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Countering counterfeits in the African market.

Counterfeit paints in the Africa market have continued to pose a threat to the expansion and earnings of paint manufacturers despite the companies reporting mixed experiences with this global problem.

Recent discoveries of fake paint in the Kenyan and Ugandan markets point to a serious challenge facing paint makers in Eastern Africa unlike in South Africa where firms said counterfeits are yet to reach market threatening levels.

In Kenya, for example, officers from the country's state-run Kenya Anti-Counterfeit Authority, with the backing of police discovered several liters of counterfeit paint in Kitengela town, 30 kilometers south of the capital, Nairobi.

The fake paint was trading under one of the leading brand names in East Africa's paint market, Crown Paints.

The discovery in mid-June came barely weeks after officials from the same agencies made another raid at a hard-ware retailing shop in Thika town, 45 kilometers northeast of the capital, Nairobi and recovered several liters of counterfeit paint on sale. Although two suspects were arrested and arraigned for trading in counterfeit paint, a leading lobby of manufacturers in East Africa, Kenya Association of Manufacturers (KAIVI) said the judicial process does not help curb the flourishing counterfeit business.

"The level of punishment under the Anti Counterfeit Act of 2008 for counterfeiting is still low, investigation and prosecution processes take too long, while a common approach to combat counterfeit at regional level is yet to be realized. These are serious challenges and need to be addressed urgently," said KAM chief executive Betty Maina.

The same situation emerged in Uganda previously when police and officials from the Uganda Revenue Authority (URA) recovered several liters of counterfeit paint sold in shops across the country. The paint was from 12 different factories with (URA) saying the proliferation of fake paint in Uganda was "choking the manufacturing sector."

It is not easy to quantity the extent of the counterfeit paint market in Africa because of lack of reliable data and as Maina said brand owners "do not discuss the problem in public for fear of their competitors." She believes the counterfeit problem is prevalent in economies such as South Sudan, Rwanda and Burundi where she said there is lack "of intellectual property rights legislation combined with the attitude of consumers, purchasing power of the consumers and inability of governments to prioritize counterfeiting in their socio economic programs."

But overall the counterfeit market in the region is huge with the United Nations Office on Drugs and Crime (UNODC) saying the trade thrives because of high poverty levels with consumers considering product prices more than the quality of products before purchasing.

The agency said Africa is "one market where price is likely to continue to be more important than quality assurance."

Although no reliable data exists on the African counterfeit market, globally the value is in excess of $650 billion with the International Chamber of Commerce reporting the figure will grow to $1.7 trillion by 2015.

Hard hit countries, the agency said, "have generally poor and lower capacity for oversight."

A recent report by UNODC said the counterfeit products are competitively priced and remain profitable because there are no overheads like those incurred by the manufacture of original products.

"Because counterfeiters are essentially unaccountable and have no interest in building a brand reputation, costs can be additionally reduced by cutting corners in the production phase such as employing sweatshop labo4 engaging in environmentally unsound manufacturing processes and using inferior-grade materials," said UNODC.

Trade in counterfeits has seen many countries in Africa pay dearly. They have been unable to meet their tax revenue targets impacting negatively on their development and recurrent expenditure budgets.

UNODC said the tax evasion and competitive pricing "end up undermining the tax base and affect public services available for all."

For example, Uganda and Kenya missed their tax revenue targets in different reporting periods last year. Kenya collected $4.45 billion for the period between January and June 2012, which was $12 million less than the target. Uganda also collected $985 million between July and November of the same year against a target of $1.02 billion.

Despite the enormity of challenges posed by trade in counterfeits, paint makers in the continent seem to have different experiences with this problem that has been blamed for the loss of more than 2.5 million jobs annually globally, according to International Chamber of Commerce.

However, South Africa paint market players seem to have had little adverse experience with counterfeits as some of the members of South African Paint Manufacturers Association say their production process may have locked out counterfeiters from faking their brand of products.

The market seem to have few reported counterfeit cases although some of the paint manufacturer feel the need for strengthening of the country's regulatory framework.

Eastern Cape-based Newdens, which manufactures a wide range of hardware, candles and beauty products, said although the company has experienced counterfeiting in some its products, none of its eight paint products has been counterfeited.

"We have had experience with other types of products of ours being counterfeited, but not paint" said the company's director Richard Boardman.

South Africa's other leading paint maker Plascon told Coatings World in an emailed response that it "uses only top quality materials and reputable manufacturers in the production and packaging of its products., which is why it is a market leader."

"The Plascon process and superlative quality is difficult to match and thus easy to differentiate from cheap counterfeit products," the company reported. "The Plascon brand is protected by trademark registration in the countries of Sub-Saran Africa, as well as in East and West Africa."

However, another market player in South Africa, Weatherprufe Coatings, which produces wide range of high quality coatings in Western Cape, said both the paint industry and its leading consumer, the construction industry should be regulated to lock out counterfeits from the market.

"The building industry -- as well as the paint industry- is poorly regulated leaving room for dishonest practices," said the company's technical director Mark Giddey.

"It is difficult to quantify, but there are several instances of products being decanted into specified brands for use on building projects especially the supply of inferior products as an "approved equivalent" to a specified paint," he said.

"The consumers are at the mercy of advertising and in general very weak technical advice from retail outlets. There is a strong need for us, the manufacturers, to educate sales staff better, so that the end user can make more informed decisions around product selection," added Giddey.

Basco Paints in East Africa seems to have embraced the training strategy in its war against counterfeits. The company has introduced a training program on how to use their paint products and also detect counterfeits.

The company, which has an installed paint production capacity of two million liters/year with a presence in Uganda, Rwanda, Ethiopia, Tanzania, Burundi and Democratic Republic of Congo, has introduced a training program targeting schools.

Managing director Kamlesh Shah said through the school-based training "many students will be able to understand whether the paint is the right texture and thickness or how many layers should be laid on and in this way Basco Paints will be reducing on the issues to do with counterfeits."

The story is not the same with another leading player in East Africa's paint market, Crown Paints. The Nairobi-based company, which also has a heavy presence in Tanzania and Uganda where it trades as Regal, said it loses $4.5 million every year because of counterfeits.

Crown Paints, which reported a 15 percent growth in turnover for the period ending December 2012 to $50 million, said it has launched a new seal proof packaging to ward off counterfeits which are eating into its profits. The company made a $2.5 million profit for the period ending December 2012, an equivalent of 12 percent growth from the previous year.

"We have already imported special seals in addition to using protected bar codes on some of our fast moving products to fight off counterfeits," said the company CEO Rakesh Rao.

UNODC is pushing manufacturers, including paint makers, to raise the bar in the war against counterfeits if they expect to remain relevant in the market.

"If reputable wholesalers and retainers assure that their sources are clean, then the buying of counterfeits will remain a marginal activity," the agency said. But more importantly, the UN agency said "Africa agencies need outside support to protect their populations while agencies in source countries must continue to crack down on this shameful enterprise."

The trending phenomenon among manufacturers today--outsourcing, has been singled as the biggest contributor to the persistent counterfeit problem.

"Outsourced manufacturers working under licences of trademark owners expose the brand to the risk of counterfeiting as the transfer of knowledge, work force and machinery to counterfeit manufacturers is easier from outsourced manufacturers than from the original manufacturer," said Maina. "There are also cases where bogus goods are mixed with genuine ones in the formal distribution channels without the knowledge of the trademark owner and the distributor and many a time, it is difficult to draw a line between the products. Counterfeit and original products can travel in the same consignment in different containers."

by Shem Oirere

Africa Correspondent
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Title Annotation:Africa
Author:Oirere, Shem
Publication:Coatings World
Geographic Code:6UGAN
Date:Sep 1, 2013
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