EA loses huge sums of money in counterfeit products

KAMPALA

East Africa loses over Shs1.3 trillion—an equivalent of $500 million— in revenue annually from product imitation. Counterfeiting is the act of imitating and duplicating the already existing product brands and services on the market.

Source
There has been a tremendous influx of different imported products on the market since Uganda’s economy was liberalised in 1996, and later EAC integration. These imported products face various quality and standard related challenges that have greatly affected the business environment in Uganda.

“Counterfeit and sub-standard products in the East African market are largely imported and they come into Uganda at low cost than the locally made goods,” Mr Vinay Dawda, managing director Britannia Allied (U) Limited said. These products mostly come from Asian countries, such as China, India, Dubai, Indonesia, Thailand and Taiwan, and African countries like Egypt and Nigeria.

They include alcoholic beverages, biscuits, fruit juices, shoe polish, toothpastes, toothbrushes, soaps and detergents, pens, books, toys, electrical and electronic items like electrical cables and percolators. Others are building materials, personal care products, cosmetics, medicines, clothing, construction materials, shoes, vehicle spare parts and computers.

“Counterfeits have threatened the collapse of several manufacturing companies in the region due to price wars in addition to discouraging investors,” he noted.

Cheap and sub-standard products supplied through foreign and local traders and manufacturers are illegally replicating well-known brand names and designs on their packages.

“Imported food products from India are given a shelf life of two years whereas the same products that are made for the Indian markets are given a shelf life of six months. This is a clear indication that the manufacturers of these products are aware that they cannot stay on the shelf under normal conditions for over one year,” Mr Dawda said. He added that contrary to the requirements of the standard US clauses 4.4 which require that the name and address of the manufacturer is indicated on the packet, most of these imported biscuits only bear the country of origin.

The other products are those that don’t comply with the Non-Conformity, for example; aseptically packed juices have a shelf life of one year whereas some of the imported juices have continuously declared a shelf life of two years and others 18 months. Mr Dawda added: “The percentage of juice content is also varied and the consumers are misguided with words like ‘Nectars’ , ‘Only Fruit’ , No sugar added.’’ Some juices have thickeners and sugar added to increase thickness.”

Legislation
The private sector alleges that the counterfeit vice has been on the rise in Uganda and East Africa due to weak Intellectual property law and policies including the enforcement framework and institutional arrangements.

In Uganda, there are relevant laws, institutions and policy frameworks on checking fake goods and counterfeits. Uganda National Bureau of Standards (UNBS) is the statutory organisation responsible for regulating and enforcing standards and quality assurance of goods and services.

Counterfeits are managed under different legal frameworks, the patents Act and Regulations, 2003, the copyright and neighboring rights Act, 2006; and the Trademark Act and the Trade marks (/Amendment) Rules, 2005, in collaboration with the Trade ministry. “There is no specific law against counterfeits in Uganda creating a big challenge towards fighting the vice,” Dawda said.

However, the Trade Minister, Ms Amelia Kyambadde said her ministry had forwarded the anti-counterfeit Bill to Parliament, which she hopes will be passed by the end of October. We are lobbying for it [Anti-counterfeit Bill] to go for the third reading. We thought at least by July it would be passed but parliament has had a number of interruptions of other bills,” Ms Kyambadde said.

However, the Secretary-General of the EAC, Dr Richard Sezibera said handling the counterfeit vice as individual states would not do much. “The EAC anti-Counterfeit Bill should be handled collectively,” Dr Sezibera said. Experts say that’s how East African Communications Organisation (EACO) has handled the issue of counterfeit mobile phones flooding the region.

The Uganda Communications Commission November deadline to switch off all counterfeit mobile phones is drawing closer. This campaign that kicked off in Kenya and saw over a million counterfeit handsets switched off is spreading to other member states like Rwanda and Zambia. The initiative supported by the EACO is geared towards fighting the counterfeit vice collectively and has seen other member states take action. EACO’s objective is to end the menace which is eroding businesses and threatening investments in the region.

Losses
Speaking at the regional Chief Executive Officers’, meeting in Kampala, the chairman, Standard Chartered Bank and a renowned manufacturer, Dr James Mulwana, said: “Counterfeits are affecting the local investment in the region and our appeal is for the EAC member states to sort out this issue by making it a policy which is strong and easy to enforce.”
Dr Mulwana urged the EAC to emulate United States which has successfully stopped importing counterfeit products.

Mr Dawda, said: “Counterfeit products pose serious adverse effects to registered businesses and may lead to their collapse.” Counterfeit products damage the reputation of genuine industries, dilute their brand value, reduce their market share and bring down their profitability. “Manufacturers spend colossal sums of money on research and development of their product, advertising it, obtaining licenses, paying wages and taxes and constructing a plant and equipping it unlike the counterfeiters,” Mr Dawda added.

With counterfeits, job creation and tax base expansion is frustrated while innovations and research towards new products is also stifled. This hinders economic growth and development. This vice does not spare the general public or government because either of them may fall victim to the counterfeit trade by unknowingly buying fake materials such as foods, drugs, construction materials and endangering consumers.

Challenges
Beyond the limited staffing, lies a far bigger problem- the weak law. The UNBS Act, according to Ms Barbara Kamusiime UNBS Public Relations manager, is close to useless as far as the fight against sub-standard products is concerned. She says that the fine, when arrested over trading in these products ranges between Shs3,000 to Shs10,000, a fee too low to serve as a punishment to such grave acts.

She said that as a result, substandard products find their way into the market.
‘Recently we were at Yamaha Centre for an inspection and we found so many fake electrical equipment. These products are so many on the market and some of them are manufactured by our own traders but we are on our toes, trying to do the ground work to fish out the culprits,” She said.

Despite the weak law, UNBS inspects products and in case any manufacturer does not meet the standard, the standards body liaises with police to have them arrested.

Ms Kamusiime says that all hope is not yet gone since the proposed amendment UNBS Act is before Parliament awaiting passing. Meanwhile the Pre-Export Verification of Conformity to Standards Programme (PVoC) facilitates the process of testing for standard products.

Ms Kamusiime explained that with the PVoC regulation in place, efforts will be targeted towards joining hands with other East African states to do away with substandard products.
And on Counterfeited goods, she says whereas substandard goods are illegal, most counterfeit goods are acceptable on the market- particularly those that meet the standards; “There are so many counterfeit products that are of standard. We let them into the market since they tick the standards boxes.”

The private sector remains optimistic that this will be one of the main agenda during the next EAC Heads of states meeting scheduled for November.

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