Why we Should be Concerned About the Growing Trade in Counterfeit Goods
The influx of counterfeit goods in formal and informal Southern African markets came under the spotlight again at a recent workshop held in Harare, Zimbabwe. The Interpol Regional Bureau provided an appropriate setting for the discussion, which brought together representatives of some of the affected industries and police officials from twelve countries in the region. Of particular concern was the impact being encountered at present, and what can be expected in the future.
Charles Goredema, Programme Head, Organised Crime & Money Laundering, ISS Cape Town
The influx of counterfeit goods in formal and informal Southern African markets came under the spotlight again at a recent workshop held in Harare, Zimbabwe. The Interpol Regional Bureau provided an appropriate setting for the discussion, which brought together representatives of some of the affected industries and police officials from twelve countries in the region. Of particular concern was the impact being encountered at present, and what can be expected in the future.
Counterfeiting means “unauthorized representation of a registered trademark, with a view to deceiving purchasers into believing they are buying the original goods.” Counterfeit goods may be defined as goods that imitate other goods, while being different (and usually inferior) in quality or value. Imitation is through the use of markings that are either false or misleading or both. Trading in counterfeit goods has a long history. In Southern Africa today, the variety of what is traded is endless, including consumable substances, such as pharmaceutical drugs. Money, clothing, cigarettes, toothpaste, soap, matches, spare parts for machinery and cosmetics have also been counterfeited. Four countries in the region, namely South Africa, Lesotho, Swaziland and Botswana have had recent experience of counterfeit currency notes. It has therefore become common to use the term commodities in preference to goods.
Worsening economic positions and declining health being experienced in many parts of the region have worsened the exposure to counterfeit goods. The workshop noted that there has been an increase in crimes that utilise a combination of theft, forgery and counterfeiting. In all countries this applies to the use of falsified passports, falsified academic certificates, as well as credit and debit cards. Because not all instances of counterfeiting are reported, and even where reports are made, losses have not been quantified, no accurate figures on the value of the counterfeit commodity industry could be given. It was however agreed that the trade in counterfeit commodities in the region is a multi-billion dollar industry. Case studies show that a fair amount of professionalism is involved in the production, distribution and marketing of the commodities.
As financial gain motivates trafficking in counterfeit commodities, it is inevitably accompanied by money laundering. Opportunistic organised crime networks have taken an interest either in producing and marketing counterfeit commodities or in reaping some benefit from them.
There is very little appreciation in the region of the harm attributable to counterfeit commodity trafficking. Unstructured surveys conducted in various countries ahead of the workshop showed that some influential officials who should know better even regard counterfeit commodities on informal markets as useful to poor people, on account of affordability. This is certainly so in respect of counterfeit sports clothing apparel and related paraphernalia that were so much in abundance during the FIFA World Cup in June and July 2010. A similar argument is raised regarding counterfeit DVDs and CDs. It is contended that if the producers of genuine commodities would only charge affordable prices, this would reduce the market for counterfeit commodities. In response to the ‘competition’ from counterfeit goods, prices should be adjusted downwards. The argument overlooks the factors that influence the cost of genuine commodities – which include tax, research, cost of labour, cost of other inputs, transportation and marketing. Counterfeit commodity barons are able to circumvent some of these costs and to charge a ‘competitive’ price as a result.
The workshop attempted to clarify where these barons operate from. Raids and interceptions in Zambia, Mozambique and South Africa show that some of the most enterprising counterfeit commodity barons in the region live amongst us. They include some that immigrated from China and from south–East Asia. The circulation of spare parts for luxury vehicles has been attributed to their activities. Innovative locals have partnered with these ‘foreign’ barons, and in some cases, set up in competition with them to produce counterfeit DVDs and fake branded clothing. Most of the counterfeit pharmaceuticals appear to emanate from beyond Southern Africa. The trade in them has ensnared reputable professionals, initially in east Africa but gradually in Southern Africa as well.
The last decade has been characterised by an escalation in the volume of counterfeit pharmaceuticals sold out of registered outlets in Zimbabwe to take advantage of the demand exerted by communicable diseases on poor communities. Dar es Salaam and other cities in east Africa have witnessed significant increases in counterfeit medication, prompting three major police operations co-ordinated by the Interpol bureau for East Africa. In Zimbabwe, the Medicines Control Authority teamed up with the police and customs authorities in November 2009 to mount Operation Zambezi in a handful of Harare suburbs.
In Operation Zambezi: ‘36 premises were found selling unregistered medicines, 6 of them being licensed pharmacies, 13 of them run by medical practitioners who were not licensed to dispense medicines, 3 were unlicensed nurses and 1 was a wholesale dealer. The remaining 13 were either running hair salons, or working from flea markets, selling mostly skin lighteners (which contained corticosteroids) and anti-histamines (which are used as appetite stimulants).’ (Rukwata, 2010)
The operations in east Africa led to the seizure of 100 types of pharmaceutical products from 236 establishments. They included anti-malarial, cardiac, anti-fungal, multi-vitamin, hormonal and skin medicines. More than 40 successful prosecutions ensued. (Interpol media release, 29 October 2008)
These successes notwithstanding, discussions at the workshop highlighted the absence of harmonised legal frameworks to prevent, detect and reduce the proliferation of counterfeit commodities. Only three countries appear to have relatively modern laws that could assist in evaluating the quality of traded commodities. In between ad hoc inter-departmental policing ‘operations’ there are no frameworks to guide collaboration among departments located in different areas of the state, or between them and private sector institutions.
There is no shortage of enthusiasm from the private sector to clamp down on counterfeit commodities, which is understandable. A few associations are active in this sphere, such as the Anti-Piracy Organisation of Zimbabwe and the Consumer Goods Council of South Africa. Apart from the challenge of funding, non-state institutions are constrained by the absence of statutory authority to gather intelligence and act on it without involving government institutions. As was pointed out at the workshop, quite often time and valuable information get lost while consultation is going on to decide what to do. It was not surprising that the adoption of harmonised, co-ordinated laws was one of the priorities identified. The ISS committed itself to play a facilitative and consultative role in that process.
