Illicit trade is a national disaster

By Flora Mutahi,

Illicit trade and counterfeit goods will be the biggest impediments to Kenya achieving its economic goals.

To state simply that illicit trade affects mainly businesses and government revenue, is to understate the extent to which the vice permeates and degrades all levels of our society and threatens the future of this country.

The nature of counterfeiting and illicit trade is such that it tends to thrive where graft and corruption is entrenched. Not only does it take away the citizen’s right to quality and genuine products, it also puts their lives at great risk by infiltrating their markets with substandard and, in many cases, highly dangerous goods.

The extent to which the vice has morphed is indeed quite alarming. Two years ago, rogue traders were arrested after months of selling fake yoghurt made of corn flour and Henna in a public bus terminus in Nakuru. Last year, a cargo container was seized at the port with counterfeit drugs valued at Ksh 6 Million. In February this year, goods worth Ksh 100 Million were also seized at the port and just two weeks ago, we witnessed the seizure of 400 tonnes of illegal sugar.

However, these are just a drop in the ocean compared to the vast network of illicit trade that exists and continues to use technology and intelligence acquired through dubious means to evade detection and capture. In fact, many of these illegal operations have their own armed ‘protection’ making it impossible for any legal officers to confront and arrest them.

This is all despite the many existing collaborative efforts by both industry and Government to curb the vice. In 2008, Parliament enacted the Anti-Counterfeit Act No.13 and hence the formation of the Anti-Counterfeit Agency. In 2014, National Council on the Administration of Justice and Kenya Association of Manufacturers (KAM) partnered to develop the Enforcement Manual to Combat Illicit Trade in Kenya. Last year, KAM launched the Intellectual Property Rights study for East Africa. The study aimed to be a useful tool for law enforcement agencies involved in the prosecution of crimes related to counterfeiting and piracy and the enforcement of the laws against the trade offenders.

Many of these initiatives exist and continuously work to strengthen their collaborative efforts but somehow, the vice still outsmarts them. This is why the move by H.E the President to recognize the vice as a national disaster and hence appointing officers within his mandate to deal with the menace, is a welcome relief and a much needed intervention for industry. The identified pillars in the Big 4 are already hard hit by these vices, and if we are to realize our intended objectives in the next five years we must take grave measures.

Additionally, many counterfeit products evade taxation and in doing so, these operations ​appropriate quite a chunk of our national revenues. This explains the recent upsurge of fictitious invoicing, which has been flagged by the Kenya Revenue Authority, as a common avenue used for tax evasion. The Government has declared loss of billions of Kenya shillings to this racket which, in addition to inflating the cost of sales and aiding in the under-declaration of imports, catalyse the smuggling of uncustomed goods.

According to a study on the vice of counterfeiting in Kenya, which was done in 2012, it is estimated that Kenyan manufacturers are losing at least 40% of their market share to counterfeiters. An approximate Kshs 30 billion (US$ 42 million) is lost by Kenyan manufacturers per year, while the Government loses Kshs 6 billion (US$80million) annually as potential tax revenue. With these​ statistics increasing annually, our vision to industrialize is in peril.

The appointment of Deputy Head of Public Service, Wanyama Musiambu to spearhead the fight against illicit trade, puts State authority, resources and security apparatus behind the existing initiatives. Optimistically, this means that we can begin to combat the racket toe to toe, curtailing their plans and do so, without endangering the lives of those at the forefront of this mission.

The writer is the Chairlady of Kenya Association of Manufacturers and can be reached on info@kam.co.ke.