Recent media focus on the excisable goods management system (EGMS) has been on procedural aspects without adequate consideration being given to the benefits provided by the solution for business. In the past, the business community, through their various associations, has spotlighted government agencies for what they see as their failure to effectively combat illicit trade, a practice which undermines Kenya’s goals to industrialise. Such observations have been particularly vocalised at the Presidential Round Table, a platform regularly utilised to obtain private sector input into national policy making. The key agencies usually cited as not doing enough to combat illicit trade include Kenya Revenue Authority and Kenya Bureau of Standards.
Illicit trade occurs in various forms, including through product counterfeiting and parallel importation of franchise-protected goods. Besides the above and specifically in KRA’s context, illicit trade does occur as well where producers suppress data regarding true production levels in order to evade tax. It is because of this last observation that the fight against illicit trade ought to be seen in a broader context, beyond just meeting quality standards.
Globally, governments and industry have developed innovative solutions to tackle illicit trade. The EGMS is among the coterie of solutions that provide broad range capacity to governments, the business community and the public to combat illicit trade.
The core of EGMS-type solutions consists of an “intelligent stamp” that packs detailed information about a product, including the manufacturer, the brand, package size, date of manufacture and date of release into the market. The stamp may be in paper or digital form and may pack more features depending on need. The stamp is supported by an electronic database containing codes of all the stamps dispensed into the marketplace.
Depending on the environment, stamps may be affixed manually or concurrently with other activities within an automated production line. For automated production, the affixation of stamps may be paired with automated scanning of stamp codes to support real time tracking of production statistics. The Kenyan EGMS solution is configured in this manner, thereby enabling KRA to instantaneously collect data about production activities on the factory floor. The point is that today, KRA does not require to visit EGMS-enabled factories to audit production and sales activities, as statistics on this are uploaded into our databases on real time basis every 15 minutes.
The EGMS provides enormous benefits for the business community by enabling them to self-police the market place to detect contraband goods. The policing is done through the use of GPS-enabled infrared scanning devices that pick the codes on stamps affixed to products, transmits the codes into KRA databases for instantaneous verification of authenticity. A recently unveiled “Public App” will enable the use of smart phones to perform stamp verification, thereby opening up the entire policing operation to the general public. EGMS-enabled businesses therefore no longer need to rely on KRA alone to combat the illicit trade menace as they are now fully empowered to police their market places. This approach is consistent with the government’s policy focused on making law enforcement everyone’s business.
Although the EGMS was initially conceived to cover goods attracting excise tax, it packs the potential to deliver benefits to other vulnerable sectors as well. In a recent conversation with a major local pharmaceutical manufacturer, I learned that a substantial proportion of drugs sold in Kenya come via alternative distribution channels not controlled by original manufacturers including through parallel importation. This practice, while capable of providing access to affordable drugs, may, if not properly controlled, expose us to the perils of contraband medication with grave public health consequences. The EGMS platform provides an ideal solution that enables government, pharmaceutical distributors and retailers to confirm the authenticity of medicaments offered in the market place. To deliver such benefit merely requires definition of attributes to help in the “tracking and tracing” process. No additional capital investment beyond what KRA has committed would be required. A specifically designed stamp for track and trace purposes is all what would be needed.
John Njiraini writer is the Commissioner-General of the Kenya Revenue Authority.