluctant and sometimes
inattentive government to action. Investigative reports in local
media have increased more than seven-fold since 2007 following
intensive USG efforts to train hundreds of journalists in
responsible investigative reporting techniques. End Summary and
Comment.

The Rise and Fall of Deci Tanzania
-----------------------------------
3. In 2006, members of the Assemblies of God Pentecostal church in
Dar es Salaam received fliers informing them of a promising
investment opportunity. The Development Entrepreneurship Community
Initiative (Deci) of Tanzania, run by the Jesus Christ Deliverance
Church, announced a "poverty eradication initiative" to foster
entrepreneurship and offer access to finance to the poorest of the
poor - those without access to the traditional banking sector.
Investment in Deci promised a 200 percent return in 8 to 16 weeks,
depending on the size of the initial investment. Tsh 10,000
(currently approximately USD 7.70) would double in as little as 8
weeks while Tsh 120,000 would mature to 240,000 in 4 months.

4. Deci Tanzania set up its headquarters just down the road from the
Assemblies of God church in Mabibo, one of the poorest neighborhoods
in the city. Over the next three years, Deci offices sprang up in
18 regions nationwide and attracted an estimated 700,000 members.
Cleverly leveraging both biblical and agricultural terminology, Deci
asked members to "sow" their "seeds" in order to "harvest" or "reap"
the rewards. Most individuals began by sowing small amounts - 10 to
20 thousand shillings - but, as they harvested regularly (all the
while leaving their initial investment deposited), they gained
confidence and began sowing increasingly large amounts, sometimes
six months to a year's worth of income. Many also reinvested their
earnings. Simultaneously, members' success in harvesting rendered
them advertisements for the Deci brand and new members flocked to
branches to take advantage of the scheme.

5. In March 2009, local newspapers began reporting that Deci might
be a pyramid scheme and was rumored to not be properly registered
and licensed through the Tanzanian government. Within weeks, the
story was making front page news daily. During the first week of
April, the Bank of Tanzania issued warnings that the scheme was
illegal and bound for collapse. Prime Minister Pinda also denounced
the scheme claiming that Deci had collected Tsh 14 billion (USD 10
million) since beginning operations but had less than 2 billion in
the bank. Deci leadership worked to counter the accusations,
claiming their operations were sanctioned by the Bank of Tanzania
and the Business Registration and Licensing Agency (BRELA), and
noting that Deci had created more than 400 jobs in Tanzania, reached
more than 700,000 members and had paid taxes amounting to Tsh 120

DAR ES SAL 00000348 002 OF 004

1. Summary and Comment. In April, the GOT shut down an alleged
pyramid scheme, the Development Entrepreneurship Community
Initiative (Deci), which had attracted approximately 700,000
Tanzanian investors and USD 10 million since 2006. The government
closed Deci offices nationwide and froze its assets after a series
of news reports alleged that the enterprise had been operating
illegally. The scheme promised members 200 percent returns on
investment in as little as 8 weeks, but never revealed its
profit-making formula. Citing affiliation with the Pentecostal
Churches of Tanzania, Deci claimed its strategy was "not of the
human mind, but was established using the wisdom of God." Until the
recent government intervention, Deci members were happily pocketing
returns and the number of members was growing steadily.
Subsequently, as investigations indicated that Deci's holdings were
insufficient to repay investors, many Tanzanians lined up at Deci
offices anxiously awaiting final word on repayment. Investors
expressed anger at GOT intervention in what, from their perspective,
was a legitimate and profitable enterprise.

million.

6. Despite the controversy, members continued to deposit and collect
funds during the first weeks of April. Deci members rallied around
the enterprise. At a 2,500 person rally at a fairground in Dar es
Salaam, members held placards condemning Government efforts at
subverting a legitimate and profitable enterprise. Some pastors
urged a moderate approach, requesting that the government not close
down Deci but work with its leadership to ensure its legality and
survival. While Deci claimed it was supported by the Bank of
Tanzania, the Bank, in turn, argued that it was registered as a
microfinance institution and could legally lend but could not take
deposits. [Note: It remains unclear what Deci's legal status was or
is. BoT officials have not released any documentation. End note.]

7. Amid growing fears either of Deci's imminent collapse or a
government intervention, members started withdrawing funds. On
April 15, Deci closed its offices nationwide. As members waited in
long lines outside of closed offices, some low-level violence
occurred when frustrated members roughed up a Deci employee and
several journalists. Days later, Deci officials announced that they
would soon begin refunding money. Almost immediately, however,
reports confirmed that repayments could not begin as the Bank of
Tanzania has frozen all Deci assets. Deci reportedly had only one
official bank account containing less than Tsh 2 billion while other
money was being siphoned into the personal accounts of Deci leaders.
On May 9, the Minister for Finance and Economic Affairs announced
that no deposits would be returned and no accounts unfrozen pending
further investigation by the Government. Newspapers report that a
Task Force was set up to conduct the investigation; however, it is
unclear what the status of its report is and when Deci members might
recoup their investments.

The Poor Get Poorer
-------------------
8. Speaking with Econoff at the Assemblies of God Church near
Mabibo, a group of five women, all Deci members, revealed that they
had each deposited somewhere between Tsh 500,000 and 800,000 with
Deci, amounts that accounted for approximately six months income or
several years of savings. None of the women had begun investing
until 2008 or 2009 because, at first, the scheme sounded too good to
be true. However, after witnessing their friends and neighbors
build houses, send children to school, and start small businesses
with Deci earnings, they became convinced that their fears were
unfounded and that they were losing out. Ironically, being the most
recent investors who have had little or no chance to harvest, they
will become the biggest losers if, as expected, Deci is unable to
make repayments.

Investment Secret, Divine Intervention
---------------------------------------
9. From the beginning, Deci's profit-generating mechanism was
shrouded in mystery and prevarication. Quoted in local newspapers,
Deci leadership argued that they could not reveal the scheme's
"formula" and attributed its success to the fact that it was not
conceived of the human mind but, rather, was established and run
using the wisdom of God. When asked if they knew how Deci was making
such impressive profits so quickly, the Deci members in Mabibo shook
their heads and responded that they didn't know but had heard
various rumors. One woman said she heard it was through work with
"foreign investors," while another said she heard that the seeds
planted by very rich individuals were gaining interest enough to pay
the harvests of everyone else. Not understanding exactly how the
scheme worked did not seem odd to them at all - they placed trust in
those who they thought "knew better." As the first news of the
miraculous scheme came via the Christian community - even from some

DAR ES SAL 00000348 003 OF 004

1. Summary and Comment. In April, the GOT shut down an alleged
pyramid scheme, the Development Entrepreneurship Community
Initiative (Deci), which had attracted approximately 700,000
Tanzanian investors and USD 10 million since 2006. The government
closed Deci offices nationwide and froze its assets after a series
of news reports alleged that the enterprise had been operating
illegally. The scheme promised members 200 percent returns on
investment in as little as 8 weeks, but never revealed its
profit-making formula. Citing affiliation with the Pentecostal
Churches of Tanzania, Deci claimed its strategy was "not of the
human mind, but was established using the wisdom of God." Until the
recent government intervention, Deci members were happily pocketing
returns and the number of members was growing steadily.
Subsequently, as investigations indicated that Deci's holdings were
insufficient to repay investors, many Tanzanians lined up at Deci
offices anxiously awaiting final word on repayment. Investors
expressed anger at GOT intervention in what, from their perspective,
was a legitimate and profitable enterprise.

religious leaders - an element of blind faith has been intermingled
with the Deci brand from the outset. Deci officials were
unavailable for comment. Reverend Jackson Mutaresi, a Deci Board
Member and the official who the Mabibo residents referenced as
representing Deci interests in their community, has reportedly been
arrested.

10. Even Deci employees were not privy to the secret. Dominica, a
middle-aged mother of four who worked as a "promoter" for Deci, said
she was never told how the scheme worked and was almost never asked
the question by any of her recruits. Her promotion materials
included only registration forms and a sample schedule of payments.
She herself was satisfied that it was through the "vision of the
Deci leadership" that the money was growing. As a recruiter,
Dominica was paid 2.5% of every investment she brought in. Pleased
with her new work, she found jobs for both of her daughters as
tellers at Deci branches. As tellers, her daughters did not know
Deci's secret formula, but were aware of the need for discretion.
Dominica shared the contents of one of her daughters' Deci
employment contracts which read, "While with us always be LIP-TIGHT.
Please be advised to abstain from releasing any information which
will be detrimental or dangerous to our operations."

Second Time's the Charm?
------------------------
11. This is not the first time that East Africa has heard of Deci.
In 2007, a similar scheme called Deci Kenya collapsed owing
investors USD 7.8 million. While a connection between the two
schemes has not been proven, their similarities - such as an
association with the church, the name, and the stated mission of
poverty alleviation - suggest they are related. It is unclear
whether GOT officials knew of Deci Kenya's collapse. Our GOT
contacts would not discuss Deci, nor has the press elicited GOT
comment about why Deci was permitted to remain in operation for so
long. In any case, the majority of Tanzanian investors in Deci had
not heard of Deci Kenya until local newspapers broke the story.
Those who had heard of it - like Dominica - had been assured that
Deci Kenya failed because its members were not "faithful before
God."

Government Takes Blame
----------------------
12. Although all indications point to Deci Tanzania's being a Ponzi
scheme, among investors the most controversial issue surrounding
Deci is the GOT's decision to close it down. Some theories
propounded by unhappy investors include that Tanzanian leadership
was angry that traditional banks and investment opportunities would
lose out to Deci; and that the Government was angry because it was a
Christian, and not Muslim, organization. [Note: Although Deci claims
affiliation with the Pentecostal church, members in Mabibo claimed
it was not unusual for Muslims also to be members.]

13. Like the women in Mabibo, the majority of Deci members are poor
individuals with limited education who belong to a community of
faith. Even though they may have had their doubts about Deci at
first, having witnessed the success of others, having been assured
by Deci leadership that the venture was sanctioned by the Government
of Tanzania, and having been encouraged to invest by local religious
leaders, their hesitations were allayed and the desire to take part
in a seemingly miraculous scheme won out. Now, as the "harvests"
have come to an abrupt stop, most Deci members are focusing their
anger at the Government rather than at Deci leadership. They argue
that Deci had been in operation for nearly 3 years and that, if it
were going to collapse, it would have done so already. Explaining
to the women in Mabibo the rob-Peter-to-pay-Paul nature of such
ventures, Econoff was met with wide-eyed stares and shaking heads.

DAR ES SAL 00000348 004 OF 004

1. Summary and Comment. In April, the GOT shut down an alleged
pyramid scheme, the Development Entrepreneurship Community
Initiative (Deci), which had attracted approximately 700,000
Tanzanian investors and USD 10 million since 2006. The government
closed Deci offices nationwide and froze its assets after a series
of news reports alleged that the enterprise had been operating
illegally. The scheme promised members 200 percent returns on
investment in as little as 8 weeks, but never revealed its
profit-making formula. Citing affiliation with the Pentecostal
Churches of Tanzania, Deci claimed its strategy was "not of the
human mind, but was established using the wisdom of God." Until the
recent government intervention, Deci members were happily pocketing
returns and the number of members was growing steadily.
Subsequently, as investigations indicated that Deci's holdings were
insufficient to repay investors, many Tanzanians lined up at Deci
offices anxiously awaiting final word on repayment. Investors
expressed anger at GOT intervention in what, from their perspective,
was a legitimate and profitable enterprise.

In that case, they said, the Government is still to blame because it
failed to protect them from the outset.
ANDRE

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