The importation or manufacture and sale of counterfeit goods is one of the single biggest risks facing legitimate businesses on the African continent at present. Cheap, low quality goods, which more often than not do not meet local safety or health requirements, are flooding African markets, including South Africa. Such goods range from pharmaceutical products, to shoes and clothing to electronic goods and foodstuffs, to name but a few.
Annually, counterfeit goods worth an estimated $600 billion (6% of world trade) are traded around the world and, unfortunately, Africa has become a popular dumping ground for such goods.
According to the executive director of the Kenyan Anti-Counterfeit Agency, Gregory Munyao, Kenya loses revenue and taxes to the value of KES19 billion ($211 million) annually. It is also estimated that the private sector in Kenya is losing approximately KES50 billion ($556 million) annually.
Counterfeiting in Africa
Steven Yeates, Trade Mark partner at internationally recognised IP law firm Adams & Adams who battles with the issue of counterfeiting on an ongoing basis, is all too familiar with the problem – particularly in Africa.
“Despite the risks to local economies, civil court orders and criminal convictions in Africa pale in comparison to those being granted against counterfeiters in Europe and North America. In South Africa, the Counterfeit Goods Act prescribes a maximum sentence of R5 000 per item, and/or three years imprisonment in the case of a first offence, or R10 000 and/or five years imprisonment in the case of a second conviction.
“While these penalties are steep,” says Yeates, “the maximum sentences are hardly ever applied. However, in the USA and Canada two recent decisions have highlighted just how serious dealing in counterfeit goods is considered to be in those jurisdictions.
“In New York, the Federal Court ordered online counterfeiters to pay damages to Tory Burch, a luxury fashion brand, in the amount of $164 million. This is believed to be the largest damages award in the fashion industry ever. The counterfeiters had created 232 professional looking websites through which to sell counterfeit goods bearing the trade marks of Tory Burch.
“More recently, in June this year, the Federal Court in Canada issued the highest damages and costs award to date in Canada against counterfeiters dealing in Louis Vuitton and Burberry goods. Damages in the amount of $2.48 million, excluding legal fees, were awarded. Previously the highest order for damages was in the amount of $980 000, also in favour of Louis Vuitton,” comments Yeates.
Several recent successful seizures of large quantities of counterfeit goods have again put the spotlight on the efforts of our enforcement agencies to stem the flow of these products onto South African markets. In January this year, the Hawks seized five containers full of counterfeit goods at Durban harbour.
The goods, which included sunglasses, watches, shoes and clothing, were estimated to be valued at R120 million. In operations conducted in the first week of July this year, officials seized hundreds of thousands of counterfeit goods at buildings in the Johannesburg CBD. These included razor blades, children’s toys, clothing, shoes and personal hygiene products. Similar operations have taken place in November and now in December.
Difficult to convict fraudsters
Yeates explains the difficulties of convicting trademark fraudsters: “One potential drawback to the South African legal framework, particularly insofar as it relates to trade mark infringement and counterfeit goods, is that it does not provide a cost-effective and practical basis on which to claim damages against counterfeiters.”
According to Yeates, to be awarded damages in South Africa the Plaintiff has to prove its loss, which is often impossible in the counterfeiting scenario. Counterfeiters hardly ever keep accurate financial records and more often than not operate under false names and aliases.
It is for this very reason that African countries, including South Africa, are such easy targets for counterfeiters. “While the South African Criminal Procedure Act does make provision for compensation to be awarded to parties who have suffered damage to, or loss of, property resulting from offences, such compensation can only be applied for once a conviction is obtained. Even then, the trade mark proprietor has to prove the value of his loss – a virtually impossible task in the circumstances,” says Yeates.
Protecting your rights
The obvious question is thus what companies can do in South Africa to best protect their rights (as much as possible within the current legal framework). First and foremost Yeates says it is imperative that companies register their trade marks. Once a company’s trade marks are registered, the next step is to arrange for recordal of its trade marks with Customs.
Customs keeps a central database of all qualifying trade marks (i.e. registered or well known trade marks), and copyright which can be accessed by its officials on the ground. Customs officials use this database to determine whether certain trade marks are protected and, if so, who to contact in order to have samples of suspected counterfeit goods examined and checked.
“Once goods are seized by customs the proprietor of the relevant trade mark will have the option of taking either criminal or civil action, or both, against the importer, manufacturer or seller of the goods. While such action will not lead to massive damages being awarded to the trade mark proprietor, the actions will, if successful, lead to the destruction of the goods and, hopefully, the imprisonment of the counterfeiter.
“While massive damages claims against the manufacturers, importers and sellers of counterfeit goods are not yet on the horizon, local companies should protect their trade marks (and their businesses), by making use of the tools at their disposal. Failure to do so will result in our markets being overrun with counterfeit products, a scenario no developing country can afford,” concludes Yeates.
Be 1 Of 3 High Growth Scale Ups Sponsored By FNB & Vumela To Participate For FREE In 10X Accelerator Program (Value Of R650 000)
FNB and Vumela are sponsoring 3 high growth Scale Ups on the 10X Accelerator Program, kicking off in February 2018.
The 10X Program has received amazing reviews and huge interest, because of its unique approach:
- Focused on businesses that are Scaling Up (past the start-up / typical Accelerator phase)
- Business Scale Up focus, not capital raising / exit focused
- Broad company-building focus, not a narrow technology commercialisation focus
- Addressing the gnarly and complex issues that come with growth, like hiring, firing, performance managing, management systems, Boards, etc
- 18 months of intensive, hands on support
- Working with seasoned Scale Up leaders
Here’s what delegates are saying:
“We’ve grown really fast, but without the 10X Program we probably wouldn’t exist anymore because things were starting to break… It’s a game changer… Unlike most other workshops like this I have experienced, 10X-e combines theoretical concepts with real world applications so that I can make immediate changes to my business. The tools are easy to execute throughout my organisation and get the needed buy in from my management team. We now have every staff member fully aligned to the company’s strategy… we’re now scaling much faster and with less resources than we would have normally required without the 10x process…. – James Wilkinson, Founder, Sonic Telecoms
“Within 1 month I doubled sales revenue, because it became so clear I had 2 people in the wrong roles. We swapped their roles and doubled revenue immediately.” – Richard Rayne, Founder, iLearn
“I used to feel like I was sprinting up a sand-dune. If I stopped sprinting for a moment, the business would slide downhill. But since the program, we have much more momentum and its not all up to me because the entire team is pulling together in the same direction. Things won’t grind to a halt if I am away for 2 weeks” – Andrew Cook, Founder, Smoke Customer Intelligence
‘The [10X Strategy Workshop] process gave us the framework to focus and say no to distractions … [key] part of our journey to drive relentless focus. The Workshop catalysed us working on our business and not just in it… [and] supported a period of advancement… and scale’. – Brad McGrath, co-Founder, Zoona
‘The upfront Path To Scale Boot Camp… got us all thinking the same way and on the same page about how to Scale. It is something we have carried with us and that has guided us ever since.’. – Aisha Pandor, co-Founder, SweepSouth
The Program is worth R650k. FNB & Vumela are sponsoring 3 qualifying Companies. Seats will be awarded to businesses with the greatest Scale Up potential.
- Application deadline:12th Jan.
- More info on the Program & the Application Form: https://goo.gl/forms/dobVI6N2FY7tKiJK2
R33 Million Boost For Job Creation And Innovation In SA
The Craft + Design Institute (CDI) has launched R33 Million in funding to boost SME growth, job creation and innovation.
The CDI has raised the R33m to establish three funds – a Growth Fund, an Innovation Fund and a Loan Book – these funds will be managed by its investment arm, CDI Capital.
The funding will be for developing 60 growth oriented SME’s and 20 innovative technological solutions – and to create 600 permanent jobs in the process over three years.
This funding has been enabled by the National Treasury’s Jobs Fund through the Government Technical Advisory Centre (GTAC), the Technology Innovation Agency (TIA), and the Western Cape Department of Economic Development and Tourism (DEDAT).
CDI Capital was specifically incorporated as a CDI subsidiary in 2016 to catalyse funding for SMEs. A level 1 B-BBEE company, it aims to combine government grants with corporate Enterprise Development spend and private funds to de-risk investments in SME’s to stimulate growth and returns.
The Growth Fund is open to businesses with turnover or assets of more than R1m with the ability to create permanent jobs. Applications open on the 27th of November and close on the 31st of December 2017. For specific criteria and more information on the grant please visit www.cdicapital.co.za/GrowthFund
The Design Innovation Seed Fund (DISF) is open to inventors who believe they have protectable innovative technological solutions that could impact on specific sectors and could create permanent jobs. This is the third round of this fund. Applications open on the 27th of November and close on the 31st of December 2017. For specific criteria and more information on the grant please visit www.cdicapital.co.za/DISF
In addition to the grant funding products, CDI Capital will also launch a R3.5m working capital and term loan facility at reduced rates for the duration of the three-year project to provide access to cash flow during the growth stage of these, and other qualifying SME’s.
The CDI has 16 years of experience in SME development and started supporting development in the craft and design sectors nationally in 2015. Signaling this change, the organisation changed its name in September from the Cape Craft + Design Institute to The Craft + Design Institute.
According to Erica Elk, Executive Director of the CDI, it was a landmark moment in the organisation’s history.
“Over the past few years our team has successfully taken our services across the country – we have conducted a business and product development workshop series in every single province and received incredibly positive feedback. The message clearly is ‘more please’.”
Elk said that there is a consensus in South Africa today that SMEs hold the solution to our intractable problems of a sluggish economy and high unemployment rates.
“In most countries, SMEs play a vital role as drivers of economic growth, innovation and job creation, but, in South Africa, this value is yet to be properly realised. To achieve this, the challenges experienced by SMEs need to be addressed. Namely access to markets, finance and credit, infrastructure, resources for R&D, and access to adequately skilled and work ready labour.”
She added that the CDI, through its specialised investment arm CDI Capital, is gearing up to provide solutions to some of these challenges, particularly in the craft and design sector and related sectors where design and innovation can catalyse growth.
“Our first Jobs Fund project, completed successfully in December 2015, had 45 participating companies creating 464 jobs off an investment of R14.5m. This was 105% of the target of jobs to be created. Participating SMEs grew their combined annual revenue by 73% over three years – from R60m to R104m. Funds were used to improve their products, processes and competitiveness through the acquisition of new machinery or specialist staff, and to expand local and international market reach.”
“We also completed a first round of DISF grants in 2016, and are currently working with seven innovative SMEs in round two – round one attracted private funding of over R10m in equity funding into some of the high-potential innovators. The DISF gives innovators and entrepreneurs in the Western Cape an opportunity to get the finance and support needed to get their ideas to the next stages.”
“We have put a significant amount of work into developing these offerings, not only ensuring good governance and appropriate monitoring and evaluation measures, but realising real and sustainable impact with the businesses we support. We are excited to have raised R33m to launch this new funding for SMEs, and we thank our funders and supporters – we look forward to making meaningful investments.”
“Now – having led the way with investment from the public sector – we would like to partner with the private sector to support and strengthen this initiative. We believe this project – which aims to catalyse innovation, support growth orientated SME’s and create 600 jobs – would be an ideal Enterprise Development spend opportunity. CDI would gladly partner with corporate growth orientated accelerators and mentorship programmes to further strengthen the support offered to the participating SMEs.”
Najwah Allie-Edries, Deputy Director General: Employment Facilitation within the Jobs Fund:
“The Jobs Fund supports this initiative in recognition of the critical role that SMEs play in creating a more inclusive economy and job creation and also because it will contribute toward CDI becoming a more self-sustaining entity. The aim of this initiative is to provide appropriate financing options to SMEs in the craft and design sector in order to catalyse sustainable growth which will result in attracting further investment into a sector that has often been neglected. The introduction of a revolving loan facility will not only ensure that over time more SMEs can benefit from access to finance, the enhanced revenue streams will also contribute to the CDI’s goal of becoming a sustainable entity in its own right.”
Mr Vusi Skosana, Head: Technology Stations & IATs (TSP) at TIA, said that the Technology Innovation Agency (TIA), an agency of the Department of Science and Technology, was established with an objective to support the State in stimulating and intensifying technological innovation in order to improve economic growth and the quality of life of all South Africans by developing and exploiting technological innovations.
Solly Fourie, Head of Department, Department of Economic Development and Tourism, Western Cape Government:
“We know that there is a strong need to develop and improve the socio-economic conditions of the citizens in our region. To this end, the creation of a healthy and vibrant regional innovation system can be a catalytic driver of sustainable economic growth and development. But neither DEDAT, nor the WCG, are able to tackle this alone. The partnerships created through the Seed Fund and Jobs Fund; and initiatives like it, go a long way to creating an enabling regional innovation system in which we collectively draw on the Quad helix’s expertise and resources; promote local industry and attract and grow innovative businesses. By doing this, we are crafting the best possible conditions for businesses to develop in this region.”
Start-ups Require A Strong Legal Foundation Webber Wentzel Ignite
Entrepreneurs, start-ups and scale-ups are a lifeline to South Africa’s economy.
Entrepreneurs, start-ups and scale-ups are a lifeline to South Africa’s economy. It is however a harsh environment and many entrepreneurs find themselves in a situation where they are wearing many hats and navigating potential pitfalls without the knowledge that many professionals have from years of experience.
This is especially true from a legal point of view where entrepreneurs are faced with real world regulatory challenges that could have far-reaching consequences on their fledgling business, such as financial regulatory, tax, exchange control and intellectual property.
A common example is that start-ups often forget to secure the rights and licenses they need to operate. For example, would you invest or partner with a company that:
- doesn’t have a legal right to use their brand
- doesn’t have proprietary technology; and/or
- is reliant on a third party agreement that doesn’t permit commercial use?
Related: How To Raise Working Capital Finance
These avoidable shortcomings often result in failures at critical junctures. The specialist legal services needed to avoid these problems are typically not easily accessible to start-ups.
With this in mind, Webber Wentzel has launched a project called ‘Webber Wentzel Ignite’ – a legal incubation programme that will provide selected entrepreneurs and innovators from any sector with:
- tailored legal services valued at up to ZAR 100,000;
- bespoke mentoring and training support – focused on legal knowledge and developing key legal skills relevant to start-up businesses; and
- targeted networking and profile-raising opportunities.
Video about Ignite
Webber Wentzel is not asking for equity or exclusivity; only an opportunity to connect and make a difference as a trusted advisor over the long-term. It is a wonderful opportunity that will set the selected entrepreneurs apart in the marketplace. Applications close on 15 January 2018
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