Agency seeks sharper teeth in fakes fight

An estimated 70 per cent of counterfeits are imports.

Trade Industry Permanent Secretary Chris Kiptoo throws counterfeits into an incinerator at EPZA Grounds last month. Goods with an estimated street value of Sh40 million were seized from various businesses and destroyed. PHOTO | FRANCIS NDERITU  

IN SUMMARY

  • The Presidency has since May taken leadership in the fight against trade in illicit goods, confiscating contraband goods worth billions of shillings that were later destroyed.
  • President Uhuru Kenyatta on August 31, for instance, destroyed contraband products worth Sh1.5 billion at State-owned East African Portland Cement’s grounds.
  • The Kenya Association of Manufacturers (KAM), a lobby, says the presidential intervention, through the Deputy Head of Civil Service Wanyama Musiambo, has helped build capacity and create public awareness in the fight against the menace.

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Kenyan manufacturers are pushing the State to fast-track proposed changes to the law to give more powers to the Anti-Counterfeit Agency (ACA) in the elevated war on counterfeit menace.

The Presidency has since May taken leadership in the fight against trade in illicit goods, confiscating contraband goods worth billions of shillings that were later destroyed.

President Uhuru Kenyatta on August 31, for instance, destroyed contraband products worth Sh1.5 billion at State-owned East African Portland Cement’s grounds.

The Kenya Association of Manufacturers (KAM), a lobby, says the presidential intervention, through the Deputy Head of Civil Service Wanyama Musiambo, has helped build capacity and create public awareness in the fight against the menace.

But to sustainably combat the stubbornly rising dealings in the shadow economy, KAM wants proposed changes to the Anti-Counterfeit Act, 2008, enacted to, among other changes, give ACA inspectors investigatory powers.

“Counterfeits and illicit trade diminish our efforts to achieve the Big four plan as a country because every pillar of the agenda is gravely affected and inundated with counterfeits and criminal networks,” KAM chairman Sanchen Gudka said via email.

“It is high time we extinguish these activities as they imperil our economic development, governance structures, national security and supply chain integrity.”

Estimates on the actual cost of counterfeits, which accounts for the portion of illicit dealings, range from Sh50 billion to Sh200 billion in potential revenue to government every year.

That affects implementation of development projects, slows down economic growth and hurts creation of new job opportunities for the rising unemployed graduate youth.

KAM said trade in counterfeits has chewed up about 40 per cent market of genuine products.

An estimated 70 per cent of counterfeits are imports, Mr Gudka said, the bulk of which are sourced from China and India where low cost of production has encouraged bulk manufacturing.

Eveready East Africa, which shut its dry cell production plant in Nakuru in September 2014, is a classic example of a manufacturer, fell by the counterfeit menace, draining about 100 job opportunities.

Sameer Africa also closed down its Yana Tires plant along Mombasa Road, largely due to counterfeit and cheap imports from China and India on top of high operating costs partly driven by inefficiencies.

Electronics such as mobile phones and television sets, car spare parts and office stationery are some of the fast moving consumer goods, which are widely mimicked by unscrupulous manufacturers in the country.

Others are pharmaceutical products and farm inputs such as fertiliser, according to KAM.

ACA, the State body formed in 2008 to combat dealings in counterfeit goods, says the penalties under the current law are not deterrent enough.

ACA board chairperson Flora Mutahi said the agency is seeking stiffer fines for culprits in trade in fakes through a proposed new clause to the law to fix minimum fine at Sh200,000 for first-time offenders and Sh500,000 for repeat culprits.

A person convicted of trading, manufacturing, hiring, exhibiting for sale, importing or transiting fake goods through Kenya is liable to a fine of not less than three times the value of the prevailing retail price of each counterfeit item or article under the current law.

The fine can be substituted or accompanied with up to a five-year jail.

Repeat offenders face a maximum of 15 years imprisonment or to a fine of at least five times the value of the prevailing retail price of the counterfeited goods under section 35 of the Anti-Counterfeit Act, 2008.

The agency, she said, is keen on adopting more deterrent measures, borrowing from other countries such as the US and Singapore.

Trafficking in counterfeit goods in America attracts a fine of $2 million (Sh201.36 million) or 10 years in prison or both for first-time offenders under the 18 US Code Section 2320.

The penalty for second-time offenders is a maximum of 20 years in jail and up to $5 million (Sh503.40 million) fine, while a corporation is subjected to a fine of up to $15 million (Sh1.51 billion).

Offenders in Singapore face 10,000 Singapore dollars (S$), an equivalent of Sh737,900, per counterfeit good or up to five years’ imprisonment or both on conviction, rising to a maximum of S$100,000 (Sh7.379 million) or up to five years’ imprisonment or both for repeat convicts.

“These are the current proposed changes and these shall be reviewed again because it (counterfeiting) should be considered economic sabotage and the offence classified as an economic crime,” Ms Mutahi said.

In the long-term, the agency is also considering further amendments to the law to classify the trade in counterfeit as economic sabotage.

“Most of the dealers in counterfeit evade taxation resulting in revenue leakage which affect development projects.

Corruption plays a big role in growth of counterfeit goods which are 80 per cent imports,” Ms Mutahi said.

“The present law does not take into account the impact on the economy.”

Institute of Economic Affairs chief executive Kwame Owino, however, warned that more deterrent penalties alone were not a solution in mitigating the counterfeit menace, arguing the main challenge was enforcement of the law, which has partly been compromised by corruption.

“Just because you make a crime attract a heavy penalty does not mean people will stop doing it.

‘‘As Kenyans we have to be careful with this idea that every time we see failures, then we raise criminal sanctions. If you will not be able to enforce them, they will not give you much.”

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