Illicit trade is a serious security threat as it encourages widespread criminality, an official said as the second regional anti-illicit trade conference concluded Friday in Nairobi, Kenya.
Pointing out the impact on security, Magdalene Munyao, Chairperson of the Anti-Illicit Trade Committee of Kenya Association of Manufacturers (KAM), said the crime is conducted by organised criminal groups, and was an opportunity for financing terrorism.
Shedding light on the impact of illicit trade on investments, government revenues and social welfare, Munyao noted that it is a front for money laundering and has the potential to sabotage national economies.
“KAM urges governments, the private sector and the consumers to work together in fighting this common enemy so that we may be able to; enhance the regional and national regulatory frameworks in order to protect EAC investments and consumers,” Munyao said.
Illicit trade, she said, is defined as any practice or conduct prohibited by law and which relates to production, shipment, receipt, possession, distribution, sale or purchase including any practice or conduct intended to facilitate such activity. It comprises trade in illegal goods and services, and trading in legal goods illegally.
She said it was difficult to quantify or access its data since it operates outside the law.
The definition of illicit trade, she said, is broad enough to encompass additional activities including: trading with illegal weights and measures; human trafficking; environmental crime; illegal trade in natural resources; and trade in illegal, harmful or substandard goods that may carry serious health and safety risks.
Its impact to regional companies, Munyao said, is unfair competition and loss of profit by legitimate industries, loss of market share, brand and company reputation, among others.
Munyao said illicit trade also has a negative impact to: consumers and the public, the government, investments and the economy in general. Shedding light on how it poses a risk to health and safety, she noted that according to the International Policy Network, the number of persons in Africa that die from counterfeit medicines each year stands at 100,000.
“In Kenya alone in May 2014, deaths related to the consumption of illicitly produced and traded alcohol surpassed 90 while more than 100 people were hospitalized as a result of consuming illicit alcohol during the same period,” Munyao said, further noting that some domestic and industrial fires are attributable to fake cables and circuit breakers while accidents are attributable to fake spare parts and vehicle service fluids.
Governments also lose billions in taxes every year, depriving the public sector of significant revenues, she said.
In 2009, the value of global illicit trade, was estimated at US$ 1.3 trillion and was said to be increasing at a fast pace, she added.
The Global Financial Integrity Report 2011-2012, put the figure at about $650 billion for goods only and $2 trillion in total.
The Organization for Economic Co-operation and Development (OECD) estimates that EAC governments lose over US$ 500 million in tax revenues annually due to the influx of counterfeit and pirated products alone.
“This has a ripple effect to delivery of public services such as education, health, and infrastructure; and a ripple effect to the economy due to lost jobs and health issues,” Munyao said.
Illegal wildlife trade in Kenya is estimated at $15-20 billion yearly making it the fourth largest form of illegal trade falling behind only trafficking in illegal drugs, people and weapons.
As at 2014 it was estimated that Kenyan Manufacturers lose Kshs 50 billion to illicit trade while the Government loses Kshs 20 billion in revenue annually.
Robert Opirah, the Director General for Trade and Investment at Rwanda’s Ministry of Trade and Industry (MINICOM), admits that illicit trade is a destructive practice that misrepresents national economies, reduces legitimate business revenues and leads to depreciated socio-economic gains.
“The growth of illicit trade is a real threat to legitimate business transactions. What largely encourages illicit trade, among others, is lack of stringent legal and regulatory oversight mechanisms,” he told Sunday Times yesterday.
“MINICOM is trying to combat this malaise by strengthening the legal and regulatory frameworks governing trade. For example, we have laws on competition, consumer protection, and intellectual property rights. There are legislative reforms in other areas indirectly meant to curb this threat; such as the law on negotiable instruments, and others,” he noted.
Increasing public-private sector dialogue is also an avenue that increasingly isolates chances for illicit trade, Opirah added.
“As illicit trade is not confined to a single institution, we are fortunate to have other government institutions such as the Police committed and engaged in the fight”.
The East African Business Council (EABC) Chief Executive, Lilian Awinja, blames consumer ignorance, as “consumers think they are saving money,” is one of the factors contributing to illicit trade.
According to Grace Freedom Nicholas, acting Director of Consumer Protection and anti-counterfeit at Tanzania’s Fair Competition Commission (FCC), authorities there seized 1,151 containers with counterfeit between 2010 and 2016. The value of the goods seized was nearly three billion Tanzanian shillings.Follow https://twitter.com/KarhangaJames