Why bargain-hunting wave could be exposing you to a raw deal

The Anti Counterfeit Authority (ACA) says that with little investment, unscrupulous businesses dealing in counterfeits are able to undercut firms that are doing legit businesses.

This is even as they put consumers at risk as their illegal products do not go through required quality tests, and at the same time denying the government billions of shillings in tax revenues.

"Counterfeits sell cheaper than the original products most of the time due to the fact that counterfeiters don't pay the requisite taxes, don't go through regulatory checks and licensing and don't engage in research and development," said NCA executive director Mbugua Njoroge in an interview with Financial Standard.

"They don't undergo any advertisement expenditure since they are riding on the popularity of the genuine brands."

This therefore makes counterfeiting a very profitable venture.

The situation is worsened by declining consumer purchasing power due to tough economic conditions. "This poses an additional challenge as most consumers still want to be associated with popular brands. This demand drives up production of counterfeit goods."

The cost of living has risen significantly over the last year with prices of nearly all essential goods going up, while a mix of factors including the vagaries of Covid-19 have negatively affected earnings of many Kenyans.

Double digits

According to data by the Kenya National Bureau of Statistics (KNBS), the cost of nearly all items it sampled in August went up by double digits, both manufactured products and farm produce.

Maize flour went up 37.9 per cent when compared to prices in August last year, sugar 22 per cent, maize grain 35.8 per cent, carrots 29 per cent and bar soap 36 per cent. The cost of diesel - essential for transport and manufacturing industries - went up 29.8 per cent, and this has a knock-on effect on other products.

The only item whose cost went down was electricity following government intervention in January.

The rate of inflation was 8.5 per cent in August, the highest since June 2017.

This has seen many Kenyans left with little to spend even on basic items and in turn drawn to what might look like a bargain when shopping, which Dr Njoroge pointed out might not always be a bargain. He said ACA has made efforts to inform consumers about the risks associated with counterfeit products.

"We have been engaging in targeted consumer education on the health and safety risks associated with consumption of counterfeit goods in addition to loss of value for money spent," he said. "This goes a long way in reducing the demand for counterfeit goods thereby lowering the production."

Among the highly counterfeited items, according to the ACA, include drugs and farm chemicals. Counterfeiting of these items has been on the rise, even as the State agency says it has registered huge progress in taming counterfeiting of such products as electronics and clothing.

Fake pharmaceuticals and agriculture could have lethal implications on human health. "Through the various initiatives, ACA has had a major impact on electricals and electronics, apparels and footwear among others," said Dr Njoroge.

"The biggest challenge remains in the areas of pharmaceuticals and farm inputs including agrochemicals. These challenges have been largely attributed to uncoordinated government approach coupled with inadequate support from IPR owners in these sectors."

Counterfeit drugs

It is estimated that 10 per cent of drugs sold around the world are counterfeit and this is expected to rise to between 25 per cent and 50 per cent for developing countries. The World Health Organisation estimates that over 100,000 deaths in Africa are caused by issues related to counterfeit drugs.

The Pharmacy and Poisons Board has in the past noted that the country's porous borders are used to bring in unregulated generics and falsified medication. Most commonly counterfeited drugs include painkillers, ARVs and contraceptives.

In 2019, ACA seized over 30,000 pairs of contraceptives at the Inland Container Depot in Nairobi.

The agency published a survey in 2020 where pharmaceuticals were among the 16 sectors surveyed and found to comprise a combined value of Sh586 billion in illicit trade.

In 2018, the Agrochemicals Association of Kenya (AAK) reported that Kenya was losing at least Sh120 billion in revenue to unregistered agro-chemicals dealers and counterfeit pesticides.

It added that counterfeits accounted for between 15 per cent to 20 per cent of agrochemicals being sold in Kenya.

This, according to ACA, poses a threat to farmers' yield and the environment. Counterfeit agrochemicals are largely driven by a well organised black market that supplies fake labels and packaging.

Whereas counterfeit pharmaceuticals originate from predominantly Asian markets, agrochemicals are largely counterfeited locally since most of the chemicals come into the country as raw materials.

Dr Njoroge said the fight against counterfeits is complex in that even as ACA seals loopholes that counterfeiters exploit, they device ways to beat the system. "Counterfeiting, like any other crime, keeps morphing in sophistication," he said.

"Counterfeiters are always devising ways to stay ahead of law enforcement. Whereas it's our desire to completely rid the market of counterfeits, we also recognise that this is an uphill task and progress will be made in stages."