CTI: How counterfeit goods are hurting govt revenue

07Dec 2017
Henry Mwangonde
The Guardian
CTI: How counterfeit goods are hurting govt revenue
  • The presence of fake alternatives to authentic trademark goods is causing local producers to suffer declines in market share and profit lines, thus affecting tax revenues

A NEW report by the Confederation of Tanzania Industries (CTI) has described how counterfeit goods have heavily cost local manufacturers in terms of reductions in annual turnover figures, market share losses, and harm to their reputations.

CTI vice-president Shabbir Zavery

Among the stated consequences is the government being subjected to a loss in tax revenue estimated to be around $4-5 million annually.

The CTI survey of multinational trademark owners in pharmaceutical, foodstuff, computer and electrical products, alcoholic and non-alcoholic beverage industries – to name a few - shows that producers lost 30 per cent of their market shares with 78 per cent of them losing their brand reputations and consumer trust due to the presence of counterfeit alternatives.

Dubbed ‘The State of Counterfeit Goods in Tanzania’, the report launched in Dar es Salaam yesterday is aimed at documenting the current state of counterfeiting activities in the country through the voices of consumers, manufacturers, key informants, and trademark owners.

It also outlines how the illicit trade affects the country and its citizens.

“Some 40 per cent of consumers responded that they understood what constitutes a counterfeit, while 50 per cent were unaware and confused counterfeit with sub-standard goods,” the report says.

About 90 per cent of local manufacturers interviewed reported an increase of counterfeits in the Tanzanian market.

Key findings indicate that Tanzania and Kenya suffer from the presence of higher levels of counterfeit goods than other East African Community (EAC) member states due to their geographical locations.

The report includes an in-depth case study of one alcoholic beverage company that has been experiencing rivalry from counterfeits for the past 18 years.

The company, according to the report, has suffered a 20 percent loss of market share to counterfeiters, resulting in an annual loss of $10 million, with the government incurring a loss of between 40 and 50 percent in tax revenue (about $4 million.)

“If the company had not suffered from the counterfeiting of their brands, they would have been able to invest further by building a new factory, and creating direct employment for 200 workers plus indirect employment for at least another 1,000 workers,” the report says.

Another reported case study is that of an electrical products manufacturing firm that reported counterfeiting of its products for many years, leading to a 30 per cent loss of market share to both the counterfeit trade as well as the importation of substandard electrical products. In terms of monetary profits loss, the figures cited by the firm is 38-40 billion/- annually.

The report also suggests that measures being taken by the government todate don’t appear to be curtailing the increase of counterfeits in the economy.

According to Ellis de Bruijin, managing director of the Nairobi-based Compol consultancy company which was involved in the study, the complied data shows that the global trade in counterfeit goods  is currently half a trillion US dollars -  approximately 2.5 percent of the total global trade.

CTI vice-president Shabbir Zavery said counterfeiting undermines government efforts in establishing a level playing ground for business in Tanzania.

“There is need for coordinated efforts in dealing with these issues because these counterfeiters are taking advantage of our infantry in technology,” he asserted.

The acting director for consumer protection and counterfeit issues at the Fair Competition Commission (FCC), Magdalena Utouh, said the commission has already made some headway in tackling the problem.

“We have established clubs in various regions as one way of scaling up campaigns against the vice, but this war requires a combination of various stakeholders in the business communities,” Utouh stated.