Various forms of economic fraud are pervasive in the global economy, including in several African countries: from the sale of counterfeit, substandard and/or expired products, to credit card fraud, transfer mispricing or tax evasion. Fraud brings gains to some actors and causes harm to others, including consumers, traders, companies and governments (e.g. loss of tax revenue). Understood as intentional deception made for personal gain and/or to damage another individual, fraud, according to numerous reports and research outputs, is at very high levels, and on the rise globally (e.g. PwC 2018). In recent years, public and private actors in both the global North and the global South, including governments of high-income countries, and international/intergovernmental organisations such as the OECD and Interpol, have put forward initiatives in the name of fighting and reducing various forms of fraud and other crimes in the economy (e.g. OECD 2017). Such anti-fraud measures (AFMs) were prevalent in major African economies – from Nigeria to Uganda, Kenya and South Africa – by the mid to late 2010s too, and arguably at a higher level than in the 2000s. A study by the Association of Certified Fraud Examiners has recently argued that Africa is amongst the leading regions in the world to implement internal and external audits in business organisations, as well as carry out surprise audits, introduce antifraud policies and reward whistle-blowers (Padgett 2014, 178). Academic data and analyses of the phenomenon of AFMs on the continent, however, are sparse to date.
AFMs are of interest to political economists for a range of reasons. The analysis of the respective dynamics provides insights, among others, into the political economy of: fraud; state–business relations (including conflict and power dynamics and lobbying); regulation and regulatory agencies (including regulatory capture, ‘compromises' between state and capital concerning the details of the regulations and realities of enforcement, new ‘price’ to pay for getting around regulation, internal dynamics in relevant agencies including in-house corruption/extortion and fights against them); related discourses and ideologies concerning private sector development, benefits and harm of business, capitalism, the state etc.; role and commercial/political interests of powerful players such as transnational corporations (TNCs) (including the globally operating anti-fraud companies), Western donors, local business elites, top state/government officials; effect of measures on subaltern classes, non-dominant business factions etc. and related sector-specific struggles between various actors (indigenous vs foreign, large vs small-scale, connected vs unconnected, Western vs Chinese businesses etc.); the relative commitments of nation states to social harm reduction, economic equality/justice, fiscal health etc.; relevant aspects of international politics (including distribution of power within/between nation states); and conditions and dynamics that bring about measures-related fraud reduction in a sector and subsequently have measures to be sustained/improved, watered down/removed etc.
Against this background, this set of two briefings (of which this is the first) explores AFMs in several African countries. The research was conducted between 2015 and 2016, through desk-based research which focused on examining various online news outlets of the respective countries, spanning approximately the period 2005–15. We focused on media outlets because this is where the recent surge in AFMs first became apparent; they also offered an accessible and useful source of data gathering.1 Nine countries were studied. This briefing focuses on the countries researched in the Southern African region: Malawi, Botswana, South Africa and Zambia. It provides a country-by-country reporting of some of the characteristics of identified measures, including some of the sectors and actors involved. The research is exploratory, and the data set limited. The aim here is to start approaching the phenomenon and respective data, i.e. to give an overview, snapshot-type analysis, a first screening of some of the data, rather than an all-complete, comprehensive, in-depth analysis.
The data below reveal the following characteristics of the AFMs studied: corporations and states were the main proponents of the AFMs. Awareness building (e.g. via sensitisation campaigns) was one of the key methods to popularise the anti-fraud fight. Technology (mainly in the form of computer software but also whistle-blower hotlines etc.) was used as a main tool in AFMs. There was an involvement of international companies specialising in checking the compliance of firms with regulations and standards. The rhetoric including slogans in AFMs had a sense of alarm and urgency (e.g. referring to fraud as a cancer). AFMs were particularly prevalent in banking and telecommunication industries and sectors affected by copyright issues (e.g. textiles). Further, the drivers behind AFMs included: first, concerns raised by states and companies with business, market and consumer matters, i.e. imperatives of brand development and protection (‘reliable brand’ image), attracting/retaining customers, market protection and expansion, profits and economic growth, as well as consumer safety, confidence and well-being (i.e. countries wanting to move away from being a dumping ground for substandard/unhealthy foreign goods). Second, ensuring sustained or increased tax revenue is another official rationale for AFMs. Third, there were indications that AFMs are by now fuelling a significant for-profit industry that makes money with, for example, the development of anti-fraud technology tools and compliance checks and involves specialised, often transnational firms. These firms also do promotion for AFMs. Finally, the collected news material also showed that AFMs, as expected, were not devoid of power dynamics, tensions and conflicts, i.e. political economy and politics.
Botswana
In Botswana, AFMs featured in sectors such as insurance, finance, banking, pharmaceuticals and technology. In the insurance sector, the country’s leading financial services group, Botswana Insurance Holdings Limited, introduced in 2013 ‘Resebetse’ – a tip-off service hotline (Botswana Guardian 2013). The move followed from some serious cases of insurance fraud that reportedly occurred in the late 2000s (Sunday Standard 2007, 2008). In a similar measure, ‘Tip-Offs Anonymous Hotline’ was introduced by the Botswana Development Corporation; the hotline is managed by Deloitte Consulting (BDC 2014). The managing director of the Corporation cited as objectives of the initiative, the commitment and advancement of good corporate governance, ethical business conduct, staff empowerment and zero tolerance of fraud. Representatives from Deloitte highlighted that tip-offs served as the strongest method for detection of fraud, theft and corruption. Botswana Investment and Trade Centre, a state entity, also launched a ‘Fraud and Ethics hotline’, endorsed by the Directorate on Corruption and Economic Crime; the hotline aimed to address economic crimes in the workplace (Shapi 2015). The organisation advocated for companies and corporate staff to support the measure ‘in order to realise great profits’. Note that according to a study of banking fraud in sub-Saharan Africa (Temenos and NetGuardians 2016), whistleblowing emerges as a leading method for fraud detection; substantial investment is directed towards this type of AFM. According to expert analysis, whistle-blowing mechanisms are furthered by companies’ increased investment in technology and analytics (Financier Worldwide 2019, 5).
Moving on: in the banking sector, Barclays Bank of Botswana – as part of the Annual International Fraud Week – ran an awareness-raising presentation at a university (MmegiOnline 2016). Using the tagline ‘Act now! Fraud stops with you’, the bank educated the public on various forms of fraud, and encouraged its customers to take necessary steps to ensure safety of their accounts as well as report any suspicious activity to the bank or appropriate agencies. ‘We understand that as technology evolves, we as a bank need to be up to date with its changes. Our objective this week is to positively contribute towards the awareness of cyber-crime through education and participation’, said the head of Marketing and Corporate Services. Further, the head of Financial Crime and Fraud Operations indicated that everyone had to be involved in combating fraud.
Public awareness-building and education campaigns were a key method in the AFMs studied, here and in other sectors in Botswana, and also in other countries studied. A rhetoric of win–win, (right) choice, participation and everybody-needs-to-get-involved-and-play-a-part (what the UK government names ‘fighting fraud together’; National Fraud Authority 2011) was also a key feature. The message here: everybody has to, wants to and is able to fight clearly definable and identifiable ‘wrong-doing’. There are similarities here to (especially liberal-type) campaigns in the (international) non-governmental organisation sector in Africa.
Further, Barclays was an example of companies that had been charged with fraud themselves (e.g. in the US/UK, and accepted billions of fines in settlements in their respective cases) now being involved in AFMs (ITV 2017; White and Brice 2018; Makortoff 2019). This is a particular component of the political and moral economy of AFMs in neoliberal capitalism: certain big firms (among them the household names of global capitalism) are in a double role, fraudster and anti-fraud crusader; and the capitalist state cooperates with (e.g. obtains advice) regarding AFMs from firms that have (alleged) fraud links (see Christensen 2016 on the same point in the case of the global accounting industry).
Further, the Bankers Association of Botswana introduced a new cheque-clearing system – the Botswana Automated Clearing House, which is part of a larger campaign to modernise the National Payment Systems in the country (Pinielo 2015). A further AFM in this sector involved the international company Visa Inc. As it ‘moves to clamp down on fraud’, it introduced VISA Paywave: a card that relied on an electronic chip instead of the magnetic strip used previously (Dube 2009). The Visa Sub-Sahara general manager outlined the various benefits of a cashless economy: ‘the use of VISA cards boosts gross domestic product growth. It brings people into the banking system.’ Accordingly, plastic money also improves financial transparency and eliminates the grey economy. This reasoning is an example of how the anti-fraud fight was used to advance various business agendas (cashless economy etc.) that arguably had their (presumably underplayed) own fraud risks too.
In the pharmaceuticals industry, Global Pharma Health Fund and its funder Merck – an international pharmaceutical company with headquarters in Germany – donated a mini mobile lab to the Ministry of Health with the expressed intention to help identify counterfeit medicines (Medical Observer 2015). Accordingly, the facility has the capacity to identify 75 key active pharmaceutical ingredients, and to offer a quick, cost-efficient and reliable method of detection of counterfeit medical products. Notably, several AFM actors here (and elsewhere) promised – business-speak style – clear, almost-guaranteed, quick, efficient and lasting benefits and improvements from the adoption of the one promoted measure.
In the textile sector, raids and confiscation of tons of fake clothes of global brands such as Polo, Nike, Levi's, Converse and others occurred in 2012. This reportedly followed as a response to accusations from international clothing brands, particularly those from South Africa, that Botswana was not in adherence with Multilateral International Copyright Treaties and the Agreement on Trade-Related Aspects of Intellectual Property Rights (administered by the World Trade Organization); and that the country’s inactivity around tackling this issue provided a favourable environment for the counterfeit market (Bosaletswe 2012a, 2012b). A clear dissatisfaction with the existence of counterfeiting was also voiced by state representatives who underlined that this practice tainted the image of the country and made it an ‘unfavourable destination to invest’. A preoccupation with the country’s image internationally was apparent in this and other AFMs in Botswana, and also in other countries.
Further, it was reported that the representatives of the brands from South Africa who worked with Botswana’s Criminal Investigation Department facilitated these raids. This suggests that to a significant degree, companies emerged as leading actors in AFMs, educating, training and advising state actors regarding measures (aka ‘best practice’ etc.). Moreover, these same private actors praised Botswana (i.e. the government/state) ‘for moving in a good direction by seizing products that are related to organized crime’ (Bosaletswe 2012a). The financial imperative behind such measures – e.g. for foreign firms that do business in Botswana – is evident.
Companies also complained at how counterfeiters constantly adapted to the changing regulation and clampdowns, for example by storing garments in villages and encouraging third parties to sell on their behalf. A representative of one of the South African brands identified a need to be ‘pro-active, vigilant and committed’ given that ‘importers are continually adapting to the anti-counterfeiting measures’ (Bosaletswe 2012b). Arguably, rhetoric such as this suggests that the fight against fraud is like the ‘War on Terror’ – it is never-ending, a permanent crusade. Moreover, the notion of ‘continually adapting’ tricksters indicates a perception of AFMs as having limited, temporary (if any) effects given actors ever circumventing the rules (also Streeck 2009).
Furthermore, in various statements by pro-AFMs actors, a significant share of the responsibility for fighting fraud was placed on the consumers; hence also blame and guilt for aiding fraud by inaction, wrong consumption (of counterfeits etc.) and so on. For example, when praising Botswana’s actions, a legal advisor to LA Group, a South African company, stated that ‘consumers have to be aware that buying counterfeit products may be cheap but the cost in terms of lost revenue and supporting organised crime is high’ (Bosaletswe 2012b). Therefore, in this view, it is individual consumers – not those that create conditions of poverty and tight household budgets which make many customers opt for the cheapest options in markets – that are being encouraged to reconsider their choices, and use their agency in a pro-AFM manner. Lastly about the raids: further tensions were revealed as Chinese nationals who were arrested were said to be facing deportation. Matters of AFMs, (usually small-scale) foreign actors and immigration were interacting also in other countries (e.g. Uganda).
AFMs in the technology sector, in particular mobile phones, featured strongly in the news reviewed. For example, the global multinational Samsung, as part of its ‘Buy genuine’ campaign, advocated for recognising the benefits of buying genuine phones, stating that ‘we want to educate and empower consumers to make the right, genuine, choice so they may reap the rewards of that decision whilst contributing meaningfully to legitimate economic returns’ (Maramwidze 2014). It was reported that Samsung worked towards bringing together relevant authorities and regulators and wished to join police on their raids and arrests of counterfeiters, much like it did in other countries including Kenya, Rwanda, Zambia and South Africa (Dikuelo and Mguni 2015). Among the incentives that the company offered to customers for ‘buying genuine’ was a two-year warranty and service support on purchased items. Arguably then, AFMs brought together ‘stakeholders’ from across the private and public sector, i.e. ‘good’, supposedly non-fraudulent/non-corrupt firms and authorities, all interested in genuine and honest commerce. There were variations concerning the initiating actor of such joint gatherings and campaigns. Note as well the discourse around fake vs genuine; legitimate vs illegitimate; again here, and in other AFMs.
Further, GUD Holdings, a South African manufacturer of automotive and industrial products, in 2015 partnered with Botswana’s authorities in an undercover investigation to seize counterfeited filters (GUD Filters 2011). The company also organised a training event attended by detectives from many branches from across the country, to educate the authorities on how best to identify counterfeited produce, echoing our earlier observation regarding how firms were ‘educating’ the state as part of AFMs. Firms with various stakes in AFMs emerged as leading actors when it came to training and awareness building.
Similarly to dynamics in other countries, affirmative language characterised many of the identified AFMs in Botswana. For example, according to the CEO of the financial services group Botswana Insurance Holdings Limited, the above-mentioned tip-off service hotline Resebetse ‘guarantees identity protection’ of those reporting the fraud (Botswana Guardian 2013) and the Bankers Association of Botswana described their efforts as those that help to ‘tighten screws on the national payment systems’ (Pinielo 2015). Benefits that adherence to AFMs can have were highlighted strongly: businesses were encouraged, as mentioned above, to adopt the ‘Fraud and Ethics’ hotline initiated by Botswana Investment and Trade Centre in order to ‘realise great profits’ (Shapi 2015). A link between the adoption of AFMs and economic benefits, aka profits, was repeatedly declared.
Finally, across many cases, business interests featured strongly. For example, Samsung took an active approach to engaging law enforcement agencies to address the issue of counterfeiting, which reportedly damaged their revenue. According to one article, ‘Samsung also plans to engage authorities and regulators as it has done elsewhere in Africa where its brand has been violated by fakes’ (Dikuelo and Mguni 2015). In other words, lobbying for particular forms of regulation was taking place under the name of engaging and dialoguing with authorities. Corporate and political pressure was arguably put in some cases on regulating authorities to look after the needs of (big) business; in various discourses there was a claim that (there is a risk that) if no action is taken foreign investors will turn away/not come, having a negative impact on the economy (lower growth, fewer jobs etc.). As the deputy managing director and head of consumer electronics at Samsung Electronics SA stated, ‘It’s not just about selling products. It’s about employing Botswana and growing the economy. Our products must make your life better’ ( Ibid. ). There is a suggestion here that Samsung’s products were contributing to the wellbeing of Botswanans, making an ever more compelling case for authorities to do the necessary, i.e. side with big business in AFMs, in the name of advancing consumer welfare and general economic development. In this view, the country/government taking the genuine route is needed to secure future jobs, growth and taxes. Note that the companies called upon and partnered with the state (instead of condemning the state, declaring it to be of no use etc.), i.e. affirming that the state was needed to address fraud and reap the declared benefits of reduced/eliminated fraud.
Malawi
Corruption and fraud within the state apparatus (and related political-economic, including power, processes) have an impact on the dynamics and outcomes of AFMs, also in Malawi. The 2013 Capital Hill ‘Cashgate’ scandal is a good example of this relationship (the analysis of which is beyond the scope of this briefing). Here, there was a reported looting of significant sums by government officials from the Accountant General’s Office, the Office of the President Joyce Banda and Cabinet, the Ministry of Finance, and the ruling People’s Party, private companies and commercial banks. The fraud involved tampering with the Integrated Financial Management Information System, which resulted in over-invoicing: double payments and payments for goods that were not supplied (Ndala Jnr 2013; Smith 2015). The budget director in the Finance Ministry, who allegedly was about to uncover the fraud, was shot in September 2013. Although Banda denied any involvement in the scandal, officials from her party were accused of siphoning off funds to pay for its election campaign (Mapondera 2014). The case triggered audits, investigations, arrests, prosecutions, sentencing etc. This scandal reportedly affected the country’s international image and resulted in aid from Britain and other donors being suspended, which in turn froze projects and programmes (Tran 2014). AFMs thus were generally a part of the post-Cashgate political economy, including activities to rebuild the international image of the country. Actions regarding counterfeit produce, pharmaceuticals and the tax system featured strongly in the news; methods used included predominantly awareness-raising campaigns, introduction of new technologies, arrests and raids.
Such AFMs involved a range of collaborating actors. For example, in 2014, Business Development Facility, a local business development grouping, in order to ‘patch up the holes’ in fraud detection and prevention, organised a conference that involved training and certification of officers from regulatory authorities (Chiyembekeza 2014). Reportedly, the activities of the organisation brought together actors such as the Anti-Corruption Bureau, University of Malawi, Malawi Law Society, Institute of Internal Auditors, Insurance Association of Malawi, Association of Certified Fraud Examiners and Financial Crime Scene Investigators Africa–Zimbabwe. Another collaboration example: to address the problem of counterfeit medicine, Pharmacy Medicines and Poisons Board (PMPB) ran a clean-up operation in a district, confiscating counterfeit and unlicensed medicines worth over K10 million (Makawa 2015). This operation involved collaboration between the PMPB, police, local medicine manufacturers, the media and members from town councils. Inter-agency cooperation as seen in the above two examples was common for AFMs in Malawi and other countries studied. The research did not come across reports of conflicts or tensions within such AFM coalitions.
Further, in April 2014, the Malawi Bureau of Standards (MBS) conducted a ‘sweeping exercise’ in order to curb the amount of counterfeit produce in a local market (Chirombo 2014). The news report informed that there were alleged tussles between the suspected traders and MBS officials; however, MBS denied this. Note that raids, clean-ups and clampdowns seem rather seldom targeted at offices of big capital such as banks etc.
In an example of a sensitisation AFM, TNC Lafarge Cement Company ran a campaign to ‘warn’ people against engaging in counterfeiting its cement products, or else ‘face the law’. A Lafarge marketing and communications executive stressed that ‘as a company, we will make sure that those involved in the malpractice face the long arm of the law’ (Nkhata 2014). Note again the reference to the strong (class) state, i.e. its ‘justice, law and order’ sector.
To address the inflow of fake seeds into the country, in 2016 the government pledged to introduce measures to strengthen controls in the seeds sector and introduce new policies to advance the supply of proper seeds. Speaking at a meeting with representatives of Seed-Co, a African seeds company which operated in 17 countries on the continent, the minister for agriculture, irrigation and water development stated that ‘for agriculture to move forward, quality seeds have to be provided to the farmers and that’s why the government values its partnership with seed companies in Malawi like Seed-Co who have that kind of seeds’ (Nkosi 2016). Notably, Seed-Co is a major contributor to the government’s subsidy programme. Since 2016, further developments have been made, including the country’s participation in the Agriculture Sector Wide Approach Support Project (The World Bank 2017), supported by the International Development Association, a World Bank fund. There was also a revision of the seeds policy. The latter measure has been criticised since it purportedly promotes the interests of private seed companies (Mwafulirwa 2018). Allegedly, an official from Monsanto took part in the drafting of the policy, suggesting conflicts of interests (FAO n.d.; Wise 2019). Food security has been cited as the main justification for the use of commercial seeds (those that withstand harsh weather conditions); however, others have highlighted the importance of preserving local seed varieties (which in some instances outperform commercial hybrid seeds). Again, in the name of AFMs and promotion of the ‘genuine’, particular business interests get promoted and particular state–business alliances (i.e. public–private partnerships of sorts) are created or boosted, and, in any case, rationalised.
Moreover, the new policy stipulated that only seeds that have been certified through the Ministry’s agriculture technology approval committee are allowed to be sold. Pressure could be put on local farmer-run cooperatives as well as small-scale farmers who trade seeds on the informal market; 70% of the rural farming population rely on the informal sector to access seeds. This AFM case reveals a complex set of issues surrounding: food (in)security (and pressures to address this), market protection from (alleged) fakes, competing interests regarding the direction and design of the measure, as well as the political economy of the relationship between (i) the state, international donors and TNCs, and (ii) the state and subaltern classes affected by AFMs. AFM’s power characteristics (e.g. the influence of TNCs etc.) and actual/perceived winner–loser dynamics can be objects of public criticism.
As noted by a senior compliance officer at GE Power (an American energy tech company) in sub-Saharan Africa,
there are an increasing number of medium to large size organisations operating in Africa which have business relationships or dual listings in the US and Europe and which also play a pivotal role in raising awareness among African governments of the importance of the fight against fraud and corruption and how its success is non-negotiable. (Financier Worldwide 2019, 5)
In order to address tax evasion in the country and improve the administration of VAT, the government introduced a compulsory usage of the Electronic Fiscal Device (EFD) in 2014, following an amendment to the Value Added Tax (VAT) in 2011. Penalties were said to be adjusted; those who failed to use the EFD machines were to be fined K500,000; then K1 million and imprisonment for two years (Gwede 2015). The customers were also to be fined if found to be buying goods without receipts and ‘would be liable to a penalty of three times the tax payable’. A member of the parliament warned that people may be ‘punished for ignorance’ – facing prosecutions due to their lack of knowledge of the new legislation ( Ibid. ). Notably, arrests and prosecutions were under way shortly after this measure was introduced, with eight people reportedly arrested for not issuing and retaining receipts in accordance with the mandatory use of the EFD machines (Simutowe 2015), and a further 131 VAT operators penalised for failing to produce evidence of EFD being purchased (Nyasa Times 2014). The introduction of this AFM steered a wide-ranging national debate, whereby some business people expressed that the introduction of the EFDs might be damaging to their business due to the high maintenance cost, and as a result filed a complaint to the High Court. The Court however dismissed the complaints claiming that the arguments from the business people were ‘exaggerated’ and that this measure ‘will not kill your business’ (Phiri 2014). Here, the suggestion is that the enforcement of AFMs outweighs the concerns of the public, whereby the legislation protects the state’s efforts to strengthen tax revenues. Furthermore, there was an initiative by the Malawi Revenue Authority (MRA) in collaboration with the Anti-Corruption Bureau, aimed at tackling fraud involving fake customs documents in business. According to MRA, the illegal acts had a serious impact on the economy and denied the state tax revenues to fund the national budget.2
Moving on: concerns for the protection of consumer rights were raised by various state agencies. At the opening of the Sixth Annual African Consumer Protection Dialogue Conference, the minister of industry and trade stated that the government was committed to ‘preserving, promoting and protecting consumers’ rights’ (Chauwa 2014) and noted that the protection of consumer rights should not be the sole responsibility of the government, and urged public institutions, the private sector and civil society to join in the effort to ensure safe trading practices. Reference was made to the Consumer Protection Act of 2003, which outlines the legislative framework for safeguarding consumers. Furthermore, the executive director of the Consumers Association of Malawi stated that since the enactment of the Consumer Protection Act not a lot of progress has been made, while the ‘lack of enforcement and proper implementation of the Act has led to proliferation of counterfeit products and irregular business models’ (Kkwesa 2015). On the other hand, the executive director of the Competition and Fair-Trading Commission noted that awareness-raising campaigns were being run; notably the commission planned to distribute the Consumer Protection Act to Malawians. The creation of an enabling business environment and the advancement of (an image of) safe consumer practice were part of the official narrative behind these state initiatives. Awareness-raising campaigns were among the most used methods to promote the stated agenda of consumer rights, safety and welfare. In the discourse AFMs were argued to help advance an enabling business environment, job creation and growth. Here and in the other countries studied, public debates and criticisms focused on matters of implementation, enforcement and related gaps between official aims and plans, and reality; and there was a line of argument that noted a proliferation of the very frauds that were targeted by AFMs.
Zambia
AFMs in Zambia echo the trends that we found in the other countries studied: increased measures to counter substandard pharmaceuticals, adoption of technology in the campaigns (especially in the financial sector), confiscation of counterfeit produce (such as mobile phones), arrests, raids and the use of educational campaigns to sensitise customers. More specifically, the Drug Enforcement Commission, a state body, featured as a strong proponent for AFMs. For example, it organised a workshop to facilitate discussion and disseminate knowledge among the auditors from the Ministry of Finance and government spending agencies as part of activities to address fraud and money laundering. Commenting on the increased number of accountants arrested for economic crimes, the agency advocated for enhanced cooperation between the stakeholders named and accounting professionals to enable early detection of fraud. Yet again, advocacy for cooperation between a state entity and professional services comes to the fore here. The Commission reported on regular arrests of individuals counterfeiting money and trafficking drug and psychotropic substances (Zambian Watchdog 2011; Malambo 2015). In the 2016 Annual Report, it urges ‘members of the public to join hands with the Commission in fighting the vices of drug abuse and money laundering in Zambia’ (Lusaka Times 2017).
Moreover, as part of a clampdown, the Zambia Information and Communications Technology Authority (ZICTA) signed an agreement with the Zambia Bureau of Standards (ZABS) and the Competition and Consumer Protection Commission. According to the director general of ZICTA, the relevant authorities ‘were stepping up the fight against cheap, counterfeit handsets’ (BizTech Africa 2011). Inter-agency cooperation related to AFMs were common in the countries studied.
In efforts to fight tax evasion and smuggling, the Zambia Revenue Authority established an enforcement centre which serves as an anti-smuggling point (Chambo 2014). In order to encourage compliance, the authority offered amnesty for those that voluntarily report illegal produce. According to a commissioner of the authority, ‘Government has demonstrated its commitment towards ensuring that all revenue on tax is duly accounted for and there is no room for evaders to operate freely in Zambia’ ( Ibid. ). Note the ‘it is all-being-sorted, all-loopholes-closed’ rhetoric. The official noted that enterprises and business people evading tax do not have a sense of civic responsibility and moral empathy for the country because the money collected from taxes is also used in fighting poverty. There was a suggestion here that those who do not pay tax are ‘immoral’ and do not care about the development of the country. Discourse around accountability and being able to demonstrate effective law enforcement on the state’s behalf was apparent and was a recurrent theme throughout the study. We notice a moralisation of AFMs not dissimilar to the moralisation in (debates about) capitalism in general (e.g. Sampson 2016; Baral 2018; Berger and Przyrembel 2019).
Samsung actively took part in AFMs (Malakata 2010). It organised an ‘anti-counterfeit squad network’, reportedly because the government had shown commitment towards fighting counterfeits and putting in place regulatory mechanisms, such as an anti-piracy unit. If successful, Samsung planned to adopt similar tactics in other countries on the continent. According to the Samsung country manager for Zambia, ‘counterfeit products are impacting negatively on the Zambian government’s revenue.’ The Zambian minister of science and technology said it is important that the country appreciates the critical role intellectual property plays in technology at the national level: ‘The government understands that a conducive environment for innovation and commercialization is only possible if a country has adequate policies and laws, which allow for the award and protection of innovation and creativity.’ The imperative of the creation of a favourable business environment (strong policies and laws etc.) to facilitate economic growth, innovation and technical progress and to attract investment was apparent in governmental discourse. Moreover, the establishment of new bodies, task forces, squads as part of AFMs was common across the countries studied.
Efforts around trying to counter the increasing levels of counterfeit products featured strongly in Zambia. The destruction and seizing of counterfeit Samsung phones were reported widely. In one case, a task force was put together which included the Zambia Environmental Management Agency, Samsung representatives in Zambia and officials from Cycorps Zambia (Zambian private investigation firm specialising in intellectual property), which seized over 2600 handsets. According to the director general of ZICTA, ‘the authorities were stepping up their fight against cheap, counterfeit handsets now flooding the market.’ In further commentary, the official stated that the country would not be used ‘as a dumping ground’ for ‘inferior and possibly hazardous ICT equipment’ (BizTech Africa 2012). In another initiative to address the inflow of counterfeit phones, a committee was formed which included ZABS, ZICTA and the multinationals MTN and Airtel, as well as government-owned telecommunication service provider Zamtel (Malakata 2014). Described as ‘a matter of urgency’, the authorities promised to ‘fast-track’ the process of regulation. Two thousand seven hundred Samsung handsets were switched off; there was continuous lobbying from major mobile manufacturers in this regard. Notably, Zambia was part of a ‘region-wide crack down’ initiative of various East African countries to fight business with counterfeit Samsung mobile handsets; this featured – following Kenya’s lead of blocking 1.5 million mobile phones – switching off mobiles to ‘stop phones blocked in one country from resurfacing in another’ (Taylor 2012).
In the health sector, in the name of addressing theft and unlawful reselling of drugs, the Ministry of Health has set up a task force to strengthen the branding of products (Mwape 2015). As part of the activities, sensitisation campaigns were to be run to raise awareness of this among the public and those selling drugs. Most people who were arrested by the task force claimed to have been using the money realised from the sales to pay children’s school fees and to sustain their lives.
Comparable to the other countries studied, the language of AFMs in Zambia was one of urgency. For example, those involved in an initiative at Samsung Electronics Southern Africa have been compared to an ‘anti-counterfeit squad network’ (Malakata 2010), reflecting the almost military urgency of the matter. Notable too is that AFMs faced resistance from those (allegedly) committing the crimes. For example, in the film industry, in an initiative to prevent the breach of intellectual property rights, the Ministry of Information and Broadcasting Services introduced a hologram which is supposed to mark certified products. However, according to the organisation’s representative, the ‘pirates’ started producing counterfeit holograms (Lusaka Times 2014). This and other reporting about reactions of targeted actors (see also forthcoming second briefing) to AFMs raise questions regarding the class dimensions of the measures, including their targeting, design, legitimacy, effectiveness, and (lack of) backing from the general public and/or professions affected.
South Africa
South Africa’s economy is reportedly a fraud-intensive one: the PwC’s biennial Global Economic Crime survey at some point ranked it as the country with ‘highest instances of economic crime in the world – reaching the highest level over the past decade’ (BusinessTech 2018; PwC 2018; see also Bond 2019; Vilakazi 2019). Regarding AFMs in the period studied, these are our data: in 2014, the Payments Association of South Africa, which manages payment systems in the country, initiated the adoption by South African banks and providers of e-commerce of the 3D secure credit card authentication service for credit card transactions (Roane 2014). This initiative aimed at reducing credit card fraud; it allowed for consumers to be authenticated, which was meant to prevent fraudsters from using someone else’s card. PayU – an international fintech company headquartered in the Netherlands responsible for providing technical support for the system – stipulated that this initiative will safeguard consumers and will contribute to the growth of online e-commerce; note that most AFMs’ rationales claim a link between individual-level and country-level benefits. The initiative was said to be mandatory for those actors trading online and those who do not comply with the new standard will face a one-off fine of R100,000 per merchant and a fine of R50,000 per month, per merchant thereafter (SAPA 2015). It was also reported that the country’s banks have supported the system (Roane 2014), and some banks were to help in the implementation of sanctions by passing information about those that are non-compliant on to the relevant authorities (SAPA 2015). There were concerns about the complexity of the measure’s implementation and management. According to a representative from PayU, the roll-out should have been ‘phased’ ( Ibid. ). The initiative faced challenges: there was reportedly limited compliance as well as resistance by some of South Africa’s biggest companies ( Ibid. ). However, the report claimed many benefits of this system, including ease of access and use, improved security for customers, as well as this being a mechanism to limit the risk for those trading. While the safeguarding of credit card users was perhaps an official aim of the initiative, it is also evident that the growth of online e-commerce, and the business interests attached to this, played a role in the introduction of the regulation (also note its ‘mandatory’ status).
As illustrated by numerous examples, technology is used across the board in AFMs in the countries studied, especially in the banking sector. One of the strongest rationales for the increased adoption of technology in the banking system is the reduction in transaction costs (Maimbo, Faye, and Triki 2011, 22). However, the same technology, in certain situations, has the potential to act as a fraud-enabler. For example, mobile banking – which has been gaining ground across the continent – allows authentication without the customer being present, and in some instances makes the system more vulnerable to those who can trick the technology (Temenos and NetGuardians 2016, 12). Such concerns about tomorrow’s fraud problems arising from today’s fraud solutions do not seem to be discussed much in the reporting we have come across.
Further, the South African Police Service (SAPS) and the South African Banking Risk Information Centre (SABRIC) joined their efforts in addressing bank-related and cash-in-transit crimes (SABRIC 2015). A joint strategy was developed, with the memorandum of understanding being renewed. The authorities agreed
to cooperate in educating the public, increase the capacity in the SAPS to administer cyber-related commercial crime, enhance the intelligence capabilities between the SAPS and the industry and to ensure, as a matter of urgency, that the top-20 bank and cash-in-transit criminals in every province and at Head Office, are arrested. ( Ibid. )
Further, Capitec Bank partnered with the Department of Home Affairs and used biometric technology to limit the ability of thieves to commit identity fraud (Alfreds 2015a). The use of fingerprint technology was said to ensure that only those consumers who pass authentication were allowed to use the services, thus to prevent fraudsters from gaining access. Furthermore, in order to eliminate the chance of fraud occurring as a result of corrupt staff members, individual staff members’ fingerprints will be linked to specific transactions, advancing traceability. Nedbank also employed a multi-factor authentication system known as Nedbank Market Edge. It incorporates Nedbank ID and Approve-it, which requires that new and existing costumers create an online profile called Nedbank ID, where security filters are deployed in order to prevent data loss (Alfreds 2015b). Approve-it on the other hand is a cell-phone-based transaction authentication system, which again requires the authentication of consumers and which is thought to help to withstand account hacking and phishing. Notably, the current ‘free market’ era has resulted in an economy where the actors have to authenticate themselves in complex, data-heavy procedures before they can ‘do business’. The partnership between a state actor – the Department of Home Affairs – with Capitec is noteworthy too. There was no clear indication of who exactly is to monitor and manage the use of biometric information (or data storage); and whether the consumers themselves will be aware that their biometric information is passed on to a financial institution.
Moreover, Capitec Bank has been referred to the National Credit Regulator and taken to court by consumer advocacy bodies due to its track record of reckless lending and other dubious practices deployed to expand as rapidly as possible. For example, various loan products were exposed as exploitative or illegal and then withdrawn under pressure, but only to reappear after an interval under a different name. Capitec’s use of garnishee orders to ensure repayment of exploitative loans was another tactic that skated the law. Also, Capitec was over-indebting financially illiterate miners via its several branches on the Marikana mining complex, where later the miners’ strike and Marikana massacre occurred. Capitec Bank is thus another case where a major global corporation with a track record of questionable practices is a key proponent – and partner of the state – in an AFM (see also Bateman 2019, in this issue).
In addition, the South African Revenue Service (SARS) introduced a second high-technology cargo container scanner at the Cape Town Harbour, in an effort to curb illicit trade (Phakathi 2015; SARS 2015). Reportedly, the scanner uses X-ray technology which allows cargo to be examined in a non-intrusive (and arguably more ‘accurate’) manner. The scanner can detect 40 different types of materials, as well as detecting copper wire, scanning through up to 380 millimetres of solid steel and detecting radiation of materials. New baggage scanners were also being installed at 10 customs check-points to complement the efforts. Since the instalment of some of the scanners in 2015, non-declaration, false declaration, misclassification of goods or prohibited and restricted goods have been identified (Phakathi 2015). The above initiative suggests that the state, for various reasons, was willing to invest heavily in modern technology that (supposedly) prevents the smuggling of counterfeits. The cost of smuggling and other forms of illegal trade to the country’s revenue was one of the push-factors behind such initiatives. Generally speaking, AFMs were used to justify investment in state/public sector capacity.
Awareness raising was a widely used method. For example, the insurance company Mutual & Federal (now known as ‘Old Mutual’) invited a representative from the South African Insurance Crime Bureau to host fraud-awareness sessions. This event was run as part of ‘Fraud Week’, an annual event first introduced by the Association of Certified Fraud Examiners, which opened its first Chapter in South Africa in 1998 (FANews 2014).
Several authorities such as the police, the Counterfeit Unit and Department of Home Affairs regularly confiscated goods worth millions of rand in ongoing raids. For example, in 2015, goods worth R5 million were confiscated, which included brand names such as Nike, Adidas and Puma (Enca 2015a). As part of an operation named ‘Operation Fiela’ (translated as ‘sweep the dirt’), goods worth over R1 million were confiscated (Mortlock 2015). This operation, which involved the army, was launched after a wave of xenophobic attacks in April 2015. According to the enforcement authorities, the operation aimed to curb crime, including the possession of illegal produce in the country. Thousands of people were arrested, including hundreds of illegal immigrants. Some human-rights organisations criticised the operation, claiming that it purposely targeted immigrants, searched homes without warrants etc. (Enca 2015b). Some commentators, including those from the legal fraternity, noted that the targeting of immigrants might have had a xenophobic edge (Mudukuti 2015).
Further, the Companies and Intellectual Property Commission, the Southern African Federation against Copyright Theft and SAPS have called upon South African citizens to boycott pirated and counterfeit goods in a move to counter the inflow of illegal produce (SA News 2014).
South Africa is regarded as a top dumping destination for fake and illegally imported goods due to the high demand created by local consumers. In one year alone, SARS conducted over 25 000 seizures and confiscated illegal goods valued at R2.6 billion. ( Ibid. )
Concluding remarks
AFMs are a growing phenomenon in neoliberal Africa. They provide important insights into the latest twists in one of the biggest projects of donors, development agencies and governments on the continent: private sector development. The briefing has provided evidence of aspects of the political-economic dynamics of these measures; further empirical research is required to detail these issues. Explorations are required regarding, for instance, the political economy of (i) the relations between the state and TNCs (including anti-fraud expert companies) in AFMs; (ii) the interests and role of donors, and powerful foreign actors generally (OECD etc.) in AFMs; (iii) AFMs as business (contracts etc.); (iv) AFMS and competition/market control (barriers to entry etc.); (v) AFMs that target subaltern classes; and (vi) regulatory agencies (national bureau of standards, revenue authority etc.) and their handling of agency/state-related contributors to fraud in a sector (e.g. interference to ‘go slow’, corruption, officials’ business interests, legal loopholes, understaffing).
Notably, AFMs need to be interpreted in relation to the structures of power and political economy of the society in question, as their apparent efficacy, or not, will be affected by, and in turn will change these. Use of AFMs as political tools to disadvantage opponents and competitors is common, and more research needs to be carried out to find out how AFMs fare (and which ones can successfully endure and actually contain fraud, and why) in the highly political context of the private sector in many African countries.
We conclude: first, AFMs are shaped by powerful actors including big business (and particularly TNCs). They are interwoven with key commercial actors' struggle for markets, sales, profits and competitors' exclusion (barriers to market entry etc.) Second, AFMs are launched and sustained for reasons that go beyond an interest in ‘fighting fraud', and include for instance commercial interests of specialised anti-fraud firms and the state’s interests in reproducing, reinventing and repositioning itself on matters of economy, business, regulation, legitimacy and ideology. Third, structures and dynamics of power and interests, among others, shape what is regarded by the state and influential business factions as legal/illegal, harmful/useful, unpatriotic/patriotic practice (or goods/services), legitimate/illegitimate trickery and so on, and which sector, actor and activity is targeted (or not) by AFMs, and in what way.