A steady increase in the number of street vendors selling counterfeit clothing around the country has led to job and revenue losses for clothing manufacturers, brand licensees and formal retailers, some of whom have now hired private investigators to deal with the problem.
Both popular and expensive brands, usually associated with class and high quality, are at risk of being copied or sold as “rip-offs”.
During the past financial year the SA Revenue Service (Sars) made 20 000 seizures of illegal goods to the value of almost R1 billion, including more than 750 000 pieces of clothing worth R483 million.
Sars said undervalued imports posed a significant risk not only to the fiscus but to local industry and job creation.
Adriaan Verhagen, the managing director of Ninian & Lester, the sole licensee of US underwear brand Jockey in South Africa, said this week that counterfeits had to be eradicated as they presented a major threat to local employment.
Between 2007 and 2012, Ninian & Lester lost R20 million worth of sales to counterfeits. The company said this figure represented only 5 percent of the problem. It added that this amount could pay for 1 000 machinist jobs for 12 months.
Ninian & Lester employs about 1 500 workers and is one of the few manufacturers that make the bulk of their products locally using locally sourced raw material.
Verhagen said the company’s legal cases against counterfeiters had increased to 40 as a result of research done between 2007 and 2012.
He said vendors sold fake Jockey socks for R5 a pair, whereas retail stores charged R22.95 for the authentic item.
“Now if you consider all that goes into making those socks, the raw materials, the knitting process and transportation, how do you come up with R5 for a pair? It does not even cover the cost of raw materials,” he said.
He said that, worse still, the vendors would make a profit on the counterfeit pair.
Ruan Meintjies, who previously worked as a policeman, started a counterfeit tracking business seven years ago in Durban, which has the country’s busiest container port.
The company tracks down and tries to control the spread of counterfeit products for brands such as Lee, Wrangler, Quiksilver, Jeep clothing, Fox, Roxy, DC shoes and Valcom, among others.
He said the run-up to the festive season was the busiest part of the year and things usually slowed down when the Durban container terminal experienced disruptions.
His company, Counterfeit Label Solutions, has two agents, in Cape Town and Johannesburg. He described Durban and Johannesburg as “two different monsters”.
“Durban is busy because of the port, the network of fake goods is much broader, but Johannesburg is a beast on its own,” Meintjies said.
He said counterfeiting posed a big problem and, to illustrate his point, described how a container full of fake Bafana Bafana soccer jerseys had been discovered in Durban two months after the 2010 World Cup had ended.
“This was because Transnet had a strike before the tournament. Had it not, all those jerseys would have found their way to unsuspecting consumers,” he said.
Meintjies said his detective agency acted as a middle man between the licensee of the brands and patent lawyers.
“We fight the anti-counterfeiting operation on the street.
“We will get a complaint from the licensee about a product spotted in some shop in town. We buy the merchandise for a sample and then open a criminal case against the store owner.”
This was usually followed by a raid and seizure operation. He said such cases only scratched the surface and the real problem was finding the key players.
“Catching a kingpin is difficult as one has to track down paperwork, bank statements, receipts and telephone records. The guys that we catch are end users and they just want to make quick money.”
Meintjies said the team, comprising himself and his two partners, dealt with five to 15 cases of counterfeit goods a week. He said the modus operandi of the perpetrators changed every day.
“We used to put tracking devices on the containers, which for a while worked very well. But as soon as they catch on to it they develop new ways and we also have to change our tracking ways.
“These days you would be lucky to find hundreds of counterfeited items at a time. The goods are now moved in a smaller quantity by a large number of individuals.”
He said although most goods came from China, his company was noticing an increase in the number of goods that were coming from India.
Ninian & Lester said the problem was most acute in the independent markets.
Verhagen said that Christmas sales of lingerie were affected because “the vendors are right on the store’s doorstep selling counterfeits”.
Details on the products were exactly the same as the real items, including the VAT number and bar code. “Consumers should be buying the products from the mainline stores and not informal traders. We do not sell any goods through informal traders,” Verhagen said.
He said counterfeit products often lacked quality, and consumers could only use them once or twice.
Jockey had a factory shop where it sold distressed goods and these were often marked by cutting the label out. “But those garments were manufactured according to our standards.”
Counterfeit goods do not only affect licensed brands, but also have an impact on formal retailers such as Truworths.
Michael Mark, the chief executive of Truworths, previously said counterfeits of brands such as Ginger Mary, Outback Red and others were increasingly becoming an issue of concern.
“Sometimes it looks similar to the real product albeit using inferior quality product and sometimes the counterfeit product is appalling quality with our brand name on it,” Mark said.
“Sometimes the design is copied, on cheap fabric, but the brand name is removed.”
He blamed the large quantity of illegal clothing on the imposition of high import duties of 45 percent, which, he said, made it more appealing to illegal operators to bring in merchandise illegally and much more cheaply.
In April the finance ministry and Sars launched a programme to improve levels of tax payment and compliance with customs legislation to ensure an increase in the number of tax returns filed.
Sars said the focus of the crackdown would be on rich South Africans, large businesses and the undervaluation of imports in the clothing and textile industry, among others.
Sars said its focus on this sector would include introducing a reference pricing database to identify illegal imports, seeking systematic solutions to gaps in the clothing and textile value chain and increasing inspections at border posts.