Sino-African businesses must combat fraud

By John Gachiri Source:Global Times Published: 2013-1-30 19:33:01

Reports of fake Chinese medicines by Western media may sound like another round of accusations and counter accusations. However, if one digs more deeply, they will discover a menace which is non-discriminatory and threatens trade for everyone, whether they are local, Chinese or Western firms.

When it comes to medicine, the amounts of money involved and the side effects make it a serious issue.

As a result, it is highly expected that Kenyan health officials have to come out and give a status update on what is actually going on.

The government has already dismissed the claims as baseless, and stressed that it has a tight system of checks that sieves fakes from original medicines.

Despite this, industry players say that there is a worrying trend, and the main culprits are unscrupulous African merchants and Asian counterfeiters.

Enforcement is a big hurdle. In Kenya, anti-counterfeit laws were passed in 2008, then the laws came into effect in 2009 and the state watchdog, the Anti-Counterfeit Agency, began operations in 2010.

If Kenya, the biggest economy in the East African region, is only in the initial stages of putting up institutions to fight fakes, then the smaller African economies have a Herculean task ahead.

Kenya also has porous borders, and a popular smuggling route is through Somalia.

Patrolling a region that is prone to attacks from militia is an arduous task.

The smuggling routes were actually closed after the Kenya Defense Forces captured the port of Kismayo in Somalia, but entry of illegal goods continues uninhibited through the port of Mombasa.

Given the limited resources on the Kenyan side, Chinese authorities can step in to help. One of the ways of helping would be officials really cracking down counterfeiters based in China.

Bilateral inspections are already being conducted in the war on ivory smuggling, which is being fought both at home in Africa and in far ports in countries and regions such as Thailand and Hong Kong.

African merchants and the Chinese counterfeiters are a threat not only to local firms but also to Chinese businesses that are battling for market share with Western firms.

Chinese firms have started setting up shop in Kenya, from car assembling, cement processing and other businesses.

What will happen when counterfeiters start making fake goods coming out of these Chinese factories based in Kenya?

Beijing will also suffer a loss in tax revenues, and so too will shareholders of the genuine Chinese firms, as is happening to Western and Kenyan firms. In the final analysis it is everyone who loses.

For Kenya it would mean thousands being denied alternative and affordable medication. But not everything can be left to the government. Firms too have to take the initiative to protect their products.

A big problem in fighting counterfeits is that pharmaceutical companies do not want to overtly say that their brands are under attack from fakes for fear of consumers being put off their products.

This is a Herculean but not an insurmountable task.

John Gachiri, a business journalist based in Kenya



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