Taxpayers are losing Sh8 billion annually to trade in counterfeit goods as manufacturers grapple with half the same amount in losses, a performance audit by the office of former Auditor-General Edward Ouko has shown.
"China is the largest exporter of counterfeits to Kenya, with goods such as electronics for instance phones, sound equipment, cables as well as automobile spare parts and clothing," the newly released report says.
Mr Ouko’s latest assessment on performance of government agencies also revealed that corrupt staff at the Anti-Counterfeit Agency (ACA) are aiding forgers in defrauding both manufacturers and taxpayers.
"A documentary review revealed that 13 staff have faced disciplinary cases in line with matters bordering on corruption and harassment of traders. Additionally, the staff were suspected to have leaked confidential information to unauthorised persons. Five of those staff faced disciplinary action but were later exonerated due to anomalies in the disciplinary procedures," Mr Ouko says.
In interviews with ACA staff, the audit found that many suspected counterfeiters had opted to compromise ACA inspectors or judicial officers rather than pay hefty fines.
In one instance, ACA officials had released counterfeit goods estimated at Sh25 million back to the suspect even though they were meant to be destroyed.
In yet another case, Mr Ouko's audit team found that ACA staff in Kisumu had used un-serialised inventory forms during raids and seizures.
"The officer designated P/NO 201510102 signed the inventory forms using different signatures from the official one and also recorded them in a different handwriting. The instances were only observed in the un-serialised forms."
In Eldoret, assorted goods went missing despite the depot being manned by a security firm 24 hours a day. It was suspected to be an inside job involving collusion of ACA officials and the security company's staff.
While the ACA is one of three institutions alongside the Director of Public Prosecutions and the Kenya Revenue Authority with power to prosecute, the government agency has not made much effort to hire prosecutors.
ACA is also under-staffed as it currently has 65 employees despite it requiring 250 workers to operate efficiently, thereby over-working current staff and affecting its efficiency in handling of cases.
"ACA has 24 inspectors. Out of these, 10 are gazetted prosecutors. However, only five of these are capable of prosecuting cases. Currently, two of the five skilled prosecutors have left the Agency," the report reveals.
The woes at the key agency are made worse by disorganised book-keeping at headquarters that made tracking paperwork for individual cases difficult.
Separately, trademark owners have to part with at least Sh17,000 before their complaints can be investigated.
The steep fees have discouraged Intellectual Property Rights (IPR) holders from pursuing cases, especially in instances where the counterfeited goods are of a lower value than the fees imposed by ACA.