Caveat Emptor - Let the Buyer Beware

You're negotiating an order for 2 Million N95 PPE masks. The buyer has shown you the certificates, import papers and you've seen photos of the loaded stock. As the representative of the seller, you're hot to trot to put the deal to bed and bring the parties together on a conference call. Mid way through the call the buyer asks to see a copy of the SAPHA certificate of the seller. He needs to satisfy himself that the import channels have been properly followed and that the stock has been correctly handled and stored. The seller immediately becomes indifferent. He terminates the call. As the broker, the sale is floundering and there's something that just isn't right. A little searching shows that the "seller" is actually representing an importer who doesn't have a SAPHA certification and isn't a regular importer of Medical Goods. The goods are actually well manufactured, but aren't certified for medical use. While the buyer hasn't lost any physical money, he's lost valuable time and the broker has lost all credibility. This is is the nominal cost of not performing a due diligence from the outset of negotiations.

Covid-19 has changed the way we do business. From sales to marketing, workspace to field-forces.

Most companies have adapted incredibly well to the new pace, the new priorities and of course ensuring that their workspace are safe for staff and essential guests.

In times of crisis, trade in some areas can be extremely brisk. One of these areas is of course PPE equipment where we’ve seen a tremendous surge in new players entering the market. From simple cottage industry producers of fabric masks to re-purposed factories churning out essential equipment it’s a vibrant place to trade.

On the downside, we’ve seen extreme activity from the scammers out there. Supply scams, buyer scams, counterfeit stock and of course invoice switching and false consignments. It’s a veritable minefield for those who regularly trade in the medical import and wholesale fields.

From a due diligence perspective the reality is quite clear and patently obvious. If you’re neglecting your due diligence when you start your negotiations, you could end up spending valuable time on fake buyers or sellers. What’s worse, you could end up damaging your own reputation by taking a bad buyer or seller to the negotiating table with your client. If you’re buying PPE you could end up out of pocket a handsome sum of money and have absolutely no stock to show for it.

As a company we obviously compile thorough due diligence reports for our clients based on Open Source Intelligence. The reality is that sometimes companies just need to have a quick look themselves to satisfy themselves of the need for further investigation before the deal goes too far.

The starting point of any business negotiation around PPE equipment at this stage is to ask for company details up front. This should include a valid Ck or PTY Ltd registration number that can be verified. The companies address should be provided and verifiable. Beyond this you’d want to see that the phone numbers you’re provided with are DEFINITELY Telkom landlines (although that too is no guarantee).

Cellular numbers should be verified and if the transaction is anywhere near the R1 million mark then obviously a VAT number is essential. Logically you have to ask yourself, if a companies turnover has not yet exceeded the threshold for VAT registration – are they experienced in trading in the areas of the numbers you’re talking about.

Finally, you want to satisfy yourself that the person you’re dealing with on the phone or e-mail is exactly who they claim to be. You should certainly be verifying via simple google searches whether the details provided match those as publicly advertised.

Beyond the above, one has to look at purchase orders and requests for tenders by government. Here is the blunt and obvious reality. If you are NOT listed on the Centralized Supplier Database in a particular category – like PPE equipment, you won’t receive invitations to tender via e-mail. It’s really that simple. Purchase orders are too easily forged and require close scrutiny, tender processes seldom close within mere days and will always have an adjudication phase that takes time. Nothing happens in a rush – at least nothing GOOD anyway.

The larger the deal, the greater the need for due diligence.

Open Source Intelligence will be your quickest source of information that can be referenced and cross referenced to gain some form of peace of mind before spending hours on engagements and lost opportunity costs. Every scammer taking up your valuable time is blocking the line for a quantified lead to each you or distracting you from core business.

Do your homework methodically and be prepared to submit your own company for reasonable scrutiny to avoid potential losses and reputational damage.