How consumer awareness, monitoring technology can combat influx of counterfeit goods
The Anti-Counterfeit Act of 2008 defines counterfeiting as the manufacturing, packaging, labeling, or imitation of protected goods, such as trademarks, industrial designs, and copyrighted items.
The prevalence of counterfeit products in the Kenyan market is alarming, with estimates suggesting that one in every five products sold is counterfeit. This trend poses a grave threat to public health, safety, and economic stability by depriving the country of revenue and exacerbating poverty.
The primary motivation for purchasing counterfeit goods is their affordability and easy availability, making them attractive to consumers despite the risks they pose.
In response to the increasing infiltration of counterfeit goods, particularly in key sectors like manufacturing, the Anti-Counterfeit Authority has identified the need for effective public awareness campaigns to combat this issue.
Studies reveal that 65.44% of the Kenyan public had some awareness of counterfeiting as of 2022, but there remains a significant gap in consumer knowledge, particularly regarding the consequences of purchasing counterfeit products.
The Big Four Agenda—Kenya’s strategic development priorities—has been impacted by counterfeiting, as it undermines growth in critical sectors such as manufacturing, health, and infrastructure.
Research indicates that a large proportion of consumers, particularly in urban areas like Nairobi, buy counterfeit goods due to their lower prices and availability from retail shops and hawkers.
Additionally, the online marketplace has seen a rise in counterfeit transactions, with 20% of respondents acknowledging that they had unknowingly purchased counterfeit items online within the last six months.
To tackle the issue, experts recommend enhanced public education, better regulation, and stronger collaboration between stakeholders.
The government’s focus on increasing consumer awareness and improving enforcement mechanisms is essential for safeguarding public health, securing economic growth, and protecting the integrity of Kenya’s markets.
Kenya's economy has faced ongoing challenges due to counterfeit goods, which present not only financial risks but also severe health hazards to citizens. From everyday items like electronics to critical products such as cosmetic products and pharmaceuticals, the counterfeit market is vast and growing.
The Anti-Counterfeit Authority (ACA) estimates that counterfeit goods cost Kenya approximately Ksh.100 billion annually, amounting to a staggering Ksh.1 trillion over a decade.
As these illegal goods seep into the market, they undermine legitimate businesses, stifle innovation, and threaten consumer health. The Pervasive Problem of Counterfeit Goods Kenya's battle against counterfeit goods spans various sectors.
The ACA reports that counterfeit products affect industries ranging from cosmetics, alcoholic beverages and pharmaceuticals to electronics and automotive parts. Robi Mbugua, the Executive Director at ACA, expressed concerns about the influx of counterfeit automotive parts.
“These substandard parts have caused numerous accidents, some leading to fatalities,” he stated, emphasizing the urgency of the situation. The threat posed by counterfeit pharmaceuticals is even more significant. Fake drugs can be ineffective or, worse, deadly.
For instance, counterfeit anti-malarial drugs are a notorious issue in Kenya, potentially leading to severe health crises. In response to some of these challenges in the transport industry, the National Transport and Safety Authority (NTSA) has initiated measures to combat counterfeit automotive parts.
At the same time, the ACA collaborates internationally, organizing events like the International Symposium on Intellectual Property Protection and Enforcement (ISIPPE-2). This forum united stakeholders to address counterfeit products threatening consumer safety.
E-Commerce: A New Battlefield for Counterfeits
In today’s digital landscape, counterfeiters have increasingly exploited online marketplaces. Social media platforms like Facebook and WhatsApp have become hotspots for fake goods, making it easier for counterfeiters to reach consumers directly.
Edward Kwakwa, Director at the World Intellectual Property Organization (WIPO), noted, “The COVID-19 pandemic worsened the situation. Consumers turned to e-commerce, allowing counterfeiters to flood the market.” Kenya and Nigeria struggle significantly with online counterfeit goods.
Alhabash Saleem, a counterfeit goods expert, highlighted that counterfeit products account for about 16% of Kenya’s national budget.
“Many consumers are unaware they are buying fake goods,” he said, emphasizing the deceptive design of counterfeit products, which often closely mimic genuine items.
The Economic and Health Risks of Counterfeit Goods
The economic impact of counterfeit goods in Kenya is substantial. Small and medium-sized enterprises (SMEs) find it challenging to compete with the low prices of counterfeit products, leading to lost revenues and reduced tax income for the government.
The intellectual property theft inherent in counterfeit goods stifles innovation and discourages investment, creating a vicious cycle of economic downturn. Health risks are equally alarming. Fake pharmaceuticals may contain minimal or no active ingredients, endangering lives, while substandard auto parts increase the risk of accidents.
Counterfeit electronics, which may not meet safety standards, can lead to fires and other hazards. Saleem remarked, “Consumers often overlook these dangers, prioritizing affordability over quality.”
David Aswani Lusiti, a consumer from Vihiga, says he never checks to know if the products he buys are counterfeit or not. Especially drugs urging vigilance in purchasing, especially online.
“Look for signs of counterfeit products, such as spelling mistakes or inferior quality materials,” he advised. He encouraged consumers to verify product authenticity by checking for security labels or purchasing from reputable sellers.
Citizen Digital visited Busia County and interviewed Zed Odala, a resident of the border County. He shared his experience about online transactions, highlighting the discrepancy between advertised and received products.
The phrase mostly used is ‘what you ordered versus what was delivered.’ He said, "The pictures that were shown to me online and the products that were delivered were very different."
Odala expressed frustration with misleading photos and the challenges of resolving issues in the online marketplace, stating, "Many people, many Kenyans, have lost their money doing business online."
He called for better regulation of online businesses, urging the government to intervene, saying, "I pray that the government can help us." Odala also raised concerns about the quality of products, like machines, which sometimes appear legitimate but are broken or counterfeit.
"Some machines deceive you into thinking they have legal labels," he explained. Additionally, Odala pointed out the difficulties posed by cross-border transactions, stating, "The goods we get from Uganda complicates our local markets, there may be fake but cheaper and because of affordability most people go the counterfeits."
Absalom Ouma, a trader in Busia Town, shared his frustrations with the counterfeits in this town.
He explained, "The business here is very complicated. Some people import goods from Uganda, they buy them at lower prices yet counterfeit..." Ouma highlighted the challenges of competition and unfair market practices, stating, "some people prefer going to other counties like Kakamega and Bungoma because of lack of trust in the products we sell."
He stressed the difficulty of distinguishing between an original product and a counterfeit , saying, "The Kenya Bureau of Standards in conjunction with the Anti Counterfeit Authority should create more awareness to Kenyans on how to differentiate between the two so as to help legitimate businesses grow especially at this border county.
The COVID-19 Pandemic: A Catalyst for Counterfeit Growth
The COVID-19 pandemic has exacerbated the counterfeit goods problem globally, including in Kenya.
According to the OECD/EUIPO report, "Illicit Trade in Fakes under the COVID-19," the pandemic highlighted and intensified the existing vulnerabilities in global supply chains.
With demand for essential goods skyrocketing, counterfeiters seized the opportunity to flood the market with fake pharmaceuticals and health products, including counterfeit personal protective equipment (PPE).
This situation posed not only a significant health risk but also added further strain to Kenya's already challenged healthcare system. Counterfeit drugs and medical supplies can result in severe consequences for public health and safety, undermining trust in legitimate healthcare providers and public health initiatives.
Blockchain as a Solution to Combat Counterfeit Goods
Blockchain technology offers a promising avenue to address the counterfeit goods crisis in Kenya. This decentralized, tamper-proof digital ledger records transactions in real time, creating a transparent and unalterable record.
Each transaction forms a "block," linked to a previous one, creating an unbreakable "chain." This transparency makes it increasingly challenging for counterfeiters to infiltrate the supply chain.
Manufacturers can assign unique digital identities to each product, which are then stored in the blockchain. This creates a tamper-proof record of the product's journey from production to consumer.
Consumer Verification: Consumers can verify product authenticity by scanning its unique digital ID using a smartphone app. This access to product history is particularly crucial for high-risk items like pharmaceuticals, ensuring consumers are purchasing genuine goods.
Reducing Illicit Sales through Smart Contracts: Smart contracts are self-executing agreements coded into the blockchain, capable of releasing payments only when a product is verified as genuine.
This deters counterfeiters and ensures consumers pay for authentic goods. Global Collaboration: The decentralized nature of blockchain allows for cross-border usage, which is vital for Kenya, where many counterfeit goods are imported.
A global blockchain system would enable verification of product authenticity before entry into the country, enhancing international cooperation in combating counterfeit trade.
The Role of Stakeholders in Implementing Blockchain
Effective implementation of blockchain technology in curbing counterfeit goods requires collaboration among various stakeholders. The government, private sector, law enforcement, and consumers must unite in this effort to create a robust defense against counterfeit products.
The Kenyan government can promote blockchain adoption through policies encouraging its use. Mandating blockchain for high-risk industries, such as pharmaceuticals and automotive parts, would enhance product tracking and verification.
Furthermore, collaborating with international organizations to create a global blockchain system for supply chain management is essential to address the transnational nature of counterfeit trade.
Private Sector Participation Manufacturers and retailers must invest in blockchain technology to monitor their products effectively.
While initial costs may be high, the long-term benefits, including reduced counterfeit goods and regained consumer trust, outweigh these expenses. Collaborations with tech firms can facilitate the development of user-friendly blockchain applications, enabling businesses to easily integrate this technology into their operations.
Consumer Awareness and Participation
The success of blockchain methods relies heavily on consumer awareness and participation. Public campaigns educating consumers on how to use blockchain verification methods are crucial. Consumers must be encouraged to report suspicious products and support legitimate businesses, creating a collective effort against counterfeit goods.
Despite its potential, blockchain implementation faces several challenges. One significant hurdle is the cost of adopting this technology, particularly for small businesses.
Initial investments in blockchain infrastructure may be prohibitive for many companies, especially in an economy already burdened by counterfeit goods. Moreover, counterfeiters may develop methods to bypass blockchain systems.
However, the transparent and decentralized nature of blockchain makes infiltration difficult. Continuous updates and vigilance from governments and businesses are essential to stay ahead of counterfeiters.
Another significant challenge is the public trust and familiarity with blockchain technology, which is still developing.
Many consumers lack a thorough understanding of how blockchain works and may hesitate to utilize it. Educational campaigns will be vital in building confidence in blockchain systems and promoting their use in combating counterfeit goods.
Kenya grapples with a significant economic and public health threat due to counterfeit goods. These illicit products harm legitimate businesses, endanger consumers, and deprive the government of much-needed revenue.
Although efforts by law enforcement and international organizations have made some progress, more comprehensive actions are required to address the root causes of this issue. Blockchain technology stands out as a robust solution to the counterfeit goods crisis.
By offering transparency and traceability throughout the supply chain, blockchain can help reduce the prevalence of counterfeit products, protect consumers, and strengthen Kenya's economy. Achieving this requires collaboration among government entities, private sector stakeholders, law enforcement agencies, and consumers.
The OECD/EUIPO report underscores the urgency of addressing the counterfeit goods crisis, highlighting those effective responses must be comprehensive and collaborative. As highlighted by experts, leveraging blockchain could significantly transform Kenya's fight against counterfeit goods, leading to safer products and a strengthened economy.
With the right policies, investments, and public awareness campaigns, blockchain could be the key to eradicating counterfeit goods in Kenya for good. As Saleem explains, “Harnessing blockchain technology could transform how we combat counterfeit goods, ensuring safer products for all Kenyans.”
By embracing this innovative technology, Kenya can pave the way for a more secure and transparent marketplace, enhancing the welfare of its citizens and the integrity of its economy.
Dr. Lilian Nyawanda, the Commissioner of Customs & Border Control at the Kenya Revenue Authority (KRA), says they are leading critical initiatives to combat the influx of counterfeit goods and bolster border security.
In a recent interview, she emphasized how advanced technology is central to these efforts, addressing the pervasive challenge of illicit goods entering the Kenyan market.
Advanced Technology for Detection Dr. Nyawanda outlined KRA's implementation of sophisticated systems designed to enhance border security and detect counterfeit products. "Our Integrated Customs Management System (ICMS), smart gates, and cargo scanners are pivotal in our operations," she stated.
These technologies allow for real-time monitoring and efficient processing at border points. The establishment of Rapid Response Units and Inland Border Control Checkpoints (IBCC) has further improved KRA’s capabilities.
"These units have significantly increased our ability to identify counterfeit goods, leading to successful interceptions of illicit items, including narcotics and sugar," she noted, highlighting the tangible impact of these innovations.
In her discussion of regional cooperation, Dr. Nyawanda emphasized the importance of partnerships with customs authorities in neighboring countries. "We actively share information and engage in joint operations to effectively combat smuggling and counterfeit goods," she explained.
KRA's collaboration with international organizations, including Interpol and the World Customs Organization, has significantly strengthened efforts against illicit trade. Looking toward the future, she revealed that KRA plans to introduce new policies aimed at enhancing anti-counterfeit measures, especially given the increasing cross-border trade within the East African Community.
Leveraging Blockchain Technology Dr. Nyawanda also highlighted the potential of blockchain technology in KRA's strategy for improving supply chain transparency. "By inputting product documents into a tamper-proof system at the point of origin, we can ensure traceability," she explained. This innovation will empower consumers and businesses to verify the authenticity of goods entering the Kenyan market. “Utilizing barcodes stored in the blockchain offers a reliable method for confirming product authenticity,” she concluded, showcasing the transformative potential of blockchain in the ongoing fight against counterfeit goods in Kenya.
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