Industry news

Crime hits the industry

The desirability of branded goods across all strata of society is a known fact, but they are not necessarily affordable to all. Illegal traders therefore started selling top brands on street corners at such a low price that it not only devalues the brand, but also causes losses to retailers.

It now appears that this illegal black market is run by well-organised crime syndicates. At least three major apparel and footwear distributors have had their warehouses hit in recent months and have lost millions of rands worth of goods.

Whilst some arrests have been made, the spider web of the criminal network seems impossible to unravel as the kingpins remain out of reach, mainly because the pawns appear to be illegal immigrants, afraid of deportation and even more afraid of losing their lives if they inform.

Who’s involved?

Gideon Abrahams of Kulcaklub says that his brand, Loxion Kulca, was specifically targeted when the robbers broke into a warehouse in Johannesburg.

"The warehouse held more than R40-m of goods, but they didn’t touch anything else but R1.3-m of Loxion gear."

A few days later, after a tip-off that the warehouse was going to be robbed again, a police task force laid a trap in which a suspect was caught. After some persuasion he reluctantly revealed that a Somalian syndicate was behind the crime.

"They were very well organised and arrived in two eight ton trucks without registration and chassis and engine numbers."

Abrahams suspects that people driving a patrol van with the markings of a well-known security company employed to protect the premises might be involved. "The night before the arrest the patrol vehicle saw us waiting for the culprits and must have alerted them to the trap. The following night, they didn’t get a chance to alert them," he adds.

Footwear Trading, distributors of branded footwear like Skechers, Levi’s, Soviet, Fila, Diesel and others, also suffered a loss of R1.6-m when 16 000 pairs of shoes, including 4 000 pairs each of Levi’s and Soviets and 8 000 pairs of Orlando Pirates and Kaiser Chiefs canvas, were stolen from their warehouse during the past festive season.

According to a Footwear Trading director, the theft was only picked up during a post-holiday stocktake. Again there were indications of inside involvement.

"The warehouse has an alarm, but it seemed to have been disarmed at certain times during that period. We conducted a series of lie detector tests and employed the services of an investigation company. Some security guards failed the test, but this was not conclusive. The security company offered us very little assistance in this investigation."

Shortly afterwards a man, who turned out to be the brother of one of the guards on duty at the time, was found in possession of 60 pairs of Kaiser Chiefs footwear, which were part of the stolen stock. The man was arrested, but the police and the investigative team couldn’t get him to sign an affidavit.

"The guard (his brother) was also arrested, but no evidence came out of this investigation," The Footwear Trading director explains.

The Loxion Kulca brand was targeted again, this time footwear distributor, Treets Footwear, lost R1.5-m in a robbery at a warehouse. Although they don’t have definite proof, Graeme Katz is convinced that a foreign organised crime syndicate was involved.

Where do the goods go?

The responses vary. Abrahams says that none of his goods had been recovered locally, but he did receive information that it was being sold in Mozambique. He says there is a massive underground network operating in high-end goods, which involves trucking them across the border.

This isn’t limited to clothing and shoes, but also electronic goods. (see box)

Goods stolen from Treets and Footwear Trading seem to have made their way onto the local market through informal traders and fleamarkets.

Katz says he has heard that his brands were available on the street, but hadn’t seen them personally.

When they heard that the stolen Footwear Trading goods were being sold on the streets "we immediately made test purchases, signed affadavits and got the investigation going," says Laurence Slotsky.

"We established that the goods were being sold by informal hawkers, who were mostly illegal immigrants, apparently from Malawi," explains the forensic investigator, Carel Westraad.

The Footwear Trading director goes on to say that the "police weren’t well organised or really interested in this investigation. Raids were conducted and suspects — foreigners — were arrested, but they could not give further information on any warehousing and who the ringleaders were. It was almost like Harry Houdini arrived and the goods disappeared into thin air."

Abrahams concurs with this view and reckons the gangs are highly organised. He suspects that stolen goods are being sold from a certain warehouse in mid-town Johannesburg, but it is virtually impossible to gain access as the operators are very suspicious of people that they don’t know.

The effect on the market

A consignment of the value of Kulcaklub’s would be sold illegally for around R50 000, Abrahams estimates, which is a lot of money for the syndicate to make considering they hadn’t paid for the goods.

An item that would retail at around R200 costs about R40 to make, but it can be sold on the streets for as little as R20. This results in loss of sales for the legal traders, who have to compete with a ridiculous price offered by hawkers.

Insurance is also a problem because losses of this calibre are likely to have a nasty effect on premiums. There is also no guarantee that the insurance company will pay — as happened to Footwear Trading.

"Because there was no forced entry, the insurance won’t pay. By being honest we lost out," the Footwear Trading director says. "If we were a small company we would be out of business with a loss like this."