A REGIONAL FRAMEWORK ON COMBATING ILLICIT TRADE IN COMESA
KENYA ASSOCIATION OF MANUFACTURERS POSITION ON ILLICIT TRADE - THE RISING
COST OF DOING BUSINESS AT FIRM/ INDUSTRY LEVEL
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Date: 11th March 2015
About KAM;
The Kenya Association of Manufacturers is the representative organization for
manufacturing value-add industries in Kenya. Established in 1959 as a private sector body,
KAM has evolved into a dynamic, vibrant, credible and respected business association that
unites industrialists and offers a common voice for businesses. KAM provides an essential
link for co-operation, dialogue and understanding with the Government by representing
the views and concerns of its members to the relevant authorities.
The key challenges faced in our industry on illicit trade;
The main challenge faced in our industry today on Illicit trade is how to jointly enforce
(deter) against one of the most prevalent form of illicit trade i.e. counterfeiting, as it
continues to erode the market share of genuine manufacturing value-add industry and
threaten their overall expansion and growth (i.e. raw material processing and valueaddition through innovation, research and development) as well as hamper the creation of
the necessary job opportunities in the manufacturing industry/the region. This is a real
threat to our economy as it has led to shrinkage of the market share (by approx 40%
according to 2012 KAM survey) leading to the ultimate closure of some industries.
Key industrial sectors adversely affected by the above threat - Illicit trade;
Examples of the various industrial sectors that have adversely been affected by this form
of illicit trade i.e. counterfeiting, are those sectors which deal with Fast Moving Consumer
Goods (FMCG) as their value-added products are easy to sell as there is already a vibrant
consumer demand in the market due to their good brand reputation, characterized by
high quality/ performance. As such, consumers have built such confidence on the products
over the years. Such sectors include;
i)
ii)
iii)
iv)
Motor vehicle assemblers and components (spare parts) sector
Energy, electrical and electronics sector
Food, beverages and tobacco sector
Chemical and allied sector
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v)
Pharmaceutical and medical equipment sector
Impact of the illicit trade to EAC and COMESA region;
Given that Kenya is part of the EAC and the COMESA, the closing down of a company in one
partner state/country directly affects trade in the rest of the region in a phenomenal way.
The entire region is drawn back to being dependent on imports from other regions e.g. Far
East countries and as such, our trade deficit increases exponentially every year. What this
means is that our raw material cannot therefore be processed within the region and as such,
we end up exporting raw or semi-processed material to other countries. This further means
is that we are not only exporting the raw materials but also job opportunities as well as
prevent regional technological advancement through innovation, research and
development. The region therefore becomes a net importer and a trading entity rather than
a manufacturing entity. This reality has greatly contributed to the low investment levels in
the manufacturing sector yet the region is very rich in raw materials. The aftermath of all
this is that we highly expose our consumers to hazardous products in terms of their health
and safety of products as we compromise on the regional standards on goods.
What has been done in Kenya in the past to curb illicit trade and what are the challenges;
In Kenya, we have tried our level best to address the issue of counterfeiting through
advocating for the enactment of proper legislation to curb the vice, and this led to the
enactment of the Anti Counterfeit Act 2008 which provided for the establishment of the
Anti Counterfeit Agency in June 2010. This is the body that is mandated to fight against
counterfeits in Kenya as well as create consumer awareness on the vice in order to reduce
the demand of counterfeits in Kenya. However 3 years down the line, we noted that things
were not working the way we expected and counterfeiting continued to be a real threat to
the Industry. The main challenge has been the poor inter-agency collaboration, cooperation
and coordination in the fight against counterfeiting and illicit trade in totality as every
government enforcement agency in Kenya has its own mandate and hence works in silos in
delivering certain specific core mandate.
We have however taken a different approach since 2013, where we started working with
the Judiciary in an effort to secure justice for the economy through looking at implications
of the judicial judgments to the economy vis a vis Illicit trade and counterfeiting. In 2014, we
partnered yet again with the judiciary through one of its arm, the National Council on
Administration of justice (NCAJ) and came up with the “Enforcement Manual to Combat
Illicit Trade in Kenya.” This manual is intended to provide a one-point of reference for all the
players in the justice chain from investigators, prosecutors and judicial officers on matters
relating got any form of illicit trade. We are now preparing to launch the rollout programme
(scheduled for Mid March to Mid June 2015), targeted to the above players in the justice
chain as a way of making sure that the Illicit trade manual is fully adopted and implemented
by all players in Kenya.
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Another big challenge is the fact that at EAC, we are currently implementing the common
market protocol but as you may be aware, the protection of intellectual Property rights is
territorial in nature and as such, each partner state in the region has its own IP laws,
meaning that we have different IP territories in the same EAC and COMESA regions. This has
greatly affected the enforcement against counterfeits and illicit trade across the borders/
regions due to the fact that we have both challenges of transit goods as well as the porous
borders where illicit goods can be smuggled back into any of the partner states.
Our key recommendations;
As an association, having been involved in this matter since 2006, we wish to recommend
the following to governments, government agencies and private sector, based on a realistic,
practical and steadfast approach in order to curbing illicit trade, including counterfeiting in
the region. Our recommendations are highly linked to several factors including but not
limited to the following and highly touches on the unchecked trade in counterfeit and
pirated products (Illicit trade and trade in illicit goods) in the region. These are;
(a) Lack of specific anti-counterfeiting and piracy national legislation – we
recommend that each partner state to show their serious commitment (through
either proper legislation or enforcement efforts) in fighting against all forms of illicit
trade and counterfeiting from a national level;
(b) Lack of a national/regional Policy and Strategy on combating counterfeiting and
piracy (illicit trade) – we recommend that the region embarks on a serious
harmonization process on all illicit trade related laws with the objective of having
one law governing the region (EAC/ COMESA) which will further enable the region to
be recognized as one intellectual property territory. In addition to this, we would like
the region to separate Competition matters (that are highly inclined to regulation)
from counterfeit matters (that are highly inclined to enforcement) as these two issue
are very distinct in nature. Our region must also continue with their efforts to
harmonize standard laws so that we do not have a situation where standards that
are not accepted in one partner states are actually accepted in another partner
states (within the same region).
(c) Consumer ignorance on the risks involved in the use and consumption of
counterfeit/pirated products – we recommend that the region embarks on a joint
approach/ mission to create awareness to the consumers on the impact of illicit
trade and counterfeits to the national as well as the regional economic growth;
(d) Widespread poverty resulting in low purchasing power – we recommend that
the region addresses the issue of regional trade deficit through governments
encouraging investment in the value-add manufacturing sector as opposed to
heavily depending on imports. This way, we will be able to grow/ expand our
industry and process our own raw material within the region, enabling us realize
enormous job opportunities for our people as well as uplift their living standards.
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(e) Weak or non-existent institutional capacity and capabilities for legal
enforcement – we recommend that we encourage intra-regional and interagency
collaboration, corporation and coordination though such platforms such as Interpol
which has been working well to handle regional criminal challenges;
(f) Corruption, particularly at the entry points – we recommend that all non-tariff
barriers are addressed with the objective of implementing the single window system
for our imports and exports;
(g) Limited (or lack of) cooperation and coordination between and within the
private and public sectors – we recommend that all the private sector players work
in synergy to drive the regional economy as it is “our time” to do so for the good of
the regional economic growth and integration but this is only achievable if we have
political good will from all the regional partner states;
(h) Lack of appreciation by the judiciary of the enormity of the problem and its
negative impact leading to lackluster and half-hearted enforcement of the existing
laws – we recommend that each partner states plays a critical role in bringing the
Judiciary in the context of this problem and looking for ways in which this vice can be
enforced in a deterrent manner – bringing the aspect of securing justice for the
economy: implications of judgments;
(i) Neglect by brand owners to protect their brands by registration – we
recommend more sensitization to brand owners on the need to register their
brands/ trademarks in order to protect them from IP infringement and
counterfeiting. We also recommend for the establishment of a regional one-point
platform/body for the Industrial property registration i.e. where an interested
company can be able to register its trademarks once.
(j) The elimination of import restrictions and controls –there is need for the region
to be more conscious about what they are importing vis a vis the local capacity to
supply the same products and come up with policy direction that will encourage
consumption of local products. This move will not only provide a ready market for
the local manufacturers/ industry but will also dilute the consumer perception that
imported products are of higher quality than the regionally made products. The
governments should be proactive in creating the necessary market through the
various public procurement entities.
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