This archive report was first published on 12 January 2020.
Product counterfeiting has become a major concern in developing countries, with severe health and economic implications.
According to the Kenya Association of Manufacturers (KAM), the country may be losing approximately Sh200 billion to the counterfeits and illicit goods trade every year.
Counterfeiting not only deprives businesses of revenue and profits but also has untold negative effects on human health, food safety, the environment, government tax revenues, and jobs.
Unfortunately, counterfeiters have taken advantage of technological challenges in developing countries to grow their illegal distribution networks, especially of highly-taxed products such as cigarettes and alcoholic beverages.
Technology provides toolkits that can help manufacturers and economies combat counterfeits, such as standardised and harmonised identification like security stamps or barcodes that guarantee the integrity of products throughout the supply chain.
For instance, with a specialised secure stamp, authorities and consumers can verify the authenticity and origin of a product, providing an opportunity to lock out illicit and unfit products.
Effective traceability systems make it easier to single out illicit, defective, or unsafe products and remove them from the shelves as fast as possible, saving lives and protecting brands by strengthening consumer trust.
Government agencies can also monitor and control domestic production, imports, exports, and the distribution of goods using data gathered from these processes, verifying payable taxes due on all excisable products.
The Kenya Revenue Authority's (KRA) implementation of the Excisable Goods Management System (EGMS) boosts the government's anti-counterfeit strategy, enabling verification and tracing of excisable products.
However, the effectiveness of an authentication and traceability system like EGMS is not limited to excisable products, and other sectors of the market could benefit from its features.
Agencies such as the Kenya Bureau of Standards (KEBS), the Anti-Counterfeit Authority (ACA), and the Pharmacy and Poison Board (PPB) can make use of EGMS to fight counterfeits and illicit trade in many other product categories.
Inter-agency teams may consider operating in a decentralised formation to maximise their performance in the fight against illicit trade.
The writer is a finance and tax consultant.
