Illicit trade undermining profitability and market share of EAC Companies - EABC

Amid reports of increasing illegal trade within the East African Community (EAC), the East African Business Council (EABC) is rallying the region’s private sector to come up with a plan of action needed to combat the vice. Business Time’s Berna Namata, interviewed EABC’s Agatha Nderitu, the Executive Director of the council on the magnitude of the vice. Below are the excerpts;

Amid reports of increasing illegal trade within the East African Community (EAC), the East African Business Council (EABC) is rallying the region’s private sector to come up with a plan of action needed to combat the vice. Business Time’s Berna Namata, interviewed EABC’s Agatha Nderitu, the Executive Director of the council on the magnitude of the vice. Below are the excerpts;

Apart from the other issues affecting the business community do you think illicit trade is the most relevant thing to discuss today?

There are a number of issues affecting business today but each issue affects businesses differently. As a policy advocacy body for private sector in East Africa, we endeavor to bring to the attention of EAC leadership each of the issues affecting the competitiveness of EAC private sector.

That said, in recent years, East Africa’s market has been flooded with counterfeit and pirated products, making the region extremely unattractive to investors and genuine enterprises.

As the EAC integration deepens with the commencement of the Common Market implementation process following a successful Customs Union that has brought about free movement of goods, the region is finding itself in a very uncomfortable position whereby illicit trade continues to increase in absence of strong legal and institutional mechanisms to deal with it.

By illicit trade I mean trade in counterfeits, Intellectual Property Rights violations; smuggled goods, parallel imports and undeclared local production.

That is why we felt it important to organize a conference that will, among other things, highlight the growing problem of counterfeit and illicit trade in the EAC and seek to address the current weak or non‐existent institutional capacity and capabilities for legal enforcement with a view to coming up with proposed policy reforms and recommendations for prioritized and expedited implementation.

EAC partner states are losing a lot of money in illicit trade. Why is there no zeal to enforce or enact relevant laws?

I would not say that there is no zeal but rather the lack of concerted effort in dealing with illicit trade. Most of the current efforts are segregated to Partner States and appear not to be doing enough to stem off recent increase in illicit trade.

Part of what we are trying to accomplish  locally is to come up with a coherent regional framework for addressing the various form of illicit trade; that clearly articulates the gaps in the various national and regional laws in existence.

For example, one of the key challenges is the very weak or ineffective penalties served to those involved in illicit trade; that would not deter them from carrying out these acts in future.

It is also our intention to commence a more focused program on illicit trade, especially counterfeits, smuggling and piracy; not just to bring consistent pressure to bear on EAC policy makers, but also to work with businesses to ascertain how they could protect their investments.

How is illicit trade affecting the region’s competitiveness and investment climate?

Economically, not only does it eat into the profits of legitimate operators, it also destroys jobs by undermining investment in product development.

The profitability and market share of EAC companies, especially those involved in manufacturing fast moving consumer goods have been negatively affected.
For instance OECD, in 2008, estimated that the region lost about $500 million in revenue while the Kenya Institute of Public Policy and Research and Analysis (KIPPRA) in a recent report estimated that the revenue is about $2billion.

The message we get from the business community is that illicit trade continues to have adverse impacts on companies’ annual bottom-line which is why we are organizing the anti-illicit trade conference in Nairobi, Kenya to come up with a regional strategy to deal with illicit trade in the region.

The widening of the regional integration process has partly facilitated illicit trade by creating a freer environment that allows free and easy movement of goods within the region.

How can governments tackle illicit trade without negatively affecting free movement of goods in the region?
There is need for EAC Partner States to strengthen institutional mechanisms and enact stronger law to deal with counterfeits and illicit trade. Business owners need to protect their brands through registration of their trademarks.

What are the current initiatives both at regional and partner state level dealing with illicit trade?

The East African Community Customs Management Act (EACCMA) currently contains provisions with penalties which include seizure of both goods and assets like vessels used in transporting illicit goods.

Also, bodies such as revenue authorities, bureaus of standards and agencies such as Fair Competitions Commission in Tanzania are dealing with counterfeits at country level. In Kenya, there is an Anti Counterfeits

Agency that brings both public and private sector together to address the issue.

There are different initiatives dealing with illicit trade but all are fragmented and they do not appear to be in concert or even to be complementing each other.

The regional conference will therefore discuss ways on how to harmonise some of these disjointed efforts to effectively deal with illicit trade in the region.

How do you want governments and relevant authorities to deal with illicit trade?

The East African Community Customs Management Act contains provisions that prescribe penalties to anyone involved in illicit trade. Kenya, in 2009, passed the Anti-Counterfeit and Uganda is involved in due process to pass the Anti-Counterfeit Bill.

Additionally, there are currently 2 bills being formulated at EAC; one focused on Counterfeits, Intellectual Property Rights Violations and the other on Trade-related aspects of Intellectual Property Rights (TRIPS) as it relates to pharmaceutical products.

They are currently at draft stage and will be presented at the Conference.
Additionally, the EAC Council of Ministers (the decision making mechanism of the EAC Secretariat) has asked that the 2 bills be combined into 1 law.
We would like to see the remaining EAC partner states enact stronger laws and introduce institutional mechanisms to deal with counterfeits and illicit trade. There is need for a regional strategy to deal with illicit trade.

What perspective will this conference add to the already existing initiatives dealing with counterfeits?

As I said earlier, part of what we are trying to accomplish at the conference is to come up with an Action Plan that clearly articulates the gaps in the various national and regional legislations that enable illicit trade to continue thriving.

As I have indicated earlier, the need for a regionally concerted effort to address the problem cannot be overstated, not only bearing in mind that we are one customs territory, but also because a lot of counterfeiting of well known EAC brands is going on nationally, with goods being exported to other EAC countries.

It is our intention that after the conference, we shall commence a more focused program on illicit trade, especially counterfeits, smuggling and piracy.

Ends

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