Kenya is losing over KSh100B ($939.2 million) in revenue to counterfeit businesses annually, according to a recent report.
The report released by the Anti-Counterfeit Authority (ACA) prepared to determine the extent and magnitude of illicit trade noted that between October 2019 and February 2020, government revenue lost in 2018 stood at KSh102.99 billion ($967.3 million) up from KSh101.23 billion ($$950.78 million) in 2017.
The hardest hit is the manufacturing sector which is under a crippling threat. The situation got so bad that President Kenyatta issued a warning to importers trying to thrive from importation of counterfeit goods.
“Counterfeits are a major hindrance to the development of the local manufacturing sector denying millions of young Kenyans employment opportunities,” President Kenyatta said.
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Counterfeiting is a global supply chain problem.
Counterfeiting and piracy are highly pervasive across countries and sectors, representing a multi-billion-dollar industry globally that continues to grow. The Organization for Economic Cooperation and Development (OECD), estimates that the value of international and domestic trade of counterfeit and pirated goods range between US$923 billion – KSh1.13 trillion in 2013 and is expected to grow to between US$1.90 – $2.81 billion come year 2022. This represents between 5% and 7% of the world trade. This is a very conservative estimation, since it did not include pirated digital products.
According to the ACA report , the Standards and Regulatory Committee of the Kenya Association of Manufacturers (KAM) estimates that counterfeit and substandard products cost the East African region over US$500 million in lost government tax revenue annually.
Other statistics going by a conservative estimation from the KAM study in 2012 indicates 40% of their sales are lost annually as a result of trade in counterfeits. Kenya’s Information Technology (IT) industry is estimated to have delivered US$20 million in tax revenues between 2008 and 2011. During the period, if Kenya’s 80% software piracy rate were to have reduced by 10%, the multiplier effect would have generated over 1,100 additional jobs, US$12 million more in tax revenues and US$163 million spending in the local IT sector over the four year period.
“On the other hand, the ACA estimates that about one in five products sold in major towns in Kenya are counterfeit,” the report reads in part.
Also Read: Making African Manufacturing industry landscape work
Some goods prone to counterfeits
Counterfeited medicines and cigarettes are among some of the prized products that pass through Kenya into the regional markets with some spilling over to local consumers. Others include food and beverages, tobacco products, LPG and petroleum products, computer components and software, designer clothes and shoes, mobile phones and radio sets, motor vehicle parts, shoe polish, cosmetics, dry cells, soaps and detergents, and bulbs.
Counterfeit in times of COVID-19
Coronavirus was first reported in Kenya on March 12th this year. On this day, hand sanitizers as well as disinfectants were all sold out from local retailers by the end of that day.
Soon new hand sanitizers hit the market. Some were locally made. Coronavirus had presented a business opportunity for thrifty Kenyans. As the new products flooded the market soon after, the ACA became wary of the danger this type of quick business poses to consumers.
The Authority even warned Kenyans to beware of the danger of counterfeit sanitizers and detergents in the market. It said that the increased demand for these posed an opportunity for criminals to capitalize on people’s vulnerability by selling counterfeit detergents and sanitizers.
According to ACA Executive Director, Elema Halake, unscrupulous persons may take advantage of this situation to cash in on the pandemic to manufacture and trade in counterfeit sanitizers and detergents. The Authority is currently following some leads in the matter.
ACA has now capitalised on its partnership with TradeMark East Africa (TMEA) through funding from Department For International Development, to establish an observatory to complement and enhance efforts of the Multi-Agency Team on Illicit Trade established by President Kenyatta.
The goal is to eliminate unfair trade competition in Kenya. The observatory tracks six types of illicit trade: counterfeit, piracy, substandard goods, uncustomed goods, restricted goods, and unexcisable goods.
“The observatory is designed to be a data management and reporting tool where enforcement agencies will report seized goods (both from domestic and import markets), while the private sector shall be able to anonymously report on counterfeited products affecting their market share as well as their impact,” said Ahmed Farah, TMEA’s Kenya Country Programme Director.
