The recent move by Central Bank to withdraw the Sh1,000 from circulation by October 1 has once again shone a spotlight on the grave subject of the illicit economy and the various avenues in which it thrives to support criminal activities.
Even as we debate the short-and long-term implications of this change, industry sees it as a disrupter that is likely to curtail the prevalence of the illicit economy by making it difficult for counterfeiters, producers of substandard goods, and those trading in uncustomed goods to circulate them in the local market.
Additionally, money hoarded and funnelled into funding illicit economic activities will likely be redirected into the formal banking and lending structures to finance the production of real goods and services.
In the wake of increased trading within the continent due to the African Continental Free Trade Area coming into effect, it is paramount that we take all the fundamental steps to ensure that we weaken existing illicit trade networks.
The Organisation for Economic Co-operation and Development estimates that EAC governments lose over $500 million (Sh50 billion) in tax revenue annually due to the counterfeited products and pirated goods.
Counterfeit is the most prevalent form of the illicit trade in Kenya. The other day, President Uhuru Kenyatta, during his inspection of the Inland Container Depot in Embakasi, remarked that indeed, the multi-agency task force had uncovered illicit trade schemes that have been plaguing the local markets by circulating uncustomed goods.
Illicit trade undermines national and regional security, destabilises economies, increases the cost of public health, sabotages tourism, stunts innovation, and offers a haven to organised crime and trafficking. As a matter of fact, transnational organised crime is anchored on illicit trade. This economic sabotage is felt at every level of society from start-ups to multinationals.
It is important to note that no single entity can effectively enforce anti-counterfeiting measures within and across national boundaries. It was, therefore, encouraging when the multi-agency force was set up in 2018 and since then, notable progress in this endeavour has been made.
As the umbrella organisation for manufacturers in Kenya, we are encouraged with recent amendments to the Anti-Counterfeit Act, 2008, the legislation being the bedrock on which law enforcement can launch their offensive, and aid in increasing the success rate of action taken by law enforcement authorities.
The amendments to the Act underscore the government’s commitment to fight illicit trade and promote bona fide manufacturers and intellectual property owners in line with the Big Four agenda.
In the alcohol beverage industry alone, we still have more than 50 per cent of the commodity consumed in Kenya described as illicit. Meaning that there is loss of revenue to the government in this sector in form of unpaid taxes.
These issues were discussed and solutions suggested at the summit that KAM held where a paper on “The unintended effects of Kenya’s Alcohol Regulation Policies’ by the Institute of Economic Affairs” was unveiled.
In the long term, having the right adaptive policies in place and the collaboration of all parties in the fight against illicit goods will take the evident gains so far forward, we shall reap by having more tangible economic achievements and a healthier, and safer population.
I believe we are on the right track and it is incumbent upon us to address these challenges head-on, If left to fester, illicit trade is a threat to our nationhood. The writer is chairman, Kenya Association of Manufacturers.—[email protected]