The recent crackdown on various forms of illicit goods revealed the extent to which criminal networks have proliferated in our nation and posed a threat to the lives and safety of all citizens. The initiative has unearthed many illicit products, among them pharmaceutical products, cosmetics, and alcoholic products, as reported in the media.
According to the National Baseline Survey on Counterfeit and Other Forms of Illicit Trade in Kenya released in 2020 by the Anti-Counterfeit Authority (ACA), the total value of illicit trade was Sh826 billion in 2018, a 14 per cent increase from Sh726 billion in 2017.
In terms of their GDP share, this represents an increase from 8.9 per cent in 2017 to 9.3 per cent in 2018. Currently, ACA estimates that the numbers have hit more than Sh1 trillion this year.
Illicit trade is a longstanding grave issue that has grown in scope and magnitude and is derailing economic development. Despite being run by criminals, citizens and legitimate businesses bear the burden of illicit trade. For instance, entrepreneurs spend more resources to protect their products and services, whereas citizens not only spend money without value from counterfeits but are exposed to potential health risks posed by such products and services.
Counterfeiting
Illicit trade manifests itself in six major and interrelated ways: smuggling; transit fraud/dumping; trade in prohibited goods or products; illicit cash flows; human and wildlife trafficking; trade in small arms and light weapons; and counterfeiting, piracy, and substandard goods.
In Kenya, counterfeiting is the most prevalent form of illicit trade. It not only takes away the citizen’s right to quality and genuine products but also puts lives at risk by infiltrating the market with substandard and, in many cases, highly dangerous goods. There have been reports of illicit food and beverage products causing illnesses, disability, and death. Case and point, counterfeit alcoholic products.
Additionally, illicit trade, especially counterfeiting, undermines the value of authentic products and the investments that legitimate businesses put into their brands.
Such products are manufactured cheaply for sale at low prices disregarding quality and standards and end up hurting the market share of genuine products. On the other hand, the reputation of legitimate manufacturers is impacted negatively due to bad consumer experiences. Some manufacturers have had to restructure their operations due to the influx of counterfeit products in the country.
Furthermore, many counterfeit products evade taxation, and in doing so, they appropriate portions of our national revenue. This leads to the loss of billions in government taxes every year, depriving the public sector of significant revenue to direct towards the delivery of public services such as education, health, and infrastructure.
Illicit trade also undermines the concept of a free and open market, which is fundamental to improving competitiveness, increasing investment, creating jobs, and improving the economic situation of not only Kenya but also of the EAC partner states.
The writer is the chief executive of Kenya Association of Manufacturers. [email protected]
