Hail For the Fight Against Illicit Alcohol, But Careful Not To Harm Genuine Businesses

The government of the Republic of Kenya has been leading the war against illicit alcohol especially in Central Kenya. The war against illicit alcohol and alcoholism in the region materialized after an outcry of thousands of young men who were sinking into alcoholism. Many agreed a time had come to fight the vice in the region and across the country.

Deputy President Rigathi Gachagua has been leading the war against the vice. The war is a collaboration between security officers, chiefs, and the locals. So far, it is estimated that at least 5,000 bars and liquor outlets have been shut down. To the proponents of the war against illicit alcohol, the “war is being won”. But is it?

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It is true that Kenya has an illicit brew menace. Stats and reports indicate that Kenya is losing an average of 71 billion shillings in taxes annually due to the sale of illicit alcohol. Euromonitor Consulting says that the volume of illicit alcohol sales has recorded strong growth in value since 2020 to stand at 67 billion shillings.

The report showed that the popularity of illicit alcoholic beverages in Kenya has been fueled by non-compliance with tax and excise regulations. Illicit artisanal alcohol accounts for more than half of the total volume of illicit alcohol but the real value of illicit trade lies in counterfeiting, smuggling and rapidly developing tax leakage. This has disadvantaged genuine businesses and denied the Kenya Revenue Authority (KRA) much-needed revenue.

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According to the report, the low price of illicit drinks, high taxes, costly raw materials to produce safe alcohol, as well as easy accessibility through street vendors, licensed liquor shops, grocery retailers, bars, and other hospitality outlets, are one of the reasons why illicit alcohol has become more affordable. To make it worse, it is sometimes difficult to tell the difference between genuine alcohol and counterfeited one for an average consumer.

The main target for counterfeiting is the mass-market, high-volume brands that comprise a mix of mid-market and premium spirit brands followed by high-quality cider and beer. Illegal traders are also interested in ethanol, driven by increasing demand from illicit commercial alcohol manufacturers rendering genuine businesses useless with no sales.

Some 5 years ago, International Alliance for Responsible Drinking (IARD) said that up to 60 percent of alcohol in Kenya is illicit and dangerous, more than double previous estimates by the World Health Organization (WHO). The numbers are higher currently despite the efforts by the government to fight the same.

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And so, the fight against illicit brew is justified but what is being done to make sure that genuine businesses are protected? It is somehow unfair to assume that an increase in alcoholism in a certain region is a result of every alcohol vendor including a genuine one. The mass closure of bars and outlets without clear verification as to whether they are engaged in illicit trade is unfortunate and hurts people and the economy.

If anything, the government seems to be playing a role in fueling the growth of illicit alcohol in Kenya through its policies. For instance, the Alcoholic Beverages Association of Kenya (ABAK) feels that the move by the government to compel legal alcohol manufacturers to pay excise duty within 24 hours upon removal of goods from the stockroom is a policy proclamation that will punish innocent players due to failures in managing illicit alcohol in Kenya. If anything, this will have some finding avenues to avoid paying, not because they want to but because they want to sustain their business.

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ABAK chairman Eric Githua said the introduction of the provision via the Finance Act was unnecessary as the current model, where manufacturers remit the tax after the reconciliation of sales, is working. Excise duty is a consumption tax that needs to be charged at the point of consumption. In the alcohol industry, the product passes through a value chain comprising distributors and outlets before it is consumed.

“Our members have remained compliant in remitting excise duty, playing their part in building Kenya’s economy even in the current tough economic times. Implementing the advance payment effectively is a counterproductive, unperceptive move that will hurt legal manufacturers debilitatingly and benefit illicit alcohol dealers who do not pay taxes, anyway,” said Mr. Githua.

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