The longstanding issue of fake goods across eastern Africa is threatening trade relations between Kenya and South Sudan with genuine manufacturers at risk of having their products banned in Juba.
Reports show that the counterfeits are either smuggled to South Sudan through the Ugandan border or made in Juba’s black market.
According to Chris Mburu, Kenyan ambassador to South Sudan, there has been a backlash from consumers over low-standard goods, forcing the Embassy to seize possession of some fake products pulled out from shelves.
“Some of the manufacturers have gone through proper certification of their products by the Kenya Industrial Property Institute and Kebs but produce substandard (goods) for this market, in effect counterfeiting their products,” said Mburu in a letter to the Kenya Bureau of Standards (KEBS).
Over 20 producers are said to have been negatively affected by the counterfeit cartel. These include 14 detergent, cooking oil and shampoo makers, five engine oil makers, a popular multinational brand, as well as several food-additive companies.
The issue of counterfeiting is not new to the East African business environment. Over time, fraudulent local and foreign traders have flooded the regional market with fake and substandard goods, putting genuine businesses at risk.
A 2016 study commissioned by the Confederation of Tanzania Industries (CTI) found that at least 50 percent of goods used in the country including drugs, foods, and construction materials were fake. Between January and December 2016, Dodoma impounded counterfeit goods worth over $8 million from raids carried out at several places across the country, and regular inspections at the port of Dar es Salaam.
In Uganda, a countrywide baseline survey conducted by the standards agency in the same year revealed that 54 percent of products on the market are either fake or counterfeit.
As well as endangering lives and threatening local industries, the unethical practice is one of the leading causes of revenue loss for both the private sector and governments. Estimates show that Uganda and Tanzania governments lose $1.4 billion and $1.5 billion respectively in annual revenues to illicit trade.
On its part, Kenya’s government loses over $350 million yearly while its manufacturers are forced to part with an estimated $500 million in revenues and about 40 percent of their market share due to counterfeits.
Lack of regional quality standards
Goods impounded by the Kenyan Embassy are made up of popular Kenyan brands, reports say, highlighting the lack of a common anti-counterfeit and quality standards within the region. In fact, fraudulent operators are reportedly having it easy in Uganda and South Sudan.
At a recent meeting of the Kenyan standards agency on the issue, The EastAfrican reports that there were claims of weak anti-counterfeit legislation in Uganda which had created a loophole for clever manufacturers to counterfeit Kenyan brands and export them to South Sudan.
Uganda’s Anti Counterfeit Bill has reportedly been stuck in parliament since 2008. More so, South Sudan is yet to implement anti-counterfeit legislation, while the EAC has no common law against counterfeiting, making the region open to cartels.
“It is unfortunate that this is happening within the East African Community region… The entire menace has been caused by disparities in the legal framework within EAC, and in this case, involving the two neighbouring countries of Uganda and South Sudan,” Kenya’s manufacturing association said in a letter to the Anti Counterfeit Agency (ACA).
In addition, the CTI study pointed out the challenges of porous borders, the existence of domestically produced fake goods, lack of levelled playing field in the market as well as a wrong view of a free-market economy, organized counterfeit dealers and poverty which encourages a preference for the low-priced fake goods.
Securing Kenya-South Sudan relations
Regional bodies such as the East African Business Council (EABC) and the Common Market for Eastern and Southern Africa (COMESA) have at different times come together to enforcement measures against counterfeits.
Last year, Kenyan manufacturers called on COMESA for support in battling illicit trade in the region. The Kenya Association of Manufacturers (KAM) asked the body to consider establishing an institution to deal with counterfeits and dumping in the regional market.
But the impact of the meetings and efforts has been minimal and Nairobi’s ACA is reportedly faced with a shortage of manpower, equipment, and finances to combat the multibillion-dollar counterfeits industry.
With the current trajectory of things, South Sudan could be forced to place an embargo on Kenyan goods from entering Juba, the Kenya diplomat said. To avoid a breakdown of the relationship, Mburu urged the standards bureau to act now as South Sudan was already shunning Kenya-made goods after the counterfeiters flooded the market.
Some of his other recommendations include the sensitization of Kenyan manufacturers and other government agencies to tighten security at the border and a partnership with the South Sudan Bureau of Standards to ensure that only genuine products cross into the country.
A total collapse of trading between both parties would be dire for Kenya. Juba is a huge market for Kenyan manufacturers since it is yet to set up its own industries after years of conflict while neighbouring Uganda is still building its industries, amid infrastructure deficiencies, and is a landlocked country.
According to government data, the value of Kenyan exports to South Sudan declined by 22.6 percent from $160.7 million (Sh16.7 billion) in 2017 to $130 million (Sh13 billion) in 2018.
Meanwhile, counterfeits and fake products business transacted nearly $0.5 trillion in monetary value globally, representing 2.5 percent of global trade in 2016, the Organization for Economic Co-operation and Development (OECD) report for 2016 shows.