Tuesday January 29 2013

The East Africa Community can eliminate counterfeits

By Matsiko BD Kahunga

The menace of counterfeit goods in East Africa is growing by the day and no effective countermeasure seems forthcoming. Control efforts are in direct proportion to the level of industrialisation, thus they are high in Kenya, due to the vigilance of the local industrialists at protecting their investments and brands.

In Uganda, there is nothing much beyond UNBS monitoring, save for occasional political ‘call-upons’. Liberalisation has meant anarchy, with import trade being a free-for-all.

There are three major presentations of counterfeiting: first and most common is piracy of genuine brand names, especially those that have established a reputation: Van Hussein shirts pirated as Vun Huesen, any sparkling wine branded ‘Champagne’, Panasonic pirated to Pansonic, etc.

The other form of counterfeiting is country of manufacture labeling, where fake goods are labeled as made in a country known to manufacture quality products in a given sector. EAC is full of fake electrical appliances labeled: British Make, Made in England.
The third and most threatening category is that of grey goods: these carry all sorts of names; some are nameless, with no country of manufacture; in all colours, shapes and sizes across all sectors.
A related but different category, with a similar impact, is that of discarded goods: these traverse all sectors, with virtually everything available, except gomesi, as Ugandans would say.

How did we get here? The first finger pointing is at liberalisation. Yes and No. Yes, because liberalisation, especially under the aegis of the General Agreement on Trade and Tariffs (GATT) and its successor World Trade Organisation (WTO), is meant to facilitate unencumbered trade across and among countries.

No, because liberalisation is within regulated, structured mechanisms. The system advocating free trade is the same system providing for patent protection, quality standards, sanitary and phytosanitary control, national security, and human health.

And this is what EAC has failed to take advantage of, thus ruining the region’s economy through lost jobs, taxes, and technology transfer via licence or subsidiary manufacturing. Without even labouring the argument for infant-industry protection, which is provided for in the WTO system, East Africa has the capacity to use the above WTO-permissible regulatory measures and controls, to ensure that only quality goods enter our market.

Let’s take a mundane example of footwear: with a population of 135 million within the territorial confines of the EAC, this means 270 million pieces of shoes, if we average one pair per East African annually.
This is a market any footwear manufacturer would do anything to penetrate, including local manufacturing. All we need is the East African Business Council to create a database of reputable footwear manufacturers worldwide, including local ones, and working out with these manufacturers, a trading mechanism comprising a supply chain of mega stockists at EAC level, with distributors, wholesalers and retailers in respective countries.

Only the regional stockists should be the authorised importers, supplying the players down the chain. No importation outside this system.

The greatest undoing of liberalisation today is everyone ‘going to Dubai’; picking up the cheapest fakes and rejects. Genuine goods remain expensive because their market is eaten into by fakes and rejects.

If a trader sells one pair of genuine shoes in six months, it must cover all his overhead costs for the period. But if he were to sell fifty pairs a day, the prices would be affordable to everyone. Moreover, even with genuine manufacturers, there is a wide range within a brand: between Bata’s ‘back-to-school’ and its top of the range design, there is a design for everybody. The task is big but surmountable.